Question 1

Which of the following statements is false?

Accepted Answer

A)  If a company anticipates an ongoing surplus of cash, it may choose to increase its dividend payout. 
B)  Seasonal sales can create large short-term cash flow deficits and surpluses. 
C)  The first step in short-term financial planning is to forecast the company's future net working capital. 
D)  Deficits resulting from investments in long-term projects are often financed using long-term sources of capital, such as equity or long-term bonds. 
A)  If a company anticipates an ongoing surplus of cash, it may choose to increase its dividend payout. 
B)  Seasonal sales can create large short-term cash flow deficits and surpluses. 
C)  The first step in short-term financial planning is to forecast the company's future net working capital. 
D)  Deficits resulting from investments in long-term projects are often financed using long-term sources of capital, such as equity or long-term bonds.

Question 2

Which of the following statements is false?

Accepted Answer

A)  Because investment in permanent working capital is required so long as the firm remains in business, it constitutes a long-term investment. 
B)  Because temporary working capital represents a short-term need, the firm should finance this portion of its investment with short-term financing. 
C)  Temporary working capital is the difference between the lowest level of investment in short-term assets and the permanent working capital investment. 
D)  The matching principle states that short-term needs should be financed with short-term debt and long-term needs should be financed with long-term sources of funds. 
A)  Because investment in permanent working capital is required so long as the firm remains in business, it constitutes a long-term investment. 
B)  Because temporary working capital represents a short-term need, the firm should finance this portion of its investment with short-term financing. 
C)  Temporary working capital is the difference between the lowest level of investment in short-term assets and the permanent working capital investment. 
D)  The matching principle states that short-term needs should be financed with short-term debt and long-term needs should be financed with long-term sources of funds.

Question 3

Which of the following statements is false?

Accepted Answer

A)  When following a conservative financing policy, a firm would use long-term sources of funds to finance its fixed assets, permanent working capital, and some of its seasonal needs. 
B)  An aggressive financing policy also increases the possibility that managers of the firm will use this excess cash nonproductively-for example, on perquisites for themselves. 
C)  A firm could finance its short-term needs with long-term debt, a practice known as a conservative financing policy. 
D)  To implement a conservative financing policy effectively, there will necessarily be periods when excess cash is available-those periods when the firm requires little or no investment in temporary working capital. 
A)  When following a conservative financing policy, a firm would use long-term sources of funds to finance its fixed assets, permanent working capital, and some of its seasonal needs. 
B)  An aggressive financing policy also increases the possibility that managers of the firm will use this excess cash nonproductively-for example, on perquisites for themselves. 
C)  A firm could finance its short-term needs with long-term debt, a practice known as a conservative financing policy. 
D)  To implement a conservative financing policy effectively, there will necessarily be periods when excess cash is available-those periods when the firm requires little or no investment in temporary working capital.

Question 4

The major current assets that are used for short-term secured financing are ________.

Accepted Answer

A)  accounts receivable and inventory 
B)  accounts receivable and short-term investments 
C)  inventory and short-term investments 
D)  prepaid expenses and taxes recoverable 
A)  accounts receivable and inventory 
B)  accounts receivable and short-term investments 
C)  inventory and short-term investments 
D)  prepaid expenses and taxes recoverable

Question 5

Occasionally,a company will encounter circumstances in which cash flows are temporarily negative for an unexpected reason.We refer to such a situation as

Accepted Answer

A)  a liquidity shock. 
B)  a negative cash flow shock. 
C)  a negative liquidity shock. 
D)  a cash crunch. 
A)  a liquidity shock. 
B)  a negative cash flow shock. 
C)  a negative liquidity shock. 
D)  a cash crunch.

Question 6

Which of the following statements is false?

