Question 1

When a firm is determining which current asset policy would work best for them,what factors must they consider?

Accepted Answer

1.Current and future expected

Question 2

KJ Enterprises estimates that it takes,on average,three days for their customers' payments to reach them,one day for the payments to be processed and deposited by their bookkeeping department,and two more days for the checks to clear once they're deposited.What is their collection float?

Accepted Answer

A) one day 
B) two days 
C) three days 
D) six days 
A) one day 
B) two days 
C) three days 
D) six days

Question 3

The inventory order quantity that minimizes total holding and ordering costs is which of the following?

Accepted Answer

A) Barabas economic order quantity (EOQ) 
B) Cornett economic order quantity (EOQ) 
C) Operations management 
D) Production management 
A) Barabas economic order quantity (EOQ) 
B) Cornett economic order quantity (EOQ) 
C) Operations management 
D) Production management

Question 4

Suppose your firm is seeking a 7-year,amortizing $100,000 loan with annual payments and your bank is offering you the choice between a $110,000 loan with a $10,000 compensating balance and a $100,000 loan without a compensating balance.If the interest rate on the $100,000 loan is 7 percent,how low would the interest rate on the loan with the compensating balance have to be in order for you to choose it?

Accepted Answer

A) 7 percent 
B) 10 percent 
C) 4.34 percent 
D) Not enough information is given to know 
A) 7 percent 
B) 10 percent 
C) 4.34 percent 
D) Not enough information is given to know

Question 5

Would it be worth it to incur a compensating balance of $9,000 in order to get a 0.70 percent lower interest rate on a 1-year,pure discount loan of $250,000?

Accepted Answer

A) Yes B) No C) Not enough information is given to determine The repayment on the $250,000 loan without the compensating balance would be $250,000 × (1 + i), vs.$259,000 × (1 + [i - 0.007]): $250,000 × (1 + i) > $259,000 × (1 + [i - 0.007]) ($250,000/$259,000) × (1 + i) > (1 + [i - 0.007]) 0)9653 + 0.9653i > 1 + i - 0.007 -0)0347i > 0.0277 I < -0.7983 In other words, only if the rate is less than -79.83 percent.Since this is not likely to happen, the lower rate associated with the compensating balance isn't worth it. A) Yes B) No C) Not enough information is given to determine The repayment on the $250,000 loan without the compensating balance would be $250,000 × (1 + i), vs.$259,000 × (1 + [i - 0.007]): $250,000 × (1 + i) > $259,000 × (1 + [i - 0.007]) ($250,000/$259,000) × (1 + i) > (1 + [i - 0.007]) 0)9653 + 0.9653i > 1 + i - 0.007 -0)0347i > 0.0277 I < -0.7983 In other words, only if the rate is less than -79.83 percent.Since this is not likely to happen, the lower rate associated with the compensating balance isn't worth it.

Question 6

If a firm has a cash cycle of 75 days and an operating cycle of 120 days,what is its payables turnover?

Accepted Answer

A) 8.11 
B) 7.19 
C) 5.97 
D) 6.73 
A) 8.11 
B) 7.19 
C) 5.97 
D) 6.73

Question 7

Which of the following current asset financing policies reflects the firm financing the seasonally-adjusted average level of asset demand with long-term debt and equity enabling it to use both short-term financing and short-term investing as needed?

Accepted Answer

A) Flexible financing policy 
B) Restrictive financing policy 
C) Compromise financing policy 
D) Alternative financing policy 
A) Flexible financing policy 
B) Restrictive financing policy 
C) Compromise financing policy 
D) Alternative financing policy

Question 8

If a firm is going to take a loan with a bank that has a compensating balance requirement,how does that affect the amount of money the firm must borrow?

Accepted Answer

The firm usually ends up borro

Question 9

Suppose that Freddy's Fries has annual sales of $500,000,cost of goods sold of $375,000,average inventories of $9,000,and average accounts receivable of $25,000.Assuming that all of Freddy's sales are on credit,what will be the firm's operating cycle?

Accepted Answer

A) 27.01 
B) 18.25 
C) 8.76 
D) 9.49 
A) 27.01 
B) 18.25 
C) 8.76 
D) 9.49

Question 10

Which of the following is a checking account that the firm sets up so that the bank agrees to automatically transfer funds from an interest-bearing account to pay off any checks presented?

Accepted Answer

A) Lockbox system 
B) Concentration banking 
C) Wire transfers 
D) Zero-balance account 
A) Lockbox system 
B) Concentration banking 
C) Wire transfers 
D) Zero-balance account

Question 11

Painting,Inc.has sales of $400,000 and cost of goods sold of $275,000.The firm had a beginning inventory of $42,000 and an ending inventory of $38,000.What is the length of the days' sales in inventory?

