Question 1

Eurodollars

Accepted Answer

A)   can only be redeemed at U.S. banks or their branches in European countries.
B)   are U.S. dollars that have been converted into several European currencies.
C)   may be borrowed by anyone who wishes to hold U.S. dollars.
D)   can only be redeemed at U.S. banks or their branches in any foreign country.E) B) and D)
F) None of the above

Question 2

One of the first considerations in cash management is

Accepted Answer

A)   to have as much cash as possible on hand.
B)   synchronization of cash inflows and cash outflows.
C)   profitability.
D)   to put any excess cash into accounts receivable.E) A) and C)
F) A) and D)

Question 3

Cost savings from Just-In-Time (JIT)  inventory management include(s)

Accepted Answer

A)   reduced overhead expenses.
B)   lower inventory financing costs.
C)   greater productivity.
D)   All of the options are true.E) C) and D)
F) A) and D)

Question 4

Generally, the safest and most marketable instrument for short-term investment is

Accepted Answer

A)   commercial paper.
B)   large denomination certificate.
C)   Treasury notes.
D)   Treasury bills.E) B) and C)
F) A) and C)

Question 5

Price Corp. is considering selling to a group of new customers and creating new annual sales of $90,000. Five percent will be uncollectible. The collection cost on all accounts is 3% of new sales, the cost of producing and selling is 80% of sales, and the firm is in the 30% tax bracket. What is the profit on new sales?

Accepted Answer

A)   $7,560
B)   $9,660
C)   $7,245
D)   $10,710E) None of the above
F) C) and D)

Question 6

"Extended disbursement float" has to do with the length of time a corporation takes to collect bills.

Accepted Answer

A) True 
 B)False

Question 7

Cash management becomes more important as the level of short-term interest rates rises.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not a method of speeding up collections of cash?

Accepted Answer

A)   Lock-box system.
B)   Regional collection centers.
C)   Extended disbursement float.
D)   All of the options are methods for speeding up collections.E) A) and C)
F) A) and D)

Question 9

If a company can implement cash management systems and save three days by reducing remittance time and one day by increasing disbursement time based on $2,000,000 in average daily remittances and $2,500,000 in average daily disbursements and its return on freed-up funds is 10%, what is the maximum that it should spend on the system?

Accepted Answer

A)   $2,000,000
B)   $650,000
C)   $850,000
D)   $1,000,000E) B) and C)
F) B) and D)

Question 10

The use of "float" has dramatically increased since the Check Clearing for the 21st Century Act was passed.

Accepted Answer

A) True 
 B)False

Question 11

When considering a potential customer, the firm should overlook the customer's credit history if the customer is purchasing a huge order.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is generally considered to be the least liquid of current assets?

Accepted Answer

A)   Accounts receivable
B)   Inventory
C)   Marketable securities
D)   Cash equivalentsE) B) and D)
F) None of the above

Question 13

Certificates of deposit purchased in small denominations of $1,000 at commercial banks or savings and loan organizations are readily marketable.

Accepted Answer

A) True 
 B)False

Question 14

When using the economic order quantity model

Accepted Answer

A)   ordering costs increase as the level of inventory increases.
B)   carrying costs decrease as the level of inventory increases.
C)   costs are minimized when total carrying costs and total ordering costs are equal.
D)   None of the options are true.E) All of the above
F) B) and D)

Question 15

Computerized cash management and electronic funds transfer allow firms to carry smaller cash balances.

Accepted Answer

A) True 
 B)False

Question 16

Liquidity of an asset has nothing to do with measuring the required rate of return on the asset.

Accepted Answer

A) True 
 B)False

Question 17

Warren Enterprises expects 20,000 unit sales, has ordering costs of $20 per order, carrying costs of $1.00 per unit, and desires to keep 100 units in safety stock. Assuming level production, what should be its average inventory?

Accepted Answer

A)   200-300
B)   301-400
C)   401-500
D)   501-600E) A) and B)
F) A) and C)

Question 18

A Just-In-Time (JIT)  inventory management program has all but which of the following requirements?

Accepted Answer

A)   Quality production
B)   Large safety stocks
C)   Close ties between suppliers, manufacturers, and customers
D)   Minimizing inventory levelsE) C) and D)
F) A) and B)

Question 19

Assuming that we can earn a 10% return on accounts receivable, which of the following strategies to finance an increase in our accounts receivable balance would be optimal?