Accepted Answer

A)  In a pledging of accounts receivable agreement, the lender reviews the invoices that represent the credit sales of the borrowing firm and decides which credit accounts it will accept as collateral for the loan, based on its own credit standards. 
B)  With a trust receipts loan or floor planning, all inventory items are held in a trust as security for the loan. 
C)  If the factoring agreement is without recourse, the borrowing firm must receive credit approval for a customer from the factor prior to shipping the goods. If the factor gives its approval, the firm ships the goods and the customer is directed to make payment directly to the lender. 
D)  In a warehouse arrangement, the inventory that serves as collateral for the loan is stored in a warehouse. 
A)  In a pledging of accounts receivable agreement, the lender reviews the invoices that represent the credit sales of the borrowing firm and decides which credit accounts it will accept as collateral for the loan, based on its own credit standards. 
B)  With a trust receipts loan or floor planning, all inventory items are held in a trust as security for the loan. 
C)  If the factoring agreement is without recourse, the borrowing firm must receive credit approval for a customer from the factor prior to shipping the goods. If the factor gives its approval, the firm ships the goods and the customer is directed to make payment directly to the lender. 
D)  In a warehouse arrangement, the inventory that serves as collateral for the loan is stored in a warehouse.

Question 7

Calculate the temporary working capital needs for each of the four quarters for Hasbeen Toys.

Accepted Answer

@#IMG-DLM& Working capital = Cash + AR + inventory

Question 8

A a written,legally binding agreement that obligates the bank to lend a firm any amount up to a stated maximum,regardless of the financial condition of the firm (unless the firm is bankrupt)as long as the firm satisfies any restrictions in the agreement is called

Accepted Answer

A)  a bridge loan. 
B)  a single, end-of-period-payment loan. 
C)  a short-term mortgage loan. 
D)  a committed line of credit. 
A)  a bridge loan. 
B)  a single, end-of-period-payment loan. 
C)  a short-term mortgage loan. 
D)  a committed line of credit.

Question 9

In Canada,the overnight rate bank rate is stipulated by ________.

Accepted Answer

A)  the Ministry of Finance 
B)  the domestic capital market 
C)  the Bank of Canada 
D)  the domestic money market 
A)  the Ministry of Finance 
B)  the domestic capital market 
C)  the Bank of Canada 
D)  the domestic money market

Which of the following statements is false?

Which of the following statements is false?

Which of the following statements is false?

The major current assets that are used for short-term secured financing are ________.

Occasionally,a company will encounter circumstances in which cash flows are temporarily negative for an unexpected reason.We refer to such a situation as

Which of the following statements is false?

Calculate the temporary working capital needs for each of the four quarters for Hasbeen Toys.

A a written,legally binding agreement that obligates the bank to lend a firm any amount up to a stated maximum,regardless of the financial condition of the firm (unless the firm is bankrupt)as long as the firm satisfies any restrictions in the agreement is called

In Canada,the overnight rate bank rate is stipulated by ________.

The Corporation

Introduction to Financial Statement Analysis

Arbitrage and Financial Decision Making

The Time Value of Money

Interest Rates

Valuing Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behaviour and Capital Market Efficiency

Financial Options

Option Valuation

Real Options

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress, managerial Incentives, and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modelling: a Case Study

The Mechanics of Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

Filters

Exam 27: Short-Term Financial Planning

Which of the following statements is false?

Which of the following statements is false?

Which of the following statements is false?

The major current assets that are used for short-term secured financing are ________.

Occasionally,a company will encounter circumstances in which cash flows are temporarily negative for an unexpected reason.We refer to such a situation as

Which of the following statements is false?

Calculate the temporary working capital needs for each of the four quarters for Hasbeen Toys.

A a written,legally binding agreement that obligates the bank to lend a firm any amount up to a stated maximum,regardless of the financial condition of the firm (unless the firm is bankrupt)as long as the firm satisfies any restrictions in the agreement is called

In Canada,the overnight rate bank rate is stipulated by ________.

The Corporation

Introduction to Financial Statement Analysis

Arbitrage and Financial Decision Making

The Time Value of Money

Interest Rates

Valuing Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Capital Markets and the Pricing of Risk

Optimal Portfolio Choice and the Capital Asset Pricing Model

Estimating the Cost of Capital

Investor Behaviour and Capital Market Efficiency

Financial Options

Option Valuation

Real Options

Capital Structure in a Perfect Market

Debt and Taxes

Financial Distress, managerial Incentives, and Information

Payout Policy

Capital Budgeting and Valuation With Leverage

Valuation and Financial Modelling: a Case Study

The Mechanics of Raising Equity Capital

Debt Financing

Leasing

Working Capital Management

Mergers and Acquisitions

Corporate Governance

Risk Management

International Corporate Finance

Filters