Question 1

Business firms hold cash and marketable securities for which of the following reasons or motives?

Accepted Answer

A) transactions, precautionary, and goodwill motives 
B) precautionary, speculative, and goodwill motives 
C) transactions, precautionary, and speculative motives 
D) precautionary, goodwill, and transactions motives 
A) transactions, precautionary, and goodwill motives 
B) precautionary, speculative, and goodwill motives 
C) transactions, precautionary, and speculative motives 
D) precautionary, goodwill, and transactions motives

Question 2

If the cash conversion cycle is shortensr, then the firm's investment in inventories and receivables will always be smaller.

Accepted Answer

A) True 
 B)False

Question 3

The cash conversion cycle measures the time between when a firm pays its suppliers for inventory and when it collects cash from customers on a sale of the finished product.

Accepted Answer

A) True 
 B)False

Question 4

In cash budgeting, the ________ seasonal and uncertain a firm's cash flows, the ________ the number of budgeting intervals it should use

Accepted Answer

A) more; greater 
B) more; fewer 
C) less; greater 
D) less; fewer 
A) more; greater 
B) more; fewer 
C) less; greater 
D) less; fewer

Question 5

The ________ of a firm is the amount of time that elapses from the point when the firm makes an outlay to purchase raw materials to the point when cash is collected from bad debt.

Accepted Answer

A) cash conversion cycle 
B) operating cycle 
C) average age of inventory 
D) average collection period 
E) none of the above 
A) cash conversion cycle 
B) operating cycle 
C) average age of inventory 
D) average collection period 
E) none of the above

Question 6

Which one of the following asset accounts is not a part of a firm's working capital?

Accepted Answer

A) cash and marketable securities 
B) accounts receivable 
C) inventories 
D) fixed assets 
A) cash and marketable securities 
B) accounts receivable 
C) inventories 
D) fixed assets

Question 7

Federal funds rates usually parallel the:

Accepted Answer

A) prime rate 
B) U.S.Treasury bill rate 
C) Dow Jones Industrial Average 
D) none of the above 
A) prime rate 
B) U.S.Treasury bill rate 
C) Dow Jones Industrial Average 
D) none of the above

Question 8

If the average payment period is longer, then the cash conversion cycle will be longer.

Accepted Answer

A) True 
 B)False

Question 9

Firms may not sell marketable securities to cover cash shortfalls.

Accepted Answer

A) True 
 B)False

Question 10

Holding all other factors constant, if a firm increases its current assets relative to total assets,

Accepted Answer

A) it increases return and reduces riskits financing costs will fall. 
B) it increases return and increases risknet working capital will rise. 
C) has no effect on return and reduces risk. 
D) it reduces return and increases risk. 
E) none of above are correct 
A) it increases return and reduces riskits financing costs will fall. 
B) it increases return and increases risknet working capital will rise. 
C) has no effect on return and reduces risk. 
D) it reduces return and increases risk. 
E) none of above are correct

Question 11

BP has an average age of inventory of 60 days, an average collection period of 45 days, and an average payment period of 30 days.Based on this information, BPs cash conversion cycle is ________ days.

Accepted Answer

A) 55 
B) 65 
C) 75 
D) 85 
E) none of the above 
A) 55 
B) 65 
C) 75 
D) 85 
E) none of the above

Question 12

In the cash budget, the firm's final sales forecast us usually a function of Not in the chapter

Accepted Answer

A) economic forecasts. 
B) the sales force estimate of demand. 
C) external and internal factors in combination. 
D) accounts payable experience. 
A) economic forecasts. 
B) the sales force estimate of demand. 
C) external and internal factors in combination. 
D) accounts payable experience.

Question 13

One way a firm can reduce the amount of cash it needs in any one month is to

Accepted Answer

A) speed up the collection of receivables 
B) delay the payment of wages 
C) delay the payment of taxes 
D) delay the payment of payables 
E) all of the above 
A) speed up the collection of receivables 
B) delay the payment of wages 
C) delay the payment of taxes 
D) delay the payment of payables 
E) all of the above

Question 14

A financial manager should strive to maximize the investment in current assets.

