Question 1

An account into which a firm transfers funds,usually from a master account,in an amount sufficient to cover the checks presented for payment that day is called a _____ account.

Accepted Answer

A)  lockbox
B)  cleanup
C)  compensating balance
D)  revolving
E)  controlled disbursementF) A) and C)
G) All of the above

Question 2

National Exporters deals strictly with two customers.The average amount each customer pays per month along with the collection delay associated with each payment is shown below.Given this information,what is the amount of the average daily receipts? Assume that every month has 30 days.

Accepted Answer

A)  $2,653.33
B)  $3,006.33
C)  $4,533.33
D)  $7,811.67
E)  $8,600.00F) B) and E)
G) A) and C)

Question 3

Money market securities have which of the following characteristics?
I.long maturities
II.low default risk
III.high degree of liquidity
IV.low rates of return

Accepted Answer

A)  I and III only
B)  II and III only
C)  I and IV only
D)  II, III, and IV only
E)  I, II, III, and IVF) C) and E)
G) D) and E)

Question 4

Which of the following statements is correct?

Accepted Answer

A)  A firm has a greater likelihood of needing an unexpected loan when its cash flows are relatively constant over time.
B)  The cost of borrowing affects the target cash balance of a firm.
C)  Management's desire to maintain a low cash balance has no effect on the borrowing needs of a firm.
D)  The target cash balance increases as the interest rate rises.
E)  The target cash balance decreases as the order costs increase.F) All of the above
G) A) and D)

Question 5

Which one of the following statements is correct concerning a cash management system that employs both lockboxes and a concentration bank account?

Accepted Answer

A)  All customer payments must be submitted to a lockbox.
B)  The party which collects the checks from the lockbox is responsible for recording the payment on the customer's account.
C)  Payments received in a lockbox are transferred immediately to the concentration account.
D)  The firm's cash manager determines how the funds in the concentration account are disbursed.
E)  The concentration account must be zeroed out on a daily basis.F) A) and C)
G) A) and E)

Question 6

Collection float:

Accepted Answer

A)  is more desirable to firms than disbursement float.
B)  is totally eliminated by the installation of a lockbox system.
C)  exists when a firm's available balance exceeds its book balance.
D)  can be avoided by collecting payments electronically at the time of sale.
E)  is eliminated by implementing a concentration banking system.F) C) and D)
G) B) and D)

Question 7

Explain how the Check Clearing Act for the 21st Century affects both collection and disbursement float.

Accepted Answer

Check 21 eliminated the need to present ...

Question 8

Which one of the following statements is correct?

Accepted Answer

A)  The money market refers to securities that mature in two years or less.
B)  Banks are prohibited from investing cash surpluses on behalf of their customers on a short- term basis.
C)  Short-term securities tend to have a high degree of interest rate risk.
D)  A cyclical firm may purchase marketable securities as part of its short-term financing plan.
E)  Corporations are not permitted to invest in money market mutual funds but can invest in bank money market accounts.F) C) and E)
G) D) and E)

Question 9

A lockbox is a:

Accepted Answer

A)  special safe used by a firm for overnight storage of any cash or undeposited checks.
B)  special safe used by a firm that can only be opened at prespecified times of the day.
C)  box located in a bank's vault that is rented by a firm and used to hold unprocessed checks.
D)  special post office box which can only be opened by prespecified postal inspectors for direct delivery to the addressee.
E)  post office box strategically located so that a firm's receivables can be collected faster.F) A) and B)
G) C) and D)

Question 10

The Cow Pie Spreader Co.spends $214,000 a week to pay bills and maintains a lower cash balance limit of $150,000.The standard deviation of the disbursements is $16,000.The applicable weekly interest rate is 0.025 percent and the fixed cost of transferring funds is $49.What is the firm's cash balance target based on the Miller-Orr model?

