Cash And Liquidity Management

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Introduction to Corporate Finance
Financial Statements,Taxes,and Cash Flow
Working With Financial Statements
Long-Term Financial Planning and Growth
Introduction to Valuation: The Time Value of Money
Discounted Cash Flow Valuation
Interest Rates and Bond Valuation
Stock Valuation
Net Present Value and Other Investment Criteria
Making Capital Investment Decisions
Project Analysis and Evaluation
Some Lessons From Capital Market History
Return,Risk,and the Security Market Line
Cost of Capital
Raising Capital
Financial Leverage and Capital Structure Policy
Dividends and Payout Policy
Short-Term Finance and Planning
Cash and Liquidity Management
Credit and Inventory Management
International Corporate Finance
Behavioral Finance: Implications for Financial Management
Enterprise Risk Management
Options and Corporate Finance
Option Valuation
Mergers and Acquisitions
Leasing

All Questions

Question 1

Free

Multiple Choice

Yesterday,the president of RB Enterprises received a phone call from DLK,a competitor.DLK is a sole proprietorship.An unexpected family situation has caused the owner to suddenly want to retire and relocate closer to his family.Thus,the assets of DLK are being offered to RB Enterprises at a bargain basement price.While RB Enterprises had not anticipated purchasing these assets,it was decided that the opportunity was too good to pass up.This illustrates which of the following needs to hold cash?

Choose correct answer/s

precautionary

transaction

speculative

compensation

float

Check answer

Question 2

Free

Multiple Choice

GT Motors regularly issues short-term debt to finance its daily operations.Suddenly,the credit markets froze and no funds were available for borrowing.Fortunately,the firm had some cash reserves saved that it was able to use to fund its operations until additional credit was available.The need to retain cash for situations such as this is referred to as which one of the following motives for holding cash?

Choose correct answer/s

speculative

float

compensating

precautionary

transaction

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Question 3

Free

Multiple Choice

The cash found in a cash drawer that a check-out clerk uses to make change is an example of which of the following motives for holding cash?

Choose correct answer/s

speculative

daily float

compensating balance

precautionary

transaction

Check answer

Question 4

Free

Multiple Choice

Float is defined as the:

Choose correct answer/s

amount of cash a firm can immediately withdraw from its bank account.

difference between book cash and bank cash.

change in a firm's cash balance from one accounting period to the next.

amount of cash a firm has on hand.

cash balance according to a firm's records.

Check answer

Question 5

Free

Multiple Choice

A lockbox is a:

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special safe used by a firm for overnight storage of any cash or undeposited checks.

special safe used by a firm that can only be opened at prespecified times of the day.

box located in a bank's vault that is rented by a firm and used to hold unprocessed checks.

special post office box which can only be opened by prespecified postal inspectors for direct delivery to the addressee.

post office box strategically located so that a firm's receivables can be collected faster.

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Question 6

Multiple Choice

The Presque Isle Center has branch operations in three states.Each branch deals with a local bank.However,all excess funds in these branch bank accounts are transferred on a daily basis to the firm's primary bank located near the firm's home office.This routine of transferring cash to the primary bank on a regular basis is referred to as:

Choose correct answer/s

cash concentration.

strategic cash disbursement.

transfer flotation.

payables management.

float management.

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Question 7

Multiple Choice

An account into which funds are deposited only in an amount equal to the value of the checks presented for payment that day is called a _____ account.

Choose correct answer/s

lockbox

concentration

zero-balance

compensating balance

revolving

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Question 8

Multiple Choice

An account into which a firm transfers funds,usually from a master account,in an amount sufficient to cover the checks presented for payment that day is called a _____ account.

Choose correct answer/s

lockbox

cleanup

compensating balance

revolving

controlled disbursement

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Question 9

Multiple Choice

The Snow Hut has analyzed the carrying and shortage costs associated with its cash holdings and determined that the firm should ideally maintain a cash balance of $3,600.This $3,600 represents which one of the following to the firm?

Choose correct answer/s

target cash balance

concentration balance

available balance

selected cash amount

compensating balance

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Question 10

Multiple Choice

Adjustment costs is another name for which one of the following?

Choose correct answer/s

borrowing costs

shortage costs

cash transfer costs

cash wire costs

excess cash costs

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Question 11

Multiple Choice

Why do firms need liquidity?
I)to meet compensating balance requirements
II)to take advantage of an opportunity that suddenly arises
III)to conduct daily business activities
IV)to be prepared for a financial emergency

Choose correct answer/s

I and II only

III and IV only

I, III, and IV only

II, III, and IV only

I, II, III, and IV

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Question 12

Multiple Choice

Cash management primarily involves:

Choose correct answer/s

optimizing a firm's collections and disbursements of cash.

maximizing the income a firm earns on its cash reserves.

reconciling a firm's book balance with its bank balance.

determining the optimal level of liquidity a firm should maintain.

determining the best method of raising capital.

