Question 1

Which of the following resemble checks,but differ in that they are payable by the firm issuing them rather than payable by a bank?

Accepted Answer

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

Question 2

Suppose that Mack Industries has annual sales of $10 million,cost of goods sold of $6.5 million,average inventories of $1 million,and average accounts receivable of $600,000.Assuming that all of Mack's sales are on credit,what will be the firm's operating cycle?

Accepted Answer

A) 34.25 
B) 21.9 
C) 56.15 
D) 78.05 
A) 34.25 
B) 21.9 
C) 56.15 
D) 78.05

Question 3

Would it be worth it to incur a compensating balance of $2,000 in order to get a 1.5-percent-lower interest rate on a 1-year,pure discount loan of $100,000?

Accepted Answer

A) Yes B) No C) Not enough information is given to determine It depends upon whether $100,000 × (1 + i) or $102,000 × (1 + [i - 0.015]) is larger.The compensating balance for the lower loan rate will make sense if: $100,000 × (1 + i) > $102,000 × (1 + [i - 0.015]) ($100,000/$102,000) × (1 + i) > (1 + [i - 0.015]) 0)9804 + 0.9804i > 1 + i - 0.015 -0)0196i > 0.0046 I < -0.234694 In other words, only if the rate is less than -23.47 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 It depends upon whether $100,000 × (1 + i) or $102,000 × (1 + [i - 0.015]) is larger.The compensating balance for the lower loan rate will make sense if: $100,000 × (1 + i) > $102,000 × (1 + [i - 0.015]) ($100,000/$102,000) × (1 + i) > (1 + [i - 0.015]) 0)9804 + 0.9804i > 1 + i - 0.015 -0)0196i > 0.0046 I < -0.234694 In other words, only if the rate is less than -23.47 percent.Since this is not likely to happen, the lower rate associated with the compensating balance isn't worth it.

Question 4

Detail the major differences between the three inventory loan types.

Accepted Answer

1.Under a blanket inventory lien,the len

Question 5

When the firm finances the seasonally adjusted average level of asset demand with long-term debt and equity,the firm is said to follow a:

Accepted Answer

A) seasonal-dependent financing policy 
B) relaxed financing policy 
C) restricted financing policy 
D) compromise financing policy 
A) seasonal-dependent financing policy 
B) relaxed financing policy 
C) restricted financing policy 
D) compromise financing policy

Question 6

B&O Cos.has sales of $850,000 and cost of goods sold of $490,000.The firm had a beginning inventory of $69,000 and an ending inventory of $54,000.What is the length of the days' sales in inventory?

Accepted Answer

A) 40.22 days 
B) 51.40 days 
C) 23.19 days 
D) 29.63 days 
A) 40.22 days 
B) 51.40 days 
C) 23.19 days 
D) 29.63 days

Question 7

All of the following are the different types of float the firm may experience in its collections EXCEPT:

Accepted Answer

A) mail float. 
B) availability float. 
C) check kiting float. 
D) processing float. 
A) mail float. 
B) availability float. 
C) check kiting float. 
D) processing float.

Question 8

All of the following are examples of carrying costs EXCEPT:

Accepted Answer

A) rental payments on storage facility where inventory is maintained. 
B) the lost sale if the company runs out of a particular model. 
C) the opportunity costs associated with having capital tied up in current assets instead of more productive fixed assets. 
D) All of these are examples of carrying costs. 
A) rental payments on storage facility where inventory is maintained. 
B) the lost sale if the company runs out of a particular model. 
C) the opportunity costs associated with having capital tied up in current assets instead of more productive fixed assets. 
D) All of these are examples of carrying costs.

Question 9

Imagine a firm has a temporary surplus of cash meant to fund an expansion project in the next nine months.Which of the following statements is correct?

Accepted Answer

A) The firm will probably want to invest this preferred stock. 
B) The firm will probably want to invest this surplus in U.S.Treasury bonds. 
C) The firm will probably want to invest this surplus in U.S.Treasury bills. 
D) The firm will probably want to invest this surplus in whichever security yields the highest return. 
A) The firm will probably want to invest this preferred stock. 
B) The firm will probably want to invest this surplus in U.S.Treasury bonds. 
C) The firm will probably want to invest this surplus in U.S.Treasury bills. 
D) The firm will probably want to invest this surplus in whichever security yields the highest return.

Question 10

If demand for a firm's products suddenly slows down so that inventory increases while sales decrease,how will the firm's needs for net working capital react?

Accepted Answer

The firm's needs for net worki

Question 11

The optimal cash replenishment level will increase with all of the following changes EXCEPT:

Accepted Answer

A) the transaction cost decreases. 
B) the annual demand for cash increases. 
C) the interest rate decreases. 
D) All of these will increase the optimal cash replenishment level. 
A) the transaction cost decreases. 
B) the annual demand for cash increases. 
C) the interest rate decreases. 
D) All of these will increase the optimal cash replenishment level.

Question 12

List and explain the "five C's" of credit analysis.

Accepted Answer

1.Capacity: Ensure that borrower has the

Question 13

Which of these is the period of time after a check has been written,but not yet cleared and deposited?

Accepted Answer

A) Liquid current assets 
B) Safety stock 
C) Overnight securities 
D) Float 
A) Liquid current assets 
B) Safety stock 
C) Overnight securities 
D) Float

Question 14

Suppose that LilyMac Photography has annual sales of $218,000,cost of goods sold of $123,000,average inventories of $1,250,and average accounts receivable of $22,000.Assuming that all of LilyMac's sales are on credit,what will be the firm's operating cycle?

Accepted Answer

A) 40.54 days 
B) 45.13 days 
C) 41.16 days 
D) 37.82 days 
A) 40.54 days 
B) 45.13 days 
C) 41.16 days 
D) 37.82 days

Question 15

Suppose your firm is seeking a five-year,amortizing $900,000 loan with annual payments and your bank is offering you the choice between a $950,000 loan with a $50,000 compensating balance and a $900,000 loan without a compensating balance.If the interest rate on the $900,000 loan is 9.5 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) 9.5 percent 
B) 5.56 percent 
C) 7.43 percent 
D) Not enough information is given to determine 
A) 9.5 percent 
B) 5.56 percent 
C) 7.43 percent 
D) Not enough information is given to determine

Question 16

Which of the following is a money-market security,issued by large banks and medium-to-large corporations,that matures in nine months or less?

Accepted Answer

A) Banker's paper 
B) Commercial paper 
C) Banker's acceptance 
D) Commercial acceptance 
A) Banker's paper 
B) Commercial paper 
C) Banker's acceptance 
D) Commercial acceptance

Question 17

If a firm has a cash cycle of 71 days and an operating cycle of 139 days,what is its average payment period?

Accepted Answer

A) 210 days 
B) 68 days 
C) 53 days 
D) 41 days 
A) 210 days 
B) 68 days 
C) 53 days 
D) 41 days

Which of the following resemble checks,but differ in that they are payable by the firm issuing them rather than payable by a bank?

Suppose that Mack Industries has annual sales of $10 million,cost of goods sold of $6.5 million,average inventories of $1 million,and average accounts receivable of $600,000.Assuming that all of Mack's sales are on credit,what will be the firm's operating cycle?

Would it be worth it to incur a compensating balance of $2,000 in order to get a 1.5-percent-lower interest rate on a 1-year,pure discount loan of $100,000?

Detail the major differences between the three inventory loan types.

When the firm finances the seasonally adjusted average level of asset demand with long-term debt and equity,the firm is said to follow a:

B&O Cos.has sales of $850,000 and cost of goods sold of $490,000.The firm had a beginning inventory of $69,000 and an ending inventory of $54,000.What is the length of the days' sales in inventory?

All of the following are the different types of float the firm may experience in its collections EXCEPT:

All of the following are examples of carrying costs EXCEPT:

Imagine a firm has a temporary surplus of cash meant to fund an expansion project in the next nine months.Which of the following statements is correct?

If demand for a firm's products suddenly slows down so that inventory increases while sales decrease,how will the firm's needs for net working capital react?

The optimal cash replenishment level will increase with all of the following changes EXCEPT:

List and explain the "five C's" of credit analysis.

Which of these is the period of time after a check has been written,but not yet cleared and deposited?

Suppose that LilyMac Photography has annual sales of $218,000,cost of goods sold of $123,000,average inventories of $1,250,and average accounts receivable of $22,000.Assuming that all of LilyMac's sales are on credit,what will be the firm's operating cycle?

Which of the following is a money-market security,issued by large banks and medium-to-large corporations,that matures in nine months or less?

If a firm has a cash cycle of 71 days and an operating cycle of 139 days,what is its average payment period?

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

Which of the following resemble checks,but differ in that they are payable by the firm issuing them rather than payable by a bank?

Suppose that Mack Industries has annual sales of $10 million,cost of goods sold of $6.5 million,average inventories of $1 million,and average accounts receivable of $600,000.Assuming that all of Mack's sales are on credit,what will be the firm's operating cycle?

Would it be worth it to incur a compensating balance of $2,000 in order to get a 1.5-percent-lower interest rate on a 1-year,pure discount loan of $100,000?

Detail the major differences between the three inventory loan types.

When the firm finances the seasonally adjusted average level of asset demand with long-term debt and equity,the firm is said to follow a:

B&O Cos.has sales of $850,000 and cost of goods sold of $490,000.The firm had a beginning inventory of $69,000 and an ending inventory of $54,000.What is the length of the days' sales in inventory?

All of the following are the different types of float the firm may experience in its collections EXCEPT:

All of the following are examples of carrying costs EXCEPT:

Imagine a firm has a temporary surplus of cash meant to fund an expansion project in the next nine months.Which of the following statements is correct?

If demand for a firm's products suddenly slows down so that inventory increases while sales decrease,how will the firm's needs for net working capital react?

The optimal cash replenishment level will increase with all of the following changes EXCEPT:

List and explain the "five C's" of credit analysis.

Which of these is the period of time after a check has been written,but not yet cleared and deposited?

Suppose that LilyMac Photography has annual sales of $218,000,cost of goods sold of $123,000,average inventories of $1,250,and average accounts receivable of $22,000.Assuming that all of LilyMac's sales are on credit,what will be the firm's operating cycle?

Which of the following is a money-market security,issued by large banks and medium-to-large corporations,that matures in nine months or less?

If a firm has a cash cycle of 71 days and an operating cycle of 139 days,what is its average payment period?

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