Question 1

When considering offering a cash discount, a firm must weigh the benefits of freed-up cash with the cost of the cash discount.

Accepted Answer

A) True 
 B)False

Question 2

Electronic funds transfer will likely increase the use of float.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not a strategy to expedite the collection and check-clearing process?

Accepted Answer

A)   Utilizing a variety of collection centers throughout a marketing area.
B)   Utilizing a lockbox system.
C)   Mailing checks and waiting for the check to clear.
D)   Utilizing electronic payment between banks.E) A) and B)
F) A) and C)

Question 4

A cash discount typically lowers the average collection period of a firm.

Accepted Answer

A) True 
 B)False

Question 5

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) B) and D)
F) All of the above

Question 6

The economic order quantity

Accepted Answer

A)   assumes that inventory usage is seasonal.
B)   assumes that delivery times of each order are consistent.
C)   considers stock-outs.
D)   All of the options are true.E) A) and C)
F) B) and C)

Question 7

If a firm's average accounts receivable balance increases, this could be because the company improved what customers it extended credit to.

Accepted Answer

A) True 
 B)False

Question 8

Cash management becomes more important as the level of short-term interest rates rises.

Accepted Answer

A) True 
 B)False

Question 9

The two basic costs associated with inventory are production cost and ordering cost.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

There are two kinds of float: mail float and clearing float.

Accepted Answer

A) True 
 B)False

Question 12

For a given firm, holding other factors constant, ordering costs per unit generally

Accepted Answer

A)   decline as average inventory increases.
B)   increase in proportion to increases in inventory.
C)   are considered fixed costs.
D)   are negotiated.E) All of the above
F) B) and D)

Question 13

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) A) and C)
F) A) and B)

Question 14

All of the following are benefits of just-in-time inventory ordering systems except that JIT

Accepted Answer

A)   reduces warehouse space.
B)   saves utility and manpower costs.
C)   reduces inventory costs.
D)   prevents stock outs.E) B) and C)
F) A) and B)

Question 15

The "SWIFT" transfer system was developed to aid regional bank fund transfers within the United States.

Accepted Answer

A) True 
 B)False

Question 16

Some of the services provided around the clock by SWIFT are

Accepted Answer

A)   international payments between banks.
B)   foreign exchange.
C)   trade finance transactions.
D)   All of the options are true.E) All of the above
F) A) and B)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

One of the first considerations in cash management is

Accepted Answer

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.E) B) and D)
F) A) and D)

Question 19

The inventory decision model provides which type of information?

Accepted Answer

A)   Optimal total inventory
B)   Optimal safety stock
C)   Optimal order size
D)   Optimal carrying cost per unitE) A) and C)
F) B) and D)

Question 20

Which of the following is generally considered to be the least liquid of current assets?

Accepted Answer

A)   Accounts receivable
B)   Inventory
C)   Marketable securities
D)   Cash equivalentsE) None of the above
F) B) and D)

Exam 7: Current Asset Management

The two basic costs associated with inventory are production cost and ordering cost.

Correct AnswerverifiedShow Answer

The "SWIFT" transfer system was developed to aid regional bank fund transfers within the United States.

Correct AnswerverifiedShow Answer

Electronic funds transfer will likely increase the use of float.

Correct AnswerverifiedShow Answer

Which of the following is not a strategy to expedite the collection and check-clearing process?

Correct AnswerverifiedShow Answer

Level production offers all of the following benefits except

Correct AnswerverifiedShow Answer

For a given firm, holding other factors constant, ordering costs per unit generally

Correct AnswerverifiedShow Answer

Which of the following is generally considered to be the least liquid of current assets?

Correct AnswerverifiedShow Answer

Some of the services provided around the clock by SWIFT are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

One of the first considerations in cash management is

Correct AnswerverifiedShow Answer

The economic order quantity

Correct AnswerverifiedShow Answer

A cash discount typically lowers the average collection period of a firm.

Correct AnswerverifiedShow Answer

When considering offering a cash discount, a firm must weigh the benefits of freed-up cash with the cost of the cash discount.

Correct AnswerverifiedShow Answer

If a firm's average accounts receivable balance increases, this could be because the company improved what customers it extended credit to.

Correct AnswerverifiedShow Answer

Cash management becomes more important as the level of short-term interest rates rises.

Correct AnswerverifiedShow Answer

The inventory decision model provides which type of information?

Correct AnswerverifiedShow Answer

There are two kinds of float: mail float and clearing float.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

All of the following are benefits of just-in-time inventory ordering systems except that JIT

Correct AnswerverifiedShow Answer

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