Accepted Answer

A) True 
 B)False

Question 15

The delivery or transmission float is the delay in transferring the means of payment from the payor (customer) to the payee (the provider of goods or services).

Accepted Answer

A) True 
 B)False

Question 16

A (n) ________ in current assets ________ net working capital, thereby ________ the risk of technical insolvency.

Accepted Answer

A) decrease; increases; increasing 
B) decrease; decreases; reducing 
C) increase; decreases; increasing 
D) increase; increases; reducing 
A) decrease; increases; increasing 
B) decrease; decreases; reducing 
C) increase; decreases; increasing 
D) increase; increases; reducing

Question 17

If a firm has net sales of $400,000, annual cost of goods sold of $315,000, an inventory turnover of 4.5 times a year, and an accounts receivable turnover of five times a year, the combined investment in inventories and accounts receivable would be:

Accepted Answer

A) $64,500 
B) $92,000 
C) $122,500 
D) $150,000 
A) $64,500 
B) $92,000 
C) $122,500 
D) $150,000

Question 18

A (n) ________ in current liabilities ________ net working capital, thereby ________ the risk of technical insolvency.

Accepted Answer

A) decrease; increases; increasing 
B) decrease; decreases; reducing 
C) increase; decreases; increasing 
D) increase; increases; reducing 
A) decrease; increases; increasing 
B) decrease; decreases; reducing 
C) increase; decreases; increasing 
D) increase; increases; reducing

Question 19

A firm has a minimum desired cash balance of $10,000.Any cash shortfalls will be made up with short-term financing.The net cash flow for January is $3,000 and the beginning balance for that month is $5,000: The cash balance for the beginning of February will be:

Accepted Answer

A) -$2,000 
B) $10,000 
C) $3,000 
D) cannot determine from this information 
A) -$2,000 
B) $10,000 
C) $3,000 
D) cannot determine from this information

Question 20

All of the following statements is correct EXCEPT

Accepted Answer

A) The financial crisis and recession of 2007-2009 had strong effects on the ability of borrower firms to obtain short-term financing and for firms with surplus funds to invest in short-term instruments. 
B) During the 2007-2009 financial crisis and recession, major spikes in the risk premium between commercial paper and T-bills indicate major stresses to the financial system-both for issuers and investors. 
C) During the 2007-2009 financial crisis and recession, major spikes in the risk premium between commercial paper and T-bills indicate periods of investors fleeing investments of perceived risk (commercial paper) and placing funds in the safest assets (T-Bills). 
D) During the 2007-2009 financial crisis and recession, major spikes in the risk premium between commercial paper and T-bills indicate periods of investors fleeing investments of perceived risk (T-Bills) and placing funds in the safest assets (corporate bonds). 
E) all of the above are correct 
A) The financial crisis and recession of 2007-2009 had strong effects on the ability of borrower firms to obtain short-term financing and for firms with surplus funds to invest in short-term instruments. 
B) During the 2007-2009 financial crisis and recession, major spikes in the risk premium between commercial paper and T-bills indicate major stresses to the financial system-both for issuers and investors. 
C) During the 2007-2009 financial crisis and recession, major spikes in the risk premium between commercial paper and T-bills indicate periods of investors fleeing investments of perceived risk (commercial paper) and placing funds in the safest assets (T-Bills). 
D) During the 2007-2009 financial crisis and recession, major spikes in the risk premium between commercial paper and T-bills indicate periods of investors fleeing investments of perceived risk (T-Bills) and placing funds in the safest assets (corporate bonds). 
E) all of the above are correct

Business firms hold cash and marketable securities for which of the following reasons or motives?

If the cash conversion cycle is shortensr, then the firm's investment in inventories and receivables will always be smaller.