Accepted Answer

A)   An increase in bank loans that would cost us 8%
B)   A decrease in inventories that are earning a 16% return
C)   A reduction in marketable securities that are earning a return of 14%
D)   An increase in accounts payable that would cost our firm 15%E) A) and B)
F) B) and C)

Question 20

The difference between the amount of cash on the firm's books and the amount credited to it by its bank is

Accepted Answer

A)   an overdraft.
B)   interest revenue.
C)   extended disbursement.
D)   float.E) None of the above
F) A) and B)

Exam 7: Current Asset Management

Certificates of deposit purchased in small denominations of $1,000 at commercial banks or savings and loan organizations are readily marketable.

Correct Answer
verified

Warren Enterprises expects 20,000 unit sales, has ordering costs of $20 per order, carrying costs of $1.00 per unit, and desires to keep 100 units in safety stock. Assuming level production, what should be its average inventory?

Correct Answer
verified

Eurodollars

Correct Answer
verified

The difference between the amount of cash on the firm's books and the amount credited to it by its bank is

Correct Answer
verified

Computerized cash management and electronic funds transfer allow firms to carry smaller cash balances.

Correct Answer
verified

Which of the following is not a method of speeding up collections of cash?

Correct Answer
verified

The use of "float" has dramatically increased since the Check Clearing for the 21^st Century Act was passed.

Correct Answer
verified

"Extended disbursement float" has to do with the length of time a corporation takes to collect bills.

Correct Answer
verified

Assuming that we can earn a 10% return on accounts receivable, which of the following strategies to finance an increase in our accounts receivable balance would be optimal?

Correct Answer
verified

Liquidity of an asset has nothing to do with measuring the required rate of return on the asset.

Correct Answer
verified

Correct Answer
verified

Generally, the safest and most marketable instrument for short-term investment is

Correct Answer
verified

When considering a potential customer, the firm should overlook the customer's credit history if the customer is purchasing a huge order.

Correct Answer
verified

Correct Answer
verified

Which of the following is generally considered to be the least liquid of current assets?

Correct Answer
verified

One of the first considerations in cash management is

Correct Answer
verified

A Just-In-Time (JIT) inventory management program has all but which of the following requirements?

Correct Answer
verified

When using the economic order quantity model

Correct Answer
verified

Cost savings from Just-In-Time (JIT) inventory management include(s)

Correct Answer
verified

Cash management becomes more important as the level of short-term interest rates rises.

Correct Answer
verified

Exam 7: Current Asset Management

Certificates of deposit purchased in small denominations of $1,000 at commercial banks or savings and loan organizations are readily marketable.

Correct AnswerverifiedShow Answer

Warren Enterprises expects 20,000 unit sales, has ordering costs of $20 per order, carrying costs of $1.00 per unit, and desires to keep 100 units in safety stock. Assuming level production, what should be its average inventory?

Correct AnswerverifiedShow Answer

Eurodollars

Correct AnswerverifiedShow Answer

The difference between the amount of cash on the firm's books and the amount credited to it by its bank is

Correct AnswerverifiedShow Answer

Computerized cash management and electronic funds transfer allow firms to carry smaller cash balances.

Correct AnswerverifiedShow Answer

Which of the following is not a method of speeding up collections of cash?

Correct AnswerverifiedShow Answer

The use of "float" has dramatically increased since the Check Clearing for the 21st Century Act was passed.

Correct AnswerverifiedShow Answer

"Extended disbursement float" has to do with the length of time a corporation takes to collect bills.

Correct AnswerverifiedShow Answer

Assuming that we can earn a 10% return on accounts receivable, which of the following strategies to finance an increase in our accounts receivable balance would be optimal?

Correct AnswerverifiedShow Answer

Liquidity of an asset has nothing to do with measuring the required rate of return on the asset.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Generally, the safest and most marketable instrument for short-term investment is

Correct AnswerverifiedShow Answer

When considering a potential customer, the firm should overlook the customer's credit history if the customer is purchasing a huge order.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is generally considered to be the least liquid of current assets?

Correct AnswerverifiedShow Answer

One of the first considerations in cash management is

Correct AnswerverifiedShow Answer

A Just-In-Time (JIT) inventory management program has all but which of the following requirements?

Correct AnswerverifiedShow Answer

When using the economic order quantity model

Correct AnswerverifiedShow Answer

Cost savings from Just-In-Time (JIT) inventory management include(s)

Correct AnswerverifiedShow Answer

Cash management becomes more important as the level of short-term interest rates rises.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

The use of "float" has dramatically increased since the Check Clearing for the 21^st Century Act was passed.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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