Question 1

Which of the following scenarios is an example of the transactions motive to hold cash?

Accepted Answer

A) An oil company saves abnormally high earnings as cash on its balance sheet which it will use to buy another oil company. 
B) A manufacturing company holds cash to pay its suppliers for raw materials. 
C) An airline keeps a reserve of cash during the winter months in case it has to pay customers a refund because bad weather results in a cancellation of flights. 
D) A firm holds cash to pay its annual dividend. 
A) An oil company saves abnormally high earnings as cash on its balance sheet which it will use to buy another oil company. 
B) A manufacturing company holds cash to pay its suppliers for raw materials. 
C) An airline keeps a reserve of cash during the winter months in case it has to pay customers a refund because bad weather results in a cancellation of flights. 
D) A firm holds cash to pay its annual dividend.

Question 2

In light of the 2008 financial crisis, describe the importance of credit to companies and the importance of having access to available cash.

Accepted Answer

During the 2008 financial crisis, the ba

Question 3

The drawbacks to delaying making payments may include all of the following, except

Accepted Answer

A) alienating suppliers. 
B) losing out on valuable trade credit. 
C) loss of business. 
D) reduced liquidity. 
A) alienating suppliers. 
B) losing out on valuable trade credit. 
C) loss of business. 
D) reduced liquidity.

Question 4

By adopting a just-In-time inventory management system, a company will be vulnerable:

Accepted Answer

A) to suppliers' bargaining power. 
B) to acute changes in economic environment. 
C) to suppliers' risk of bankruptcy. 
D) all of the above 
A) to suppliers' bargaining power. 
B) to acute changes in economic environment. 
C) to suppliers' risk of bankruptcy. 
D) all of the above

Question 5

Securitization refers to the process of:

Accepted Answer

A) bonds are sold to the public at a discount. 
B) stocks are issued to raise funds instead of bonds. 
C) loans and / or receivables are packaged to create new securities. 
D) a portfolio of securities is sold to raise funds to pay debts. 
A) bonds are sold to the public at a discount. 
B) stocks are issued to raise funds instead of bonds. 
C) loans and / or receivables are packaged to create new securities. 
D) a portfolio of securities is sold to raise funds to pay debts.

Question 6

Cash on hand provides:

Accepted Answer

A) low return, high liquidity, and low default risk. 
B) high return, high liquidity, and low default risk. 
C) high return, high liquidity, and high default risk. 
D) low return, high liquidity, and high default risk. 
A) low return, high liquidity, and low default risk. 
B) high return, high liquidity, and low default risk. 
C) high return, high liquidity, and high default risk. 
D) low return, high liquidity, and high default risk.

Question 7

Which of the following scenarios is an example of the finance motive to hold cash?

Accepted Answer

A) A government holds cash to pay for its operating expenses. 
B) A taxi company holds cash in reserve in case some of its vehicles require repairs. 
C) A company that makes motion pictures holds cash to pay for special effects for a new film. 
D) A bank holds cash to pay its shareholders their annual dividend. 
A) A government holds cash to pay for its operating expenses. 
B) A taxi company holds cash in reserve in case some of its vehicles require repairs. 
C) A company that makes motion pictures holds cash to pay for special effects for a new film. 
D) A bank holds cash to pay its shareholders their annual dividend.

Question 8

A firm taking an aggressive approach with respect to their cash balance is most likely to be:

Accepted Answer

A) holding as little cash as possible. 
B) holding as much cash as possible. 
C) holding as much credit as possible. 
D) holding as little borrowing power as possible. 
A) holding as little cash as possible. 
B) holding as much cash as possible. 
C) holding as much credit as possible. 
D) holding as little borrowing power as possible.

Question 9

Which of the following firms will have the highest cash balance?

Accepted Answer

A) A firm with low cash requirements but unpredictable cash needs 
B) A firm with high cash requirements but unpredictable cash needs 
C) A firm with high cash requirements but predictable cash needs 
D) A firm with low cash requirements but predictable cash needs 
A) A firm with low cash requirements but unpredictable cash needs 
B) A firm with high cash requirements but unpredictable cash needs 
C) A firm with high cash requirements but predictable cash needs 
D) A firm with low cash requirements but predictable cash needs

Question 10

Laurentide Resort Company would like to issue $25 million face value of 60-day commercial paper at a cost of 0.65%.In addition, the firm must maintain the $25 million credit line at a cost of 0.1% as a standby fee.What is the effective annual cost of this transaction?

Accepted Answer

A) 4.02% 
B) 4.56% 
C) 4.65% 
D) 56.57% 
A) 4.02% 
B) 4.56% 
C) 4.65% 
D) 56.57%

Question 11

When a firm lowers its inventory period:

Accepted Answer

A) it requires additional cash investment. 
B) it requires lower cash investment. 
C) it does not have any impact on the cash flows of the firm. 
D) none of the above 
A) it requires additional cash investment. 
B) it requires lower cash investment. 
C) it does not have any impact on the cash flows of the firm. 
D) none of the above

Question 12

The two major types of money market instruments available are

Accepted Answer

A) credit lines and T-Bills. 
B) T-bonds and junk bonds. 
C) bankers' acceptances and commercial paper. 
D) stocks and options. 
A) credit lines and T-Bills. 
B) T-bonds and junk bonds. 
C) bankers' acceptances and commercial paper. 
D) stocks and options.

Question 13

Investments in short-term marketable securities are categorized as:

Accepted Answer

A) operational investments. 
B) speculative investments. 
C) strategic investments. 
D) near-cash investments. 
A) operational investments. 
B) speculative investments. 
C) strategic investments. 
D) near-cash investments.

Question 14

The net credit period for a company with terms of 3/15 net 40 is:

Accepted Answer

A) 15 days 
B) 25 days 
C) 40 days 
D) 55 days 
A) 15 days 
B) 25 days 
C) 40 days 
D) 55 days

Question 15

The term "cash on hand" refers to:

Accepted Answer

A) cash in the current account. 
B) cash in short-term marketable securities. 
C) none of the above. 
D) a and b 
A) cash in the current account. 
B) cash in short-term marketable securities. 
C) none of the above. 
D) a and b

Question 16

Poutine Cheez Company has yearly sales of $550,000 and an average collection period of 35 days.A factoring company is offering a 35-day receivables loan equal to 85% of the accounts receivable at 9% along with a commission fee of .45% of the receivables.The firm estimates that by taking the offer, it could save $300 in collection costs and a full half of one percent in bad debt costs, as a percentage of sales.What is the annual cost (in percent)of the arrangement to Poutine Cheez?

Accepted Answer

The effective annual

Question 17

When a cheque is written by the firm, it is said to generate:

Accepted Answer

A) a float. 
B) an account receivable. 
C) an account payable. 
D) none of the above. 
A) a float. 
B) an account receivable. 
C) an account payable. 
D) none of the above.

Question 18

The transactions motive refers to:

Accepted Answer

A) the motive to hold cash that is required for a firm's normal operations. 
B) the motive to hold cash that is required for purchases. 
C) the motive to hold cash that is required for a firm's long-term purchases. 
D) the motive to hold cash that is required for emergencies. 
A) the motive to hold cash that is required for a firm's normal operations. 
B) the motive to hold cash that is required for purchases. 
C) the motive to hold cash that is required for a firm's long-term purchases. 
D) the motive to hold cash that is required for emergencies.

Exam 24: Working Capital Management: Current Assets and Current Liabilities

Which of the following scenarios is an example of the transactions motive to hold cash?

In light of the 2008 financial crisis, describe the importance of credit to companies and the importance of having access to available cash.

The drawbacks to delaying making payments may include all of the following, except

By adopting a just-In-time inventory management system, a company will be vulnerable:

Securitization refers to the process of:

Cash on hand provides:

Which of the following scenarios is an example of the finance motive to hold cash?

A firm taking an aggressive approach with respect to their cash balance is most likely to be:

Which of the following firms will have the highest cash balance?

Laurentide Resort Company would like to issue $25 million face value of 60-day commercial paper at a cost of 0.65%.In addition, the firm must maintain the $25 million credit line at a cost of 0.1% as a standby fee.What is the effective annual cost of this transaction?

When a firm lowers its inventory period:

The two major types of money market instruments available are

Investments in short-term marketable securities are categorized as:

The net credit period for a company with terms of 3/15 net 40 is:

The term "cash on hand" refers to:

When a cheque is written by the firm, it is said to generate:

The transactions motive refers to:

An Introduction to Finance

Business Corporate Finance

Financial Statements

Financial Statement Analysis and Forecasting

Time Value of Money

Bond Valuation and Interest Rates

Equity Valuation

Risk, Return, and Portfolio Theory

The Capital Asset Pricing Model Capm

Market Efficiency

Forwards, Futures, and Swaps

Options

Capital Budgeting, Risk Considerations, and Other Special Issues

Cash Flow Estimation and Capital Budgeting Decisions

Mergers and Acquisitions

Leasing

Investment Banking and Securities Law

Debt Instruments

Equity and Hybrid Instruments

Cost of Capital

Capital Structure Decisions

Dividend Policy

Working Capital Management: General Issues

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