Question 1

The just-in-time inventory control system is just a new approach to the EOQ model which tries to produce the lowest average inventory possible.

Accepted Answer

A) True 
 B)False

Question 2

Zero balance accounts reduce disbursing float.

Accepted Answer

A) True 
 B)False

Question 3

Funds that are available in a company's bank account until its payment check has cleared refers to

Accepted Answer

A) mail float. 
B) processing float. 
C) transit float. 
D) disbursing float. 
A) mail float. 
B) processing float. 
C) transit float. 
D) disbursing float.

Question 4

Which of the following would be an example of the "speculative motive" for a firm holding cash balances?

Accepted Answer

A) make dividend payments 
B) anticipating a strike 
C) purchase of inventory 
D) take advantage of an anticipated decline in the price of raw materials 
A) make dividend payments 
B) anticipating a strike 
C) purchase of inventory 
D) take advantage of an anticipated decline in the price of raw materials

Question 5

If a firm extends 4/10,net 60-day terms of sale,what is the cost in terms of nominal APR? Assume a 360-day year.

Accepted Answer

A) 29.40% 
B) 30.0% 
C) 23.99% 
D) 27.86% 
A) 29.40% 
B) 30.0% 
C) 23.99% 
D) 27.86%

Question 6

An extremely liquid asset is one that can be sold for cash quickly without a reduction in price below its current market value.

Accepted Answer

A) True 
 B)False

Question 7

One of the attractive features of commercial paper is an active secondary market.

Accepted Answer

A) True 
 B)False

Question 8

If you were a treasurer for a Fortune 1,000 corporation who has responsibility for investing "excess cash balances," which of the following alternatives would you be least likely to select?

Accepted Answer

A) commercial paper 
B) common stock 
C) bankers' acceptances 
D) U.S.Treasury bills 
A) commercial paper 
B) common stock 
C) bankers' acceptances 
D) U.S.Treasury bills

Question 9

If a firm with credit terms of 1/10 net 30 were to change its terms to 3/10 net 30,the result would probably be

Accepted Answer

A) increased bank loans. 
B) increased accounts receivable turnover. 
C) an increase in the average level of accounts receivable. 
D) a decrease in accounts payable. 
A) increased bank loans. 
B) increased accounts receivable turnover. 
C) an increase in the average level of accounts receivable. 
D) a decrease in accounts payable.

Question 10

A retailer sells most of its merchandise on credit and bills clients monthly.Which of the following elements of float does the retailer have the most control over?

Accepted Answer

A) mail float 
B) processing float 
C) transit float 
D) disbursing float 
A) mail float 
B) processing float 
C) transit float 
D) disbursing float

Question 11

The purpose of maintaining a raw materials inventory is to integrate the purchasing and production functions.

Accepted Answer

A) True 
 B)False

Question 12

Payable through drafts

Accepted Answer

A) provides for effective control over field payments. 
B) are not legal instruments. 
C) cannot be cleared through the banking system. 
D) are a form of commercial paper. 
A) provides for effective control over field payments. 
B) are not legal instruments. 
C) cannot be cleared through the banking system. 
D) are a form of commercial paper.

Question 13

You purchase $10,000 worth of supplies every 90 days and never take the trade discount of 2/10 net 30.How much could you save each (360-day)year if you took the discount?

Accepted Answer

2% × $10,000 = $200

Question 14

Commercial paper is a short-term,unsecured,promissory note.

Accepted Answer

A) True 
 B)False

Question 15

The estimated value of reducing float by 1-day is one day's interest on the freed up sales.

Accepted Answer

A) True 
 B)False

Question 16

Money market funds

Accepted Answer

A) are tax exempt. 
B) typically invest in a diversified portfolio of short-term,high-grade debt instruments. 
C) are generally very profitable but fail to provide liquidity to the small investor. 
D) typically sell shares to the public in $25,000 denominations. 
A) are tax exempt. 
B) typically invest in a diversified portfolio of short-term,high-grade debt instruments. 
C) are generally very profitable but fail to provide liquidity to the small investor. 
D) typically sell shares to the public in $25,000 denominations.

Question 17

The terms of sale identify the possible discount for early payment,the discount period,and the total credit period.

Accepted Answer

A) True 
 B)False

Question 18

The benefits derived from reduced mail and processing floats must be greater than the bank fees associated with a lockbox system or else a firm would be better off without the lockbox.

Accepted Answer

A) True 
 B)False

Question 19

A company's investment in accounts receivable is determined by the company's level of sales,percent of credit sales to total sales,and credit and collection policies.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is generally under the control of the financial manager?

Accepted Answer

A) the percentage of credit sales to total sales 
B) the actual level of sales 
C) the credit policies 
D) A and B 
A) the percentage of credit sales to total sales 
B) the actual level of sales 
C) the credit policies 
D) A and B

The just-in-time inventory control system is just a new approach to the EOQ model which tries to produce the lowest average inventory possible.

Zero balance accounts reduce disbursing float.

Funds that are available in a company's bank account until its payment check has cleared refers to

Which of the following would be an example of the "speculative motive" for a firm holding cash balances?

If a firm extends 4/10,net 60-day terms of sale,what is the cost in terms of nominal APR? Assume a 360-day year.

An extremely liquid asset is one that can be sold for cash quickly without a reduction in price below its current market value.

One of the attractive features of commercial paper is an active secondary market.

If you were a treasurer for a Fortune 1,000 corporation who has responsibility for investing "excess cash balances," which of the following alternatives would you be least likely to select?

If a firm with credit terms of 1/10 net 30 were to change its terms to 3/10 net 30,the result would probably be

A retailer sells most of its merchandise on credit and bills clients monthly.Which of the following elements of float does the retailer have the most control over?

The purpose of maintaining a raw materials inventory is to integrate the purchasing and production functions.

Payable through drafts

You purchase $10,000 worth of supplies every 90 days and never take the trade discount of 2/10 net 30.How much could you save each (360-day)year if you took the discount?

Commercial paper is a short-term,unsecured,promissory note.

The estimated value of reducing float by 1-day is one day's interest on the freed up sales.

Money market funds

The terms of sale identify the possible discount for early payment,the discount period,and the total credit period.

The benefits derived from reduced mail and processing floats must be greater than the bank fees associated with a lockbox system or else a firm would be better off without the lockbox.

A company's investment in accounts receivable is determined by the company's level of sales,percent of credit sales to total sales,and credit and collection policies.

Which of the following is generally under the control of the financial manager?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Filters

Exam 17: Cash,receivables,and Inventory Management

The just-in-time inventory control system is just a new approach to the EOQ model which tries to produce the lowest average inventory possible.

Zero balance accounts reduce disbursing float.

Funds that are available in a company's bank account until its payment check has cleared refers to

Which of the following would be an example of the "speculative motive" for a firm holding cash balances?

If a firm extends 4/10,net 60-day terms of sale,what is the cost in terms of nominal APR? Assume a 360-day year.

An extremely liquid asset is one that can be sold for cash quickly without a reduction in price below its current market value.

One of the attractive features of commercial paper is an active secondary market.

If you were a treasurer for a Fortune 1,000 corporation who has responsibility for investing "excess cash balances," which of the following alternatives would you be least likely to select?

If a firm with credit terms of 1/10 net 30 were to change its terms to 3/10 net 30,the result would probably be

A retailer sells most of its merchandise on credit and bills clients monthly.Which of the following elements of float does the retailer have the most control over?

The purpose of maintaining a raw materials inventory is to integrate the purchasing and production functions.

Payable through drafts

You purchase $10,000 worth of supplies every 90 days and never take the trade discount of 2/10 net 30.How much could you save each (360-day)year if you took the discount?

Commercial paper is a short-term,unsecured,promissory note.

The estimated value of reducing float by 1-day is one day's interest on the freed up sales.

Money market funds

The terms of sale identify the possible discount for early payment,the discount period,and the total credit period.

The benefits derived from reduced mail and processing floats must be greater than the bank fees associated with a lockbox system or else a firm would be better off without the lockbox.

A company's investment in accounts receivable is determined by the company's level of sales,percent of credit sales to total sales,and credit and collection policies.

Which of the following is generally under the control of the financial manager?

An Introduction to the Foundations of Financial Management

The Financial Markets and Interest Rates

Understanding Financial Statements and Cash Flows

Evaluating a Firms Financial Performance

The Time Value of Money

The Meaning and Measurement of Risk and Return

The Valuation and Characteristics of Bonds

The Valuation and Characteristics of Stock

The Cost of Capital

Capital-Budgeting Techniques and Practice

Cash Flows and Other Topics in Capital Budgeting

Determining the Financing Mix

Dividend Policy and Internal Financing

Short-Term Financial Planning

Working-Capital Management

International Business Finance

Filters