Accepted Answer

A)  $183,511
B)  $208,511
C)  $251,006
D)  $254,545
E)  $258,878F) A) and D)
G) C) and E)

Question 11

Check kiting is:

Accepted Answer

A)  used by most firms as an ethical means of handling its cash reserves.
B)  the process of withdrawing all funds from a bank account as soon as the funds are available.
C)  the central core of a good cash management system.
D)  using uncollected cash to invest in short-term, liquid assets.
E)  increasingly popular due to recent banking law changes.F) B) and E)
G) B) and C)

Question 12

Rosie O'Grady's spends $115,000 a week to pay bills and maintains a lower cash balance limit of $95,000.The standard deviation of the disbursements is $14,600.The applicable interest rate is 4.8 percent and the fixed cost of transferring funds is $50.What is this firm's total cost of holding cash based on the BAT model?

Accepted Answer

A)  $1,431
B)  $2,862
C)  $3,034
D)  $4,912
E)  $5,358F) A) and D)
G) B) and D)

Question 13

An account into which funds are deposited only in an amount equal to the value of the checks presented for payment that day is called a _____ account.

Accepted Answer

A)  lockbox
B)  concentration
C)  zero-balance
D)  compensating balance
E)  revolvingF) All of the above
G) A) and D)

Question 14

Which of the following statements related to the BAT model is correct?
I.The BAT model is used to determine the target cash balance for a firm.
II.The BAT model is rarely used in business due to its complex nature.
III.The BAT model is a model that helps eliminate a firm's collection float.
IV.One disadvantage of the BAT model is the fact that it assumes all cash outflows are known with certainty.

Accepted Answer

A)  I and II only
B)  III and IV only
C)  II and III only
D)  I and III only
E)  I and IV onlyF) A) and C)
G) A) and B)

Question 15

Your firm generally receives 4 checks a month.The check amounts and the collection delay for each check is shown below.Given this information what is the amount of the average daily float? Assume a 30 day month.

Accepted Answer

A)  $1,120
B)  $2,333
C)  $2,640
D)  $2,900
E)  $3,416F) A) and B)
G) None of the above

Question 16

Lockboxes:

Accepted Answer

A)  should be geographically located close to a firm's primary customers.
B)  should be located in remote locations to increase the net disbursement float.
C)  offer no additional benefit to a firm now that the Check Clearing Act for the 21st Century has been enacted.
D)  tend to be negative net present value projects for firms with a large number of sizeable transactions.
E)  tend to also be used as concentration accounts.F) B) and C)
G) A) and E)

Question 17

Rosewell International receives an average of 268 checks a day with an average amount per check of $780.The firm is considering a lockbox system which it anticipates will reduce the average collection time by 1.4 days.The bank charges $0.21 a check for this service.The daily interest rate on Treasury bills is 0.02 percent.What is the net present value of this lockbox arrangement?

Accepted Answer

A)  -$61,640
B)  -$11,256
C)  $11,256
D)  $30,820
E)  $61,640F) B) and C)
G) B) and D)

Question 18

When Chris balanced her business checkbook,she had an adjusted bank balance of $11,418.She had 2 outstanding deposits worth $879 each and 11 checks outstanding with a total value of $3,648.What is the amount of the collection float on this account?

Accepted Answer

A)  -$1,890
B)  $1,758
C)  $3,648
D)  $5,406
E)  $6,012F) D) and E)
G) B) and D)

Question 19

The Snow Hut has analyzed the carrying and shortage costs associated with its cash holdings and determined that the firm should ideally maintain a cash balance of $3,600.This $3,600 represents which one of the following to the firm?

Accepted Answer

A)  target cash balance
B)  concentration balance
C)  available balance
D)  selected cash amount
E)  compensating balanceF) B) and E)
G) All of the above

Question 20

The Blue Star generally receives only 3 checks a month.The check amounts and the collection delay for each check are shown below.Given this information,what is the amount of the average daily float? Assume every month has 30 days.

Accepted Answer

A)  $971.43
B)  $1,376.67
C)  $3,351.33
D)  $5,666.67
E)  $6,800.00F) A) and E)
G) B) and C)

Exam 19: Cash and Liquidity Management

Collection float:

Correct Answer
verified

Your firm generally receives 4 checks a month.The check amounts and the collection delay for each check is shown below.Given this information what is the amount of the average daily float? Assume a 30 day month.

Correct Answer
verified

Correct Answer
verified

Explain how the Check Clearing Act for the 21^st Century affects both collection and disbursement float.

Correct Answer
verified
Check 21 eliminated the need to present ...
View Answer

An account into which a firm transfers funds,usually from a master account,in an amount sufficient to cover the checks presented for payment that day is called a _____ account.

Correct Answer
verified

An account into which funds are deposited only in an amount equal to the value of the checks presented for payment that day is called a _____ account.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Which one of the following statements is correct concerning a cash management system that employs both lockboxes and a concentration bank account?

Correct Answer
verified

Which one of the following statements is correct?

Correct Answer
verified

Money market securities have which of the following characteristics? I.long maturities II.low default risk III.high degree of liquidity IV.low rates of return

Correct Answer
verified

Lockboxes:

Correct Answer
verified

A lockbox is a:

Correct Answer
verified

Check kiting is:

Correct Answer
verified

National Exporters deals strictly with two customers.The average amount each customer pays per month along with the collection delay associated with each payment is shown below.Given this information,what is the amount of the average daily receipts? Assume that every month has 30 days.

Correct Answer
verified

When Chris balanced her business checkbook,she had an adjusted bank balance of $11,418.She had 2 outstanding deposits worth $879 each and 11 checks outstanding with a total value of $3,648.What is the amount of the collection float on this account?

Correct Answer
verified

The Blue Star generally receives only 3 checks a month.The check amounts and the collection delay for each check are shown below.Given this information,what is the amount of the average daily float? Assume every month has 30 days.

Correct Answer
verified

The Snow Hut has analyzed the carrying and shortage costs associated with its cash holdings and determined that the firm should ideally maintain a cash balance of $3,600.This $3,600 represents which one of the following to the firm?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Correct Answer
verified

Exam 19: Cash and Liquidity Management

Collection float:

Correct AnswerverifiedShow Answer

Your firm generally receives 4 checks a month.The check amounts and the collection delay for each check is shown below.Given this information what is the amount of the average daily float? Assume a 30 day month.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Explain how the Check Clearing Act for the 21st Century affects both collection and disbursement float.

Correct AnswerverifiedCheck 21 eliminated the need to present ...View AnswerShow Answer

An account into which a firm transfers funds,usually from a master account,in an amount sufficient to cover the checks presented for payment that day is called a _____ account.

Correct AnswerverifiedShow Answer

An account into which funds are deposited only in an amount equal to the value of the checks presented for payment that day is called a _____ account.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which one of the following statements is correct concerning a cash management system that employs both lockboxes and a concentration bank account?

Correct AnswerverifiedShow Answer

Which one of the following statements is correct?

Correct AnswerverifiedShow Answer

Money market securities have which of the following characteristics? I.long maturities II.low default risk III.high degree of liquidity IV.low rates of return

Correct AnswerverifiedShow Answer

Lockboxes:

Correct AnswerverifiedShow Answer

A lockbox is a:

Correct AnswerverifiedShow Answer

Check kiting is:

Correct AnswerverifiedShow Answer

National Exporters deals strictly with two customers.The average amount each customer pays per month along with the collection delay associated with each payment is shown below.Given this information,what is the amount of the average daily receipts? Assume that every month has 30 days.

Correct AnswerverifiedShow Answer

When Chris balanced her business checkbook,she had an adjusted bank balance of $11,418.She had 2 outstanding deposits worth $879 each and 11 checks outstanding with a total value of $3,648.What is the amount of the collection float on this account?

Correct AnswerverifiedShow Answer

The Blue Star generally receives only 3 checks a month.The check amounts and the collection delay for each check are shown below.Given this information,what is the amount of the average daily float? Assume every month has 30 days.

Correct AnswerverifiedShow Answer

The Snow Hut has analyzed the carrying and shortage costs associated with its cash holdings and determined that the firm should ideally maintain a cash balance of $3,600.This $3,600 represents which one of the following to the firm?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Explain how the Check Clearing Act for the 21^st Century affects both collection and disbursement float.

Correct Answer
verified
Check 21 eliminated the need to present ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified