Question 1

Checks can be cleared only through the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False  True

Question 3

The system whereby funds are moved between computer terminals without use of checks is

Accepted Answer

A)   electronic funds transfer.
B)   float.
C)   a lock-box system.
D)   magnetic character recognition.E) B) and C)
F) All of the above

Question 4

Computerized cash management and electronic funds transfer allow firms to carry smaller cash balances.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a valid reason for holding cash?

Accepted Answer

A)   To meet transaction requirements.
B)   To earn the highest return possible.
C)   To satisfy emergency needs for funds.
D)   To provide a compensating balance for a bank.E) None of the above
F) A) and B)

Question 6

Proper management of sales, receivables, payables, and inventory form the basis of cash flow.

Accepted Answer

A) True 
 B)False  True

Question 7

The problem in stretching out the maturity of marketable securities is that

Accepted Answer

A)   you are legally locked in until the maturity date.
B)   longer-term securities always make less interest than shorter-term securities.
C)   there is a greater possibility that the value of the security will drop because of interest rate fluctuations.
D)   interest rates are generally lower over time.E) A) and B)
F) A) and C)

Question 8

Certificates of deposit purchased in small denominations of $1,000 at commercial banks or savings and loan organizations are readily marketable.

Accepted Answer

A) True 
 B)False

Question 9

When developing a credit scoring report, many variables would be considered. Which of the following best represents the major factors Dun & Bradstreet would examine?

Accepted Answer

A)   The age of the management team, the dollar amount of sales, net profits, and long-term debt.
B)   The age of the company, the number of employees, and the level of current assets.
C)   The financial statements, satisfactory or slow payment experiences, and negative public records (suits, liens, judgments, and bankruptcies) .
D)   The company's cash balances, return on equity, and its average tax rates.E) B) and C)
F) C) and D)

Question 10

Treasury bills are unique in that they trade on a premium basis.

Accepted Answer

A) True 
 B)False

Question 11

Characteristics of a money market mutual fund include

Accepted Answer

A)   the purchase of shares by investors, the proceeds of which are reinvested into liquid short-term securities.
B)   a required minimum balance of $2,500.
C)   the ability to be readily marketable.
D)   None of the options are true.E) A) and B)
F) C) and D)

Question 12

Bankers' acceptances are short-term securities that arise from foreign trade.

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) B) and D)
F) A) and B)

Question 14

If a company can implement cash management systems and save three days by reducing remittance time and one day by increasing disbursement time based on $2,000,000 in average daily remittances and $2,500,000 in average daily disbursements and its return on freed-up funds is 10%, what is the maximum that it should spend on the system?

Accepted Answer

A)   $2,000,000
B)   $650,000
C)   $850,000
D)   $1,000,000E) C) and D)
F) B) and D)

Question 15

The corporate sweep account is an account

Accepted Answer

A)   that allows companies to maintain zero balances in their checking accounts, with their excess cash moved into an interest-earning account.
B)   that allows companies to write checks on zero balance accounts with the understanding that when the check is presented for payment, money will be moved from the interest-bearing account to the appropriate payment account.
C)   that allows companies to move their lockbox collections into an interest-bearing checking account.
D)   that allows companies to maintain zero balances in their checking accounts, with their excess cash moved into an interest-earning account and lets companies write checks on zero balance accounts with the understanding that when the check is presented for payment, money will be moved from the interest-bearing account to the appropriate payment account.E) A) and D)
F) None of the above

Question 16

In comparison to securities issued by the U.S. Treasury, securities issued by U.S. government agencies

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 than Treasury securities.E) B) and C)
F) A) and B) C

Question 17

A lock-box is used to safeguard the corporation's marketable securities.

Accepted Answer

A) True 
 B)False

Question 18

In general, cash management at the international level employs the same techniques as domestic cash management.

Accepted Answer

A) True 
 B)False

Question 19

When using the economic order quantity model

Accepted Answer

A)   ordering costs increase as the level of inventory increases.
B)   carrying costs decrease as the level of inventory increases.
C)   costs are minimized when total carrying costs and total ordering costs are equal.
D)   None of the options are true.E) All of the above
F) None of the above

Question 20

If a company would like to reduce its average collection period, it can either offer a cash discount or increase net terms.

Accepted Answer

A) True 
 B)False

Exam 7: Current Asset Management

Checks can be cleared only through the Federal Reserve System.

Correct Answer
verified

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

Correct Answer
verified
True

The system whereby funds are moved between computer terminals without use of checks is

Correct Answer
verified

Computerized cash management and electronic funds transfer allow firms to carry smaller cash balances.

Correct Answer
verified

Which of the following is not a valid reason for holding cash?

Correct Answer
verified

Proper management of sales, receivables, payables, and inventory form the basis of cash flow.

Correct Answer
verified
True

The problem in stretching out the maturity of marketable securities is that

Correct Answer
verified

Certificates of deposit purchased in small denominations of $1,000 at commercial banks or savings and loan organizations are readily marketable.

Correct Answer
verified

When developing a credit scoring report, many variables would be considered. Which of the following best represents the major factors Dun & Bradstreet would examine?

Correct Answer
verified

Treasury bills are unique in that they trade on a premium basis.

Correct Answer
verified

Characteristics of a money market mutual fund include

Correct Answer
verified

Bankers' acceptances are short-term securities that arise from foreign trade.

Correct Answer
verified

"Float" takes place because

Correct Answer
verified

Correct Answer
verified

The corporate sweep account is an account

Correct Answer
verified

In comparison to securities issued by the U.S. Treasury, securities issued by U.S. government agencies

Correct Answer
verified
C

A lock-box is used to safeguard the corporation's marketable securities.

Correct Answer
verified

In general, cash management at the international level employs the same techniques as domestic cash management.

Correct Answer
verified

When using the economic order quantity model

Correct Answer
verified

If a company would like to reduce its average collection period, it can either offer a cash discount or increase net terms.

Correct Answer
verified

Exam 7: Current Asset Management

Checks can be cleared only through the Federal Reserve System.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedTrue

The system whereby funds are moved between computer terminals without use of checks is

Correct AnswerverifiedShow Answer

Computerized cash management and electronic funds transfer allow firms to carry smaller cash balances.

Correct AnswerverifiedShow Answer

Which of the following is not a valid reason for holding cash?

Correct AnswerverifiedShow Answer

Proper management of sales, receivables, payables, and inventory form the basis of cash flow.

Correct AnswerverifiedTrue

The problem in stretching out the maturity of marketable securities is that

Correct AnswerverifiedShow Answer

Certificates of deposit purchased in small denominations of $1,000 at commercial banks or savings and loan organizations are readily marketable.

Correct AnswerverifiedShow Answer

When developing a credit scoring report, many variables would be considered. Which of the following best represents the major factors Dun & Bradstreet would examine?

Correct AnswerverifiedShow Answer

Treasury bills are unique in that they trade on a premium basis.

Correct AnswerverifiedShow Answer

Characteristics of a money market mutual fund include

Correct AnswerverifiedShow Answer

Bankers' acceptances are short-term securities that arise from foreign trade.

Correct AnswerverifiedShow Answer

"Float" takes place because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The corporate sweep account is an account

Correct AnswerverifiedShow Answer

In comparison to securities issued by the U.S. Treasury, securities issued by U.S. government agencies

Correct AnswerverifiedC

A lock-box is used to safeguard the corporation's marketable securities.

Correct AnswerverifiedShow Answer

In general, cash management at the international level employs the same techniques as domestic cash management.

Correct AnswerverifiedShow Answer

When using the economic order quantity model

Correct AnswerverifiedShow Answer

If a company would like to reduce its average collection period, it can either offer a cash discount or increase net terms.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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True

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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True

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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C

Correct Answer
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Correct Answer
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Correct Answer
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