Accepted Answer

A) 53.09 days 
B) 36.50 days 
C) 38.33 days 
D) 50.44 days 
A) 53.09 days 
B) 36.50 days 
C) 38.33 days 
D) 50.44 days

Question 12

Which of the following is defined as costs associated with not having sufficient cash,inventory,or accounts receivable?

Accepted Answer

A) Net working capital costs 
B) Opportunity costs 
C) Shortage costs 
D) Cash cycle costs 
A) Net working capital costs 
B) Opportunity costs 
C) Shortage costs 
D) Cash cycle costs

Question 13

What effect does decreasing the standard deviation in daily cash flows have on the cash return point in the Miller-Orr model?

Accepted Answer

A) It will cause the cash return point to increase. 
B) It will cause the cash return point to decrease. 
C) It has no impact on the cash return point. 
D) It will cause the cash return point to first decrease, then increase. 
A) It will cause the cash return point to increase. 
B) It will cause the cash return point to decrease. 
C) It has no impact on the cash return point. 
D) It will cause the cash return point to first decrease, then increase.

Question 14

What is the difference between a lockbox system and concentration banking?

Accepted Answer

A) In concentration banking, both physical collection and processing take place close to the customer but in a lockbox system, neither the collections nor processing take place close to the customer. 
B) In a lockbox system, customers' payments are physically collected close to them and much of the processing takes place close to the bank, but in concentration banking both physical collection and processing take place close to the bank. 
C) Concentration banking involves using several banks to fund a large loan and lockbox systems deal with the ability to speed up collections. 
D) None of these. 
A) In concentration banking, both physical collection and processing take place close to the customer but in a lockbox system, neither the collections nor processing take place close to the customer. 
B) In a lockbox system, customers' payments are physically collected close to them and much of the processing takes place close to the bank, but in concentration banking both physical collection and processing take place close to the bank. 
C) Concentration banking involves using several banks to fund a large loan and lockbox systems deal with the ability to speed up collections. 
D) None of these.

Question 15

Reese's Resources faces a smooth annual demand for cash of $15 million; incurs transaction costs of $125 every time they sell marketable securities,and can earn 4.5 percent on their marketable securities.What will be their optimal cash replenishment level?

Accepted Answer

A) $28,867.51 
B) $288,675.13 
C) $61,237.24 
D) $6,123.72 
A) $28,867.51 
B) $288,675.13 
C) $61,237.24 
D) $6,123.72

Question 16

Which of the following describes the place over which the bank-to-bank transfers are conducted within the United States?

Accepted Answer

A) Lockbox system 
B) Concentration banking 
C) Wire transfers 
D) Fedwire 
A) Lockbox system 
B) Concentration banking 
C) Wire transfers 
D) Fedwire

Question 17

Joe's Burgers would like to maintain their cash account at a minimum level of $300,000,but expects the standard deviation in net daily cash flows to be $20,000; the effective annual rate on marketable securities to be 5.2 percent per year; and the trading cost per sale or purchase of marketable securities to be $22.55 per transaction.What will be their optimal upper cash limit?

Accepted Answer

A) $320,000.00 
B) $336,492.68 
C) $409,478.04 
D) $1,009,478.04 
A) $320,000.00 
B) $336,492.68 
C) $409,478.04 
D) $1,009,478.04

Question 18

A firm may keep part of its capital tied up in cash for three primary reasons.List the reasons and explain each.

Accepted Answer

1.Transaction facilitation.Firms need ca

Question 19

The operating cycle will increase with all of the following changes EXCEPT:

Accepted Answer

A) the cost of goods sold increases. 
B) the level of accounts receivable increases. 
C) the level of inventory increases. 
D) All of these will increase the operating cycle. 
A) the cost of goods sold increases. 
B) the level of accounts receivable increases. 
C) the level of inventory increases. 
D) All of these will increase the operating cycle.

Question 20

The area of management concerned with designing and overseeing the process of production is which of the following?

Accepted Answer

A) Production science 
B) Production management 
C) Operations management 
D) Operations science 
A) Production science 
B) Production management 
C) Operations management 
D) Operations science

When a firm is determining which current asset policy would work best for them,what factors must they consider?

KJ Enterprises estimates that it takes,on average,three days for their customers' payments to reach them,one day for the payments to be processed and deposited by their bookkeeping department,and two more days for the checks to clear once they're deposited.What is their collection float?

The inventory order quantity that minimizes total holding and ordering costs is which of the following?

Would it be worth it to incur a compensating balance of $9,000 in order to get a 0.70 percent lower interest rate on a 1-year,pure discount loan of $250,000?

If a firm has a cash cycle of 75 days and an operating cycle of 120 days,what is its payables turnover?

Which of the following current asset financing policies reflects the firm financing the seasonally-adjusted average level of asset demand with long-term debt and equity enabling it to use both short-term financing and short-term investing as needed?

If a firm is going to take a loan with a bank that has a compensating balance requirement,how does that affect the amount of money the firm must borrow?

Suppose that Freddy's Fries has annual sales of $500,000,cost of goods sold of $375,000,average inventories of $9,000,and average accounts receivable of $25,000.Assuming that all of Freddy's sales are on credit,what will be the firm's operating cycle?

Which of the following is a checking account that the firm sets up so that the bank agrees to automatically transfer funds from an interest-bearing account to pay off any checks presented?

Painting,Inc.has sales of $400,000 and cost of goods sold of $275,000.The firm had a beginning inventory of $42,000 and an ending inventory of $38,000.What is the length of the days' sales in inventory?

Which of the following is defined as costs associated with not having sufficient cash,inventory,or accounts receivable?

What effect does decreasing the standard deviation in daily cash flows have on the cash return point in the Miller-Orr model?

What is the difference between a lockbox system and concentration banking?

Reese's Resources faces a smooth annual demand for cash of $15 million; incurs transaction costs of $125 every time they sell marketable securities,and can earn 4.5 percent on their marketable securities.What will be their optimal cash replenishment level?

Which of the following describes the place over which the bank-to-bank transfers are conducted within the United States?

A firm may keep part of its capital tied up in cash for three primary reasons.List the reasons and explain each.

The operating cycle will increase with all of the following changes EXCEPT:

The area of management concerned with designing and overseeing the process of production is which of the following?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters

Exam 14: Working Capital and Policies

When a firm is determining which current asset policy would work best for them,what factors must they consider?

KJ Enterprises estimates that it takes,on average,three days for their customers' payments to reach them,one day for the payments to be processed and deposited by their bookkeeping department,and two more days for the checks to clear once they're deposited.What is their collection float?

The inventory order quantity that minimizes total holding and ordering costs is which of the following?

Would it be worth it to incur a compensating balance of $9,000 in order to get a 0.70 percent lower interest rate on a 1-year,pure discount loan of $250,000?

If a firm has a cash cycle of 75 days and an operating cycle of 120 days,what is its payables turnover?

Which of the following current asset financing policies reflects the firm financing the seasonally-adjusted average level of asset demand with long-term debt and equity enabling it to use both short-term financing and short-term investing as needed?

If a firm is going to take a loan with a bank that has a compensating balance requirement,how does that affect the amount of money the firm must borrow?

Suppose that Freddy's Fries has annual sales of $500,000,cost of goods sold of $375,000,average inventories of $9,000,and average accounts receivable of $25,000.Assuming that all of Freddy's sales are on credit,what will be the firm's operating cycle?

Which of the following is a checking account that the firm sets up so that the bank agrees to automatically transfer funds from an interest-bearing account to pay off any checks presented?

Painting,Inc.has sales of $400,000 and cost of goods sold of $275,000.The firm had a beginning inventory of $42,000 and an ending inventory of $38,000.What is the length of the days' sales in inventory?

Which of the following is defined as costs associated with not having sufficient cash,inventory,or accounts receivable?

What effect does decreasing the standard deviation in daily cash flows have on the cash return point in the Miller-Orr model?

What is the difference between a lockbox system and concentration banking?

Reese's Resources faces a smooth annual demand for cash of $15 million; incurs transaction costs of $125 every time they sell marketable securities,and can earn 4.5 percent on their marketable securities.What will be their optimal cash replenishment level?

Which of the following describes the place over which the bank-to-bank transfers are conducted within the United States?

A firm may keep part of its capital tied up in cash for three primary reasons.List the reasons and explain each.

The operating cycle will increase with all of the following changes EXCEPT:

The area of management concerned with designing and overseeing the process of production is which of the following?

Introduction to Financial Management

Reviewing Financial Statements

Analyzing Financial Statements

Time Value of Money

Time Value of Money

Valuing Bonds

Valuing Stockspart

Characterizing Risk and Return

Estimating Risk and Return

Calculating the Cost of Capital

Estimating Cash Flows on Capital Budgeting Projects

Weighing Net Present Value and Other Capital Budgeting Criteria

Financial Planning and Forecasting

Assessing Long-Term Debt, equity, and Capital Structure

Sharing Firm Wealth: Dividends, share Repurchases and Other Payouts

Issuing Capital and the Investment Banking Process

International Corporate Finance

Mergers and Acquisitions and Financial Distress

Filters