Question 1

Trade credit is a source of spontaneous financing.

Accepted Answer

A) True 
 B)False  True

Question 2

An increase in ________ would increase a firm's current ratio and net working capital.

Accepted Answer

A) notes payable 
B) inventories 
C) cash 
D) both B and C 
A) notes payable 
B) inventories 
C) cash 
D) both B and C D

Question 3

Marketable securities are near-cash assets because they can be converted into cash quickly.

Accepted Answer

A) True 
 B)False  True

Question 4

Working capital refers to investment in current assets,while net working capital is the difference between current assets and current liabilities.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is NOT a spontaneous source of financing?

Accepted Answer

A) Accrued salaries payable 
B) Loans secured by accounts receivable 
C) Accrued taxes payable 
D) Accounts payable 
A) Accrued salaries payable 
B) Loans secured by accounts receivable 
C) Accrued taxes payable 
D) Accounts payable

Question 6

Which of the following is most consistent with the self-liquidating debt principle in working capital management?

Accepted Answer

A) Fixed assets should be financed with short-term notes payable. 
B) Inventory should be financed with preferred stock. 
C) Accounts receivable should be financed with short-term lines of credit. 
D) Borrow on a floating rate basis to finance investments in permanent assets. 
A) Fixed assets should be financed with short-term notes payable. 
B) Inventory should be financed with preferred stock. 
C) Accounts receivable should be financed with short-term lines of credit. 
D) Borrow on a floating rate basis to finance investments in permanent assets.

Question 7

The operating cycle can never be longer than the cash conversion cycle.

Accepted Answer

A) True 
 B)False

Question 8

Treasury bills are a safer choice than bank deposits for very large sums.

Accepted Answer

A) True 
 B)False

Question 9

Describe the differences between secured and unsecured short-term credit.

Accepted Answer

Secured loans are backed by the pledge o

Question 10

Investing in additional marketable securities and inventories creates higher profitability and lower liquidity.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is most likely to occur if a firm under-invests in net working capital?

Accepted Answer

A) The firm might not have sufficient cash to pay its bill in a timely manner. 
B) The firm might not have adequate inventory to meet the needs of its customers. 
C) The firm could be losing sales because its terms of sale are too strict. 
D) All of the above. 
A) The firm might not have sufficient cash to pay its bill in a timely manner. 
B) The firm might not have adequate inventory to meet the needs of its customers. 
C) The firm could be losing sales because its terms of sale are too strict. 
D) All of the above.

Question 12

Which of the following will reduce the liquidity of a firm? An increase in

Accepted Answer

A) short-term notes payable. 
B) accounts payable. 
C) current assets. 
D) both A and B. 
A) short-term notes payable. 
B) accounts payable. 
C) current assets. 
D) both A and B.

Question 13

Which of the following factors influence the size of the firm's investments in accounts receivable?

Accepted Answer

A) Terms of sale 
B) Required minimum balance 
C) Customer quality 
D) A and C 
A) Terms of sale 
B) Required minimum balance 
C) Customer quality 
D) A and C

Question 14

The Smith Corporation has purchased $500,000 worth of inventory.The vendor offers terms of 1/15 net 45.Unfortunately,Smith does not have enough cash available to take advantage of the discount.It can borrow $500,000 from Wesson National Bank for 30 days at an annual percentage rate of 6%.Should Smith forego the discount or pay within the discount period with money borrowed from the bank?

Accepted Answer

In either case,Smith will effe

Question 15

The primary sources of collateral for short-term secured loans are accounts receivable and inventory.

Accepted Answer

A) True 
 B)False

Question 16

Once a cash discount period has passed

Accepted Answer

A) one should pay immediately. 
B) there is no financial incentive to pay before the final due date. 
C) one should pay after the final due date. 
D) cannot be determined from the information. 
A) one should pay immediately. 
B) there is no financial incentive to pay before the final due date. 
C) one should pay after the final due date. 
D) cannot be determined from the information.

Question 17

Spontaneous sources of financing may be either short-term or long-term.