The cash conversion cycle measures the time between when a firm pays its suppliers for inventory and when it collects cash from customers on a sale of the finished product.

In cash budgeting, the seasonal and uncertain a firm's cash flows, the the number of budgeting intervals it should use

The ________ of a firm is the amount of time that elapses from the point when the firm makes an outlay to purchase raw materials to the point when cash is collected from bad debt.

Which one of the following asset accounts is not a part of a firm's working capital?

Federal funds rates usually parallel the:

If the average payment period is longer, then the cash conversion cycle will be longer.

Firms may not sell marketable securities to cover cash shortfalls.

Holding all other factors constant, if a firm increases its current assets relative to total assets,

BP has an average age of inventory of 60 days, an average collection period of 45 days, and an average payment period of 30 days.Based on this information, BPs cash conversion cycle is ________ days.

In the cash budget, the firm's final sales forecast us usually a function of Not in the chapter

One way a firm can reduce the amount of cash it needs in any one month is to

A financial manager should strive to maximize the investment in current assets.

The delivery or transmission float is the delay in transferring the means of payment from the payor (customer) to the payee (the provider of goods or services).

A (n) in current assets net working capital, thereby the risk of technical insolvency.

If a firm has net sales of $400,000, annual cost of goods sold of $315,000, an inventory turnover of 4.5 times a year, and an accounts receivable turnover of five times a year, the combined investment in inventories and accounts receivable would be:

A (n) in current liabilities net working capital, thereby the risk of technical insolvency.

A firm has a minimum desired cash balance of $10,000.Any cash shortfalls will be made up with short-term financing.The net cash flow for January is $3,000 and the beginning balance for that month is $5,000: The cash balance for the beginning of February will be:

All of the following statements is correct EXCEPT

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 15: Managing Working Capital

Business firms hold cash and marketable securities for which of the following reasons or motives?

If the cash conversion cycle is shortensr, then the firm's investment in inventories and receivables will always be smaller.

The cash conversion cycle measures the time between when a firm pays its suppliers for inventory and when it collects cash from customers on a sale of the finished product.

In cash budgeting, the ________ seasonal and uncertain a firm's cash flows, the ________ the number of budgeting intervals it should use

The ________ of a firm is the amount of time that elapses from the point when the firm makes an outlay to purchase raw materials to the point when cash is collected from bad debt.

Which one of the following asset accounts is not a part of a firm's working capital?

Federal funds rates usually parallel the:

If the average payment period is longer, then the cash conversion cycle will be longer.

Firms may not sell marketable securities to cover cash shortfalls.

Holding all other factors constant, if a firm increases its current assets relative to total assets,

BP has an average age of inventory of 60 days, an average collection period of 45 days, and an average payment period of 30 days.Based on this information, BPs cash conversion cycle is ________ days.

In the cash budget, the firm's final sales forecast us usually a function of Not in the chapter

One way a firm can reduce the amount of cash it needs in any one month is to

A financial manager should strive to maximize the investment in current assets.

The delivery or transmission float is the delay in transferring the means of payment from the payor (customer) to the payee (the provider of goods or services).

A (n) ________ in current assets ________ net working capital, thereby ________ the risk of technical insolvency.

If a firm has net sales of $400,000, annual cost of goods sold of $315,000, an inventory turnover of 4.5 times a year, and an accounts receivable turnover of five times a year, the combined investment in inventories and accounts receivable would be:

A (n) ________ in current liabilities ________ net working capital, thereby ________ the risk of technical insolvency.

A firm has a minimum desired cash balance of $10,000.Any cash shortfalls will be made up with short-term financing.The net cash flow for January is $3,000 and the beginning balance for that month is $5,000: The cash balance for the beginning of February will be:

All of the following statements is correct EXCEPT

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

In cash budgeting, the seasonal and uncertain a firm's cash flows, the the number of budgeting intervals it should use

A (n) in current assets net working capital, thereby the risk of technical insolvency.

A (n) in current liabilities net working capital, thereby the risk of technical insolvency.