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Question 13

Multiple Choice

Disbursements float:

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occurs when a deposit is recorded but the funds are unavailable.

causes the book balance to exceed the bank balance.

has tended to increase since the enactment of the Check Clearing Act for the 21^st Century.

is a recommended source of funds for short-term investments.

is eliminated when payments are made electronically.

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Question 14

Multiple Choice

Collection float:

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is more desirable to firms than disbursement float.

is totally eliminated by the installation of a lockbox system.

exists when a firm's available balance exceeds its book balance.

can be avoided by collecting payments electronically at the time of sale.

is eliminated by implementing a concentration banking system.

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Question 15

Multiple Choice

Which one of the following statements is correct?

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Net float decreases every time a firm issues a check to pay one of its suppliers.

A positive net float indicates that collection float exceeds disbursements float.

Firms prefer a zero net float over a positive net float.

Net float is equal to collection float minus disbursement float.

Net float is equal to a firm's available balance minus its book balance.

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Question 16

Multiple Choice

Check kiting is:

Choose correct answer/s

used by most firms as an ethical means of handling its cash reserves.

the process of withdrawing all funds from a bank account as soon as the funds are available.

the central core of a good cash management system.

using uncollected cash to invest in short-term, liquid assets.

increasingly popular due to recent banking law changes.

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Question 17

Multiple Choice

Which of the following will reduce collection time?
I)billing customers electronically rather than by mail
II)accepting debit cards but not checks as payment for a sale
III)offering cash discounts for early payment
IV)reducing the processing delay by one day

Choose correct answer/s

I and II only

I and III only

I, II, and III only

II, III, and IV only

I, II, III, and IV

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Question 18

Multiple Choice

Which of the following should help reduce the total collection time for a firm?
I)opening a post office box so mail can be received earlier in the morning
II)assigning additional staff in the morning to process incoming payments
III)providing a discount for customers who pay electronically
IV)establishing preauthorized payments from customers

Choose correct answer/s

I and II only

III and IV only

II, III, and IV only

I, II, and IV only

I, II, III, and IV

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Question 19

Multiple Choice

Which one of the following collection times is correctly described?

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The processing delay starts when a firm mails out a billing statement and ends when the payment is received from a customer.

Mailing time begins when a firm mails out a billing statement and ends when the payment is received.

Collection time begins when a firm mails out a billing statement and ends when the cash payment for that billing is available to the firm.

Availability delay begins when a firm deposits a customer's check into its bank account and ends when the cash from that payment is available to the firm.

Processing delay begins when a firm mails out billing statements and ends when the firm deposits the payment for that statement into its bank account.

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Question 20

Multiple Choice

A lockbox system:

Choose correct answer/s

entails the use of a bank which is centrally located to collect payments on a nationwide basis.

is designed to deposit a customer's check into the firm's bank account prior to recording the receipt of that check to a customer's account.

is used to reduce the disbursement float of a firm.

is efficient regardless of the locations selected for lockbox destinations.

automatically records payments to a customer's account when the customer's check is received at the lockbox location.

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Cash And Liquidity Management

The cash found in a cash drawer that a check-out clerk uses to make change is an example of which of the following motives for holding cash?

Float is defined as the:

A lockbox is a:

An account into which funds are deposited only in an amount equal to the value of the checks presented for payment that day is called a _____ account.

An account into which a firm transfers funds,usually from a master account,in an amount sufficient to cover the checks presented for payment that day is called a _____ account.

The Snow Hut has analyzed the carrying and shortage costs associated with its cash holdings and determined that the firm should ideally maintain a cash balance of $3,600.This $3,600 represents which one of the following to the firm?

Adjustment costs is another name for which one of the following?

Why do firms need liquidity?I)to meet compensating balance requirementsII)to take advantage of an opportunity that suddenly arisesIII)to conduct daily business activitiesIV)to be prepared for a financial emergency

Cash management primarily involves:

Disbursements float:

Collection float:

Which one of the following statements is correct?

Check kiting is:

Which of the following will reduce collection time?I)billing customers electronically rather than by mailII)accepting debit cards but not checks as payment for a saleIII)offering cash discounts for early paymentIV)reducing the processing delay by one day

Which one of the following collection times is correctly described?

A lockbox system:

Why do firms need liquidity?
I)to meet compensating balance requirements
II)to take advantage of an opportunity that suddenly arises
III)to conduct daily business activities
IV)to be prepared for a financial emergency

Which of the following will reduce collection time?
I)billing customers electronically rather than by mail
II)accepting debit cards but not checks as payment for a sale
III)offering cash discounts for early payment
IV)reducing the processing delay by one day