Accepted Answer

A) True 
 B)False

Question 18

Current assets of NorthPole.com at the end of each quarter were: 1st quarter $1.3 million,2nd quarter $1.7 million,3rd quarter $1.5 million and 4th quarter $2.2 million.The best estimate for North Pole's permanent current assets is

Accepted Answer

A) $2.2 million. 
B) $1.675 million. 
C) $1.3 million. 
D) $0.9 million. 
A) $2.2 million. 
B) $1.675 million. 
C) $1.3 million. 
D) $0.9 million.

Question 19

Which of the following is most likely to be a temporary source of financing?

Accepted Answer

A) Commercial paper 
B) Preferred stock 
C) Long-term debt 
D) All of the above 
A) Commercial paper 
B) Preferred stock 
C) Long-term debt 
D) All of the above

Question 20

Trade credit is an example of which of the following sources of financing?

Accepted Answer

A) Spontaneous 
B) Temporary 
C) Permanent 
D) Both A and B 
A) Spontaneous 
B) Temporary 
C) Permanent 
D) Both A and B

Trade credit is a source of spontaneous financing.

An increase in ________ would increase a firm's current ratio and net working capital.

Marketable securities are near-cash assets because they can be converted into cash quickly.

Working capital refers to investment in current assets,while net working capital is the difference between current assets and current liabilities.

Which of the following is NOT a spontaneous source of financing?

Which of the following is most consistent with the self-liquidating debt principle in working capital management?

The operating cycle can never be longer than the cash conversion cycle.

Treasury bills are a safer choice than bank deposits for very large sums.

Describe the differences between secured and unsecured short-term credit.

Investing in additional marketable securities and inventories creates higher profitability and lower liquidity.

Which of the following is most likely to occur if a firm under-invests in net working capital?

Which of the following will reduce the liquidity of a firm? An increase in

Which of the following factors influence the size of the firm's investments in accounts receivable?

The primary sources of collateral for short-term secured loans are accounts receivable and inventory.

Once a cash discount period has passed

Spontaneous sources of financing may be either short-term or long-term.

Current assets of NorthPole.com at the end of each quarter were: 1st quarter $1.3 million,2nd quarter $1.7 million,3rd quarter $1.5 million and 4th quarter $2.2 million.The best estimate for North Pole's permanent current assets is

Which of the following is most likely to be a temporary source of financing?

Trade credit is an example of which of the following sources of financing?

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

International Business Finance

Corporate Risk Management

Filters

Exam 18: Working Capital Management

Trade credit is a source of spontaneous financing.

An increase in ________ would increase a firm's current ratio and net working capital.

Marketable securities are near-cash assets because they can be converted into cash quickly.

Working capital refers to investment in current assets,while net working capital is the difference between current assets and current liabilities.

Which of the following is NOT a spontaneous source of financing?

Which of the following is most consistent with the self-liquidating debt principle in working capital management?

The operating cycle can never be longer than the cash conversion cycle.

Treasury bills are a safer choice than bank deposits for very large sums.

Describe the differences between secured and unsecured short-term credit.

Investing in additional marketable securities and inventories creates higher profitability and lower liquidity.

Which of the following is most likely to occur if a firm under-invests in net working capital?

Which of the following will reduce the liquidity of a firm? An increase in

Which of the following factors influence the size of the firm's investments in accounts receivable?

The primary sources of collateral for short-term secured loans are accounts receivable and inventory.

Once a cash discount period has passed

Spontaneous sources of financing may be either short-term or long-term.

Current assets of NorthPole.com at the end of each quarter were: 1st quarter $1.3 million,2nd quarter $1.7 million,3rd quarter $1.5 million and 4th quarter $2.2 million.The best estimate for North Pole's permanent current assets is

Which of the following is most likely to be a temporary source of financing?

Trade credit is an example of which of the following sources of financing?

Getting Started-Principles of Finance

Firms and the Financial Market

Understanding Financial Statements,taxes,and Cash Flows

Financial Analysis-Sizing up Firm Performance

Time Value of Money-The Basics

The Time Value of Money-Annuities and Other Topics

An Introduction to Risk and Return-History of Financial Market Returns

Risk and Return-Capital Market Theory

Debt Valuation and Interest Rates

Stock Valuation

Investment Decision Criteria

Analyzing Project Cash Flows

Risk Analysis and Project Evaluation

The Cost of Capital

Capital Structure Policy

Dividend Policy

Financial Forecasting and Planning

International Business Finance

Corporate Risk Management

Filters