Exam 21: Mergers, Acquisitions, and Corporate Control

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One way of handling uncertain cash flows is to set an upper and lower limit for cash balances and a return point to which the cash balance is brought to when the upper or lower limit is reached.

(True/False)

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Question 41

As the number of inventory orders per year increases, the total order costs increase.

(True/False)

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Question 42

While many firms may hold too much cash, it is virtually impossible to hold too little cash.

(True/False)

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Question 43

Availability float reflects the amount on cheques that has been deposited by a company but that has not been cleared.

(True/False)

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Question 44

If there is an increase in interest rates, a firm which uses Baumol's model should reduce the funds held in cash and reduce the holding of interest-bearing securities.

(True/False)

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Question 45

A firm using Baumol's model will do one of the following if the interest rate on short-term securities went up.

(Multiple Choice)

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Question 46

A lock-box service will benefit the following firm the most.

(Multiple Choice)

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Question 47

Paying a supplier in Toronto with a cheque drawn on a bank in New Brunswick is an example of:

(Multiple Choice)

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Question 48

Money market securities usually have a maturity of:

(Multiple Choice)

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Question 49

How many cases of microwave popcorn are sold annually by a firm which has total annual order costs of $32,000, orders in units of 100 cases, and is charged $90 per order in addition to the $72 per case product cost?

(Multiple Choice)

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Question 50

Which of the following statements is correct for a firm that currently has total costs of carrying and ordering inventory that are 50 percent higher than total carrying costs?

(Multiple Choice)

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Question 51

The annual cash requirement for a firm is $1,000,000.The cost for each security transaction is $20 and current short-term return is 5 percent.Using Baumol's model estimate the initial cash balance.

(Multiple Choice)

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Question 52

Potential savings from a lock-box system will be reduced by:

(Multiple Choice)

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Question 53

The bank's ledger balance for a firm is equal to the:

(Multiple Choice)

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Question 54

In the Baumol model, the optimal sale amount is _ with higher interest rates and __ with a higher cost of selling securities.

(Multiple Choice)

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Question 55

Calculate the EOQ given the following information:

(Multiple Choice)

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Question 56

The Canadian central bank encourages remote disbursements, because it decreases the payment float.

(Short Answer)

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Question 57

Discuss the distinction of playing the float versus cheque kiting.

(Essay)

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Question 58

Which of the following is true for a "repurchase agreement"?

(Multiple Choice)

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Question 59

Where do firms invest excess funds until they are needed to pay bills?

(Essay)

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Question 60

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Exam 21: Mergers, Acquisitions, and Corporate Control

One way of handling uncertain cash flows is to set an upper and lower limit for cash balances and a return point to which the cash balance is brought to when the upper or lower limit is reached.

As the number of inventory orders per year increases, the total order costs increase.

While many firms may hold too much cash, it is virtually impossible to hold too little cash.

Availability float reflects the amount on cheques that has been deposited by a company but that has not been cleared.

If there is an increase in interest rates, a firm which uses Baumol's model should reduce the funds held in cash and reduce the holding of interest-bearing securities.

A firm using Baumol's model will do one of the following if the interest rate on short-term securities went up.

A lock-box service will benefit the following firm the most.

Paying a supplier in Toronto with a cheque drawn on a bank in New Brunswick is an example of:

Money market securities usually have a maturity of:

How many cases of microwave popcorn are sold annually by a firm which has total annual order costs of $32,000, orders in units of 100 cases, and is charged $90 per order in addition to the $72 per case product cost?

Which of the following statements is correct for a firm that currently has total costs of carrying and ordering inventory that are 50 percent higher than total carrying costs?

The annual cash requirement for a firm is $1,000,000.The cost for each security transaction is $20 and current short-term return is 5 percent.Using Baumol's model estimate the initial cash balance.

Potential savings from a lock-box system will be reduced by:

The bank's ledger balance for a firm is equal to the:

In the Baumol model, the optimal sale amount is _____ with higher interest rates and ______ with a higher cost of selling securities.

Calculate the EOQ given the following information:

The Canadian central bank encourages remote disbursements, because it decreases the payment float.

Discuss the distinction of playing the float versus cheque kiting.

Which of the following is true for a "repurchase agreement"?

Where do firms invest excess funds until they are needed to pay bills?

Goals and Governance of the Firm

Financial Markets and Institutions

Accounting and Finance

Measuring Corporate Performance

The Time Value of Money

Valuing Bonds

Valuing Stocks

Net Present Value and Other Investment Criteria

Using Discounted Cash-Flow Analysis to Make Investment Decisions

Project Analysis

Introduction to Risk, Return, and the Opportunity Cost of Capital

Risk, Return, and Capital Budgeting

The Weighted-Average Cost of Capital and Company Valuation

Introduction to Corporate Financing and Governance

Venture Capital, Ipos, and Seasoned Offerings

Debt Policy

Payout Policy

Long-Term Financial Planning

Short-Term Financial Planning

Working Capital Management

International Financial Management

Options

Risk Management

Conclusion

What We Do and Do Not Know About Finance

Filters

In the Baumol model, the optimal sale amount is _ with higher interest rates and __ with a higher cost of selling securities.