Question 1 of 25

4.0 Points

As a general rule, it is desirable to finance the permanent assets, including “permanent current assets”, with long-term debt and equity.

True

False

Question 2 of 25

Short-term interest rates are generally lower than long-term interest rates.

A. True

B. False

Question 3 of 25

4.0 Points

Commercial bank term loans

A.usually carry fixed interest rates.

B.are very short-term in nature.

C.are offered to superior credit applicants.

D.both b and c.

Question 4 of 25

4.0 Points

Dun & Bradstreet is known for providing

A.interest rate information to cash managers.

B.credit scoring reports that rank a company’s payment habits relative to its peer group.

C.cash management systems to corporate treasurers.

D.consumer credit reports to credit card companies

Question 5 of 25

4.0 Points

Small companies finance a relatively greater proportion of their assets through trade credit than do larger concerns.

A. True

B. False

Question 6 of 25

4.0 Points

A financial executive devotes the most time to

A.Long-range planning.

B.Capital budgeting.

C.Short-term financing.

D.Working capital management.

Question 7 of 25

4.0 Points

Short-term financing is risky because of the possibility of rising short-term rates and the inability of always being able to refund short-term debt.

A. True

B. False

Question 8 of 25

4.0 Points

From the banker’s point of view, short-term bank credit is an excellent way of financing

A.fixed assets.

B.permanent working capital needs.

C.repayment of long-term debt.

D.seasonal bulges in inventory and receivables.

Question 9 of 25

4.0 Points

One of the first considerations in cash management is

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.

Question 10 of 25

4.0 Points

Cash balances are usually determined by the amount of cash flowing through the firm on a yearly basis.

True

False

Question 11 of 25

4.0 Points

Seasonal production allows for maximum efficiency in machinery and manpower use.

A. True

B. False

Question 12 of 25

4.0 Points

Even during slack loan periods, banks will never loan out money at an interest rate lower than the prime rate because the prime rate is their best rate.

A. True

B. False

Question 13 of 25

4.0 Points

The use of cash budgeting procedures

A.helps the firm plan its current asset levels for a given production plan.

B.makes managing inventory easier under seasonal production.

C. illustrates fluctuating levels of current assets for a given production plan.

D. all of these are correct.

Question 14 of 25

4.0 Points

Permanent current assets are not similar to fixed assets because they are fully liquidated within the year.

A. True

B. False

Question 15 of 25                                                                                                       4.0 Points

Modos Company has deposited $3,500 in checks received from customers. It has written $1,400 in checks to its suppliers. The initial bank and book balance was $600. If $1,600 of its customer s checks have cleared but only $600 of its own, calculate its float.

A.$1,200

B.$1,100

C.$300

D.$700

Bank balance = $600 + $1.600 – $600 = $1,600

Book balance = $600 + $3,500 – $1,400 = $2,700

Float = $1,100

Question 16 of 25

4.0 Points

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

A.quality production

B.large safety stocks

C.close ties between suppliers, manufacturers, and customers

D.minimizing inventory levels

Question 17 of 25

4.0 Points

Because of changing economic conditions, it is difficult for companies such as Dun & Bradstreet to devise models predicting payment problems and probability of bankruptcy 12 months in the future.

A. True

B. False

Question 18 of 25

4.0 Points

A trade discount is a percentage reduction from the invoice price given for purchasing certain minimum quantities.

A. True

B. False

Question 19 of 25

4.0 Points

The Truth in Lending law is designed to protect

A.corporate borrowers.

B.banks.

C. consumers.

D.investors in municipal bonds.

Question 20 of 25

4.0 Points

A “normal” term structure of interest rates would depict

A.short-term rates higher than long-term rates.

B.long-term rates higher than short-term rates.

C.no general relationship between short- and long-term rates.

D.Intermediate rates (1-5 years) lower than both short-term and long-term rates.

Question 21 of 25

4.0 Points

Bank loans to business firms

A.are usually short-term in nature.

B.are preferred by the banker to be self-liquidating.

C.may require compensating balances.

D.all of these.

Question 22 of 25

4.0 Points

Normally, permanent current assets should be financed by

A.long-term funds.

B.short-term funds.

C.borrowed funds.

D.internally generated funds.

Question 23 of 25

4.0 Points

Which of the following is not a valid quantitative measure for accounts receivable collection policies?

A.average collection period

B.aging of accounts receivables

C.ratio of debt to equity

D.ratio of bad debts to credit sales

Question 24 of 25

4.0 Points

Working capital management is relatively unimportant for the small business.

True

False

Question 25 of 25

4.0 Points

For most firms, the primary motive for holding cash is the transaction motive.

A. True

B. False