Question 1

Which of the following is not a true statement about automated clearinghouses (ACHs) ?

Accepted Answer

A)   Automated clearinghouses are responsible for the check clearing process between commercial banks and the Federal Reserve Banks.
B)   Commercial transactions using automated clearinghouses have been growing at close to 17% per year since 1989.
C)   Debits drawn on automated clearinghouses cost less than half that of checks processed through financial institutions.
D)   The ability to reduce transactions costs and create convenience is driving the growth of automated clearinghouses.E) A) and B)
F) None of the above

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

"Float" is the name given for a short-term loan between suppliers and buyers.

Accepted Answer

A) True 
 B)False

Question 4

Stretching out the maturity of marketable securities can rarely result in a loss.

Accepted Answer

A) True 
 B)False

Question 5

The rate on Eurodollar certificates of deposit is usually lower than domestic certificates of deposit.

Accepted Answer

A) True 
 B)False

Question 6

One way businesses try to overcome the risk associated with new customers is to access a credit scoring report that will predict the probability of a customer causing credit problems in the future.

Accepted Answer

A) True 
 B)False

Question 7

International cash management is more complex than domestic-based cash management because of

Accepted Answer

A)   liquidity management issues.
B)   different banking systems.
C)   currency fluctuation risk.
D)   All of the options are true.E) C) and D)
F) B) and D)

Question 8

Level production allows a company to reduce inventory and maximize efficiency as compared to seasonal production.

Accepted Answer

A) True 
 B)False

Question 9

Float is the difference between the cash balance on the corporate books and the amount currently credited to the corporation by the bank.

Accepted Answer

A) True 
 B)False

Question 10

The costs of carrying inventory do not include

Accepted Answer

A)   the interest on funds tied up in inventory.
B)   the cost of warehouse space.
C)   ordering costs.
D)   insurance and handling costs.E) A) and D)
F) C) and D)

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

The cash-generating process for a firm is continuous, even though cash flow can be sporadic.

Accepted Answer

A) True 
 B)False

Question 13

"Float" takes place because

Accepted Answer

A)   a firm is early in paying its bills.
B)   the level of cash on the firm's books is equal to the level of cash in the bank.
C)   a lag exists between writing a check and clearing it through the banking system.
D)   a customer writes checks without adequate supporting balances.E) A) and B)
F) A) and C)

Question 14

In the management of cash and marketable securities, the primary concern is profitability.

Accepted Answer

A) True 
 B)False

Question 15

Cash should have a higher required return than accounts receivable because it is more liquid.

Accepted Answer

A) True 
 B)False

Question 16

Characteristics of a money market deposit account include

Accepted Answer

A)   a lower risk than money market funds.
B)   insurance by federal agencies.
C)   generally a limit of three deposits or withdrawals per month.
D)   All of the options are true.E) All of the above
F) B) and C)

Question 17

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 the options are true.E) A) and B)
F) B) and C)

Question 18

Companies that are mostly influenced by seasonal sales have to make a choice between

Accepted Answer

A)   level production and inventory build up.
B)   seasonal production and an uneven workforce.
C)   a stable workforce and a fluctuating workforce.
D)   All of the options are true.E) All of the above
F) None of the above

Question 19

Level production offers all of the following benefits except

Accepted Answer

A)   lower overtime usage.
B)   maximum efficiency.
C)   greater storage space.
D)   higher use of capacity.E) C) and D)
F) All of the above

Question 20

"Float" has been largely reduced because of electronic payments and improvements in business-to-business relationships.

Accepted Answer

A) True 
 B)False

Exam 7: Current Asset Management

The cash-generating process for a firm is continuous, even though cash flow can be sporadic.

Correct AnswerverifiedShow Answer

Which of the following is not a true statement about automated clearinghouses (ACHs) ?

Correct AnswerverifiedShow Answer

"Float" takes place because

Correct AnswerverifiedShow Answer

The rate on Eurodollar certificates of deposit is usually lower than domestic certificates of deposit.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the management of cash and marketable securities, the primary concern is profitability.

Correct AnswerverifiedShow Answer

"Float" has been largely reduced because of electronic payments and improvements in business-to-business relationships.

Correct AnswerverifiedShow Answer

Float is the difference between the cash balance on the corporate books and the amount currently credited to the corporation by the bank.

Correct AnswerverifiedShow Answer

Level production offers all of the following benefits except

Correct AnswerverifiedShow Answer

One way businesses try to overcome the risk associated with new customers is to access a credit scoring report that will predict the probability of a customer causing credit problems in the future.

Correct AnswerverifiedShow Answer

Characteristics of a money market deposit account include

Correct AnswerverifiedShow Answer

Stretching out the maturity of marketable securities can rarely result in a loss.

Correct AnswerverifiedShow Answer

Cash should have a higher required return than accounts receivable because it is more liquid.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

International cash management is more complex than domestic-based cash management because of

Correct AnswerverifiedShow Answer

The costs of carrying inventory do not include

Correct AnswerverifiedShow Answer

Level production allows a company to reduce inventory and maximize efficiency as compared to seasonal production.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Companies that are mostly influenced by seasonal sales have to make a choice between

Correct AnswerverifiedShow Answer

"Float" is the name given for a short-term loan between suppliers and buyers.

Correct AnswerverifiedShow Answer

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