Question 1

A reduction in carrying costs would increase the economic order quantity.

Accepted Answer

A) True 
 B)False

Question 2

The use of automated clearinghouses (ACHs) saves money for consumers, corporations and financial institutions by reducing transactions costs.

Accepted Answer

A) True 
 B)False

Question 3

Variables important to credit scoring models include

Accepted Answer

A)   age of company in years.
B)   negative public records.
C)   facility ownership.
D)   all of these.E) A) and B)
F) None of the above

Question 4

All of the following are examples of carrying costs except:

Accepted Answer

A)   interest expense
B)   warehouse space
C)   shipping costs
D)   insurance premiumsE) B) and C)
F) A) and D)

Question 5

Eurodollars

Accepted Answer

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

Question 6

Inventories are usually the most liquid, but lowest-yielding, current asset of a firm.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following are characteristics of money market investments?

Accepted Answer

A)   Money market funds are offered by banks.
B)   Money market funds are insured up to $100,000 by federal agencies.
C)   The minimum balance for money market deposit accounts is $5,000.
D)   None of theseE) B) and C)
F) A) and D)

Question 8

In managing cash and marketable securities, what should be the manager's primary concern?

Accepted Answer

A)   Maximization of profit
B)   Maximization of liquid assets
C)   Acceptable return on investment
D)   Liquidity and safetyE) C) and D)
F) B) and D)

Question 9

The 5 C's of credit include character, capital, capacity, conditions, and collateral.

Accepted Answer

A) True 
 B)False

Question 10

All of the following are methods of controlling receivables except:

Accepted Answer

A)   offer a cash discount
B)   reduce net terms
C)   use DBIS
D)   reduce cash salesE) B) and D)
F) B) and C)

Question 11

A multinational company may prefer to hold sizeable cash balances in one currency rather than another because

Accepted Answer

A)   of high interest rates existing in one country.
B)   one country's currency may be strong relative to the dollar.
C)   both a and b
D)   None of theseE) C) and D)
F) A) and B)

Question 12

In comparison to securities issued by the U.S. Treasury, securities issued by U.S. government agencies like the Federal Land Bank

Accepted Answer

A)   are significantly riskier than Treasury securities.
B)   are much less liquid than Treasury securities.
C)   yield slightly more than Treasury securities.
D)   usually require the payment of higher commissions when purchased than Treasury securities.E) A) and D)
F) B) and C)

Question 13

It is possible for companies to operate with negative cash balances on their books.

Accepted Answer

A) True 
 B)False

Question 14

Cost savings from JIT inventory management include(s)

Accepted Answer

A)   reduced overhead expenses.
B)   lower inventory financing costs.
C)   greater productivity.
D)   all of these.E) All of the above
F) C) and D) D

Question 15

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

Accepted Answer

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

Question 16

Characteristics of a money market deposit account include

Accepted Answer

A)   a lower risk than money market funds.
B)   insured by federal agencies.
C)   generally a limit of three deposits or withdrawals per month.
D)   all of theseE) A) and D)
F) B) and C) D

Question 17

If we assume that inventory is used up at a constant rate and safety stock is zero, the average inventory will be 1/2 the order size.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following securities represents an unsecured promissory note issued by a corporation?

Accepted Answer

A)   Certificates of deposit
B)   Savings accounts
C)   Commercial paper
D)   Money market fundE) A) and B)
F) A) and C)

Question 19

Eurodollars are U.S. dollars held on deposit by foreign banks.

Accepted Answer

A) True 
 B)False

Question 20

International cash management systems are more complex than domestic cash management systems because

Accepted Answer

A)   many developing countries still use a cash payments system.
B)   some countries rely on electronic funds transfer more than the U.S.
C)   liquidity management, involving short-term cash balances and deficits, has to be managed across international boundaries and time zones and is subject to the risks of currency fluctuations.
D)   none of these.E) B) and C)
F) None of the above

Exam 7: Current Asset Management

A reduction in carrying costs would increase the economic order quantity.

Correct AnswerverifiedShow Answer

The use of automated clearinghouses (ACHs) saves money for consumers, corporations and financial institutions by reducing transactions costs.

Correct AnswerverifiedShow Answer

Variables important to credit scoring models include

Correct AnswerverifiedShow Answer

All of the following are examples of carrying costs except:

Correct AnswerverifiedShow Answer

Eurodollars

Correct AnswerverifiedShow Answer

Inventories are usually the most liquid, but lowest-yielding, current asset of a firm.

Correct AnswerverifiedShow Answer

Which of the following are characteristics of money market investments?

Correct AnswerverifiedShow Answer

In managing cash and marketable securities, what should be the manager's primary concern?

Correct AnswerverifiedShow Answer

The 5 C's of credit include character, capital, capacity, conditions, and collateral.

Correct AnswerverifiedShow Answer

All of the following are methods of controlling receivables except:

Correct AnswerverifiedShow Answer

A multinational company may prefer to hold sizeable cash balances in one currency rather than another because

Correct AnswerverifiedShow Answer

In comparison to securities issued by the U.S. Treasury, securities issued by U.S. government agencies like the Federal Land Bank

Correct AnswerverifiedShow Answer

It is possible for companies to operate with negative cash balances on their books.

Correct AnswerverifiedShow Answer

Cost savings from JIT inventory management include(s)

Correct AnswerverifiedD

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

Correct AnswerverifiedC

Characteristics of a money market deposit account include

Correct AnswerverifiedD

If we assume that inventory is used up at a constant rate and safety stock is zero, the average inventory will be 1/2 the order size.

Correct AnswerverifiedShow Answer

Which of the following securities represents an unsecured promissory note issued by a corporation?

Correct AnswerverifiedShow Answer

Eurodollars are U.S. dollars held on deposit by foreign banks.

Correct AnswerverifiedShow Answer

International cash management systems are more complex than domestic cash management systems because

Correct AnswerverifiedShow Answer

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D

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C

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D

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