Question 1

If a company can stretch its accounts payable without damaging its credit rating,it is effectively ___________ the cost of foregoing the cash discount.

Accepted Answer

A) increasing 
B) reducing 
C) not affecting 
D) not able to determine. 
E) none of the above 
A) increasing 
B) reducing 
C) not affecting 
D) not able to determine. 
E) none of the above B

Question 2

2/10 net 30 MOM translates as

Accepted Answer

A) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due in 30 days. 
B) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due 30 days after the middle of the month. 
C) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due 30 days after the end of the month. 
D) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due in 20 days. 
E) none of the above 
A) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due in 30 days. 
B) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due 30 days after the middle of the month. 
C) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due 30 days after the end of the month. 
D) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due in 20 days. 
E) none of the above B

Question 3

A business that needs short-term credit in excess of its regular line of bank credit may:

Accepted Answer

A) sell common stock to the bank with a repurchase agreement 
B) subordinate the interests of the owners to the bank's additional loans 
C) make limited use of overdrafts 
D) pledge accounts receivable as specific collateral for an additional loan 
A) sell common stock to the bank with a repurchase agreement 
B) subordinate the interests of the owners to the bank's additional loans 
C) make limited use of overdrafts 
D) pledge accounts receivable as specific collateral for an additional loan D

Question 4

Commercial paper dealers:

Accepted Answer

A) lend to small and large businesses on the basis of their receivables outstanding 
B) restrict their paper dealings to negotiable certificates of commercial banks 
C) distribute to investors the promissory notes of successful businesses 
D) distribute to investors the promissory notes of small but rapidly developing businesses 
A) lend to small and large businesses on the basis of their receivables outstanding 
B) restrict their paper dealings to negotiable certificates of commercial banks 
C) distribute to investors the promissory notes of successful businesses 
D) distribute to investors the promissory notes of small but rapidly developing businesses

Question 5

Which of the following are not typical of an accounts receivable loan arrangement?

Accepted Answer

A) basic interest charge 
B) compensating balance 
C) fee to cover extra work need for such a loan 
D) all the above are typical of accounts receivable loans 
A) basic interest charge 
B) compensating balance 
C) fee to cover extra work need for such a loan 
D) all the above are typical of accounts receivable loans

Question 6

If net working capital is negative,current assets are partially financed by the firm's long-term debt.

Accepted Answer

A) True 
 B)False

Question 7

Firms who wish to obtain short-term secured loans generally have two major current assets available as collateral in the form of:

Accepted Answer

A) cash and marketable securities 
B) receivables and inventory 
C) receivables and factoring 
D) inventory and floor planning 
A) cash and marketable securities 
B) receivables and inventory 
C) receivables and factoring 
D) inventory and floor planning

Question 8

The largest providers of short-term financing are:

Accepted Answer

A) commercial banks 
B) commercial finance companies 
C) factors 
D) none of the above 
A) commercial banks 
B) commercial finance companies 
C) factors 
D) none of the above

Question 9

If a firm chooses to take a cash discount,it should

Accepted Answer

A) pay as soon as possible. 
B) pay on the last day of the credit period. 
C) take the discount no matter when the firm actually pays. 
D) pay on the last day of the discount period. 
E) none of the above 
A) pay as soon as possible. 
B) pay on the last day of the credit period. 
C) take the discount no matter when the firm actually pays. 
D) pay on the last day of the discount period. 
E) none of the above

Question 10

Trade credit may be considered the least formal of all forms of financing.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following short-term sources of funds is available only to the financially strongest concerns?

Accepted Answer

A) trade credit 
B) commercial bank loans 
C) finance company loans 
D) commercial paper 
A) trade credit 
B) commercial bank loans 
C) finance company loans 
D) commercial paper

Question 12

When old short-term debt is replaced by new short-term debt as the old debt comes due,the process is known as:

Accepted Answer

A) compensating balance 
B) rolling the debt 
C) fluctuating financing 
D) none of the above 
A) compensating balance 
B) rolling the debt 
C) fluctuating financing 
D) none of the above

Question 13

Large U.S.corporations of high credit quality can issue or sell short-term promissory notes called:

Accepted Answer

A) revolving credit agreements 
B) commercial paper 
C) trade credit 
D) inventory loans 
A) revolving credit agreements 
B) commercial paper 
C) trade credit 
D) inventory loans

Question 14

2/10 net 30 EOM translates as

Accepted Answer

A) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due in 30 days. 
B) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due 30 days after the middle of the month. 
C) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due 30 days after the end of the month. 
D) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due in 20 days. 
E) none of the above 
A) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due in 30 days. 
B) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due 30 days after the middle of the month. 
C) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due 30 days after the end of the month. 
D) a 2 percent cash discount may be taken if paid in 10 days of shipment;if not paid within 10 days,the net amount is due in 20 days. 
E) none of the above

Question 15

A commercial finance company typically purchases the accounts receivable outright and assumes all credit risks.

Accepted Answer

A) True 
 B)False

Question 16

Factors that affect the selection of a short-term financing strategy include:

Accepted Answer

A) cost 
B) flexibility 
C) qualitative factors 
D) all the above 
A) cost 
B) flexibility 
C) qualitative factors 
D) all the above

Question 17

In general,short-term self-liquidating bank loans are intended to:

Accepted Answer

A) help recapitalize a company. 
B) help a company finance merger & acquisitions. 
C) help a company finance seasonal inventory and accounts receivable requirements. 
D) help a company finance investment in capital assets. 
E) none of the above 
A) help recapitalize a company. 
B) help a company finance merger & acquisitions. 
C) help a company finance seasonal inventory and accounts receivable requirements. 
D) help a company finance investment in capital assets. 
E) none of the above

Question 18

Commercial finance companies obtain loanable funds:

Accepted Answer

A) to a lesser extent than commercial banks through equity capital 
B) through both long- and short-term borrowing 
C) from the Small Business Administration 
D) primarily from the sale of preferred stock 
A) to a lesser extent than commercial banks through equity capital 
B) through both long- and short-term borrowing 
C) from the Small Business Administration 
D) primarily from the sale of preferred stock

Question 19

Bank loans on which interest is paid up front in advance are called:

Accepted Answer

A) front loaders. 
B) build-up loans 
C) advance interest loans. 
D) revolving credit agreements. 
E) none of the above 
A) front loaders. 
B) build-up loans 
C) advance interest loans. 
D) revolving credit agreements. 
E) none of the above

Question 20

Tangshan Mining was extended credit terms of 3/15 net 30 EOM.The cost of giving up the cash discount,assuming payment would be made on the last day of the credit period,would be ________.If the firm were able to stretch its accounts payable to 60 days without damaging its credit rating,the cost of giving up the cash discount would only be ________.

Accepted Answer

A) 70.99%;14.25% 
B) 70.99%;15.25% 
C) 73.26%;20.09% 
D) 73.26%;25.09% 
E) none of the above 
A) 70.99%;14.25% 
B) 70.99%;15.25% 
C) 73.26%;20.09% 
D) 73.26%;25.09% 
E) none of the above

If a company can stretch its accounts payable without damaging its credit rating,it is effectively ___________ the cost of foregoing the cash discount.

2/10 net 30 MOM translates as

A business that needs short-term credit in excess of its regular line of bank credit may:

Commercial paper dealers:

Which of the following are not typical of an accounts receivable loan arrangement?

If net working capital is negative,current assets are partially financed by the firm's long-term debt.

Firms who wish to obtain short-term secured loans generally have two major current assets available as collateral in the form of:

The largest providers of short-term financing are:

If a firm chooses to take a cash discount,it should

Trade credit may be considered the least formal of all forms of financing.

Which of the following short-term sources of funds is available only to the financially strongest concerns?

When old short-term debt is replaced by new short-term debt as the old debt comes due,the process is known as:

Large U.S.corporations of high credit quality can issue or sell short-term promissory notes called:

2/10 net 30 EOM translates as

A commercial finance company typically purchases the accounts receivable outright and assumes all credit risks.

Factors that affect the selection of a short-term financing strategy include:

In general,short-term self-liquidating bank loans are intended to:

Commercial finance companies obtain loanable funds:

Bank loans on which interest is paid up front in advance are called:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 16: Short-Term Business Financing

If a company can stretch its accounts payable without damaging its credit rating,it is effectively ___________ the cost of foregoing the cash discount.

2/10 net 30 MOM translates as

A business that needs short-term credit in excess of its regular line of bank credit may:

Commercial paper dealers:

Which of the following are not typical of an accounts receivable loan arrangement?

If net working capital is negative,current assets are partially financed by the firm's long-term debt.

Firms who wish to obtain short-term secured loans generally have two major current assets available as collateral in the form of:

The largest providers of short-term financing are:

If a firm chooses to take a cash discount,it should

Trade credit may be considered the least formal of all forms of financing.

Which of the following short-term sources of funds is available only to the financially strongest concerns?

When old short-term debt is replaced by new short-term debt as the old debt comes due,the process is known as:

Large U.S.corporations of high credit quality can issue or sell short-term promissory notes called:

2/10 net 30 EOM translates as

A commercial finance company typically purchases the accounts receivable outright and assumes all credit risks.

Factors that affect the selection of a short-term financing strategy include:

In general,short-term self-liquidating bank loans are intended to:

Commercial finance companies obtain loanable funds:

Bank loans on which interest is paid up front in advance are called:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters