The Management Of Cash And Marketable Securities

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Questions Bank

The Role and Objective of Financial Management
The Domestic and International Financial Marketplace
Evaluation of Financial Performance
Financial Planning and Forecasting
The Time Value of Money
Fixed Income Securities: Characteristics and Valuation
Common Stock: Characteristics, Valuation, and Issuance
Analysis of Risk and Return
Capital Budgeting and Cash Flow Analysis
Capital Budgeting: Decision Criteria and Real Option Considerations
Capital Budgeting and Risk
The Cost of Capital
Capital Structure Concepts
Capital Structure Management in Practice
Dividend Policy
Working Capital Policy and Short-term Financing
The Management of Cash and Marketable Securities
Management of Accounts Receivable and Inventories
Lease and Intermediate-term Financing
Financing With Derivatives
Risk Management
International Financial Management
Corporate Restructuring
Appendix: Continuous Compounding and Discounting
Appendix: Mutually Exclusive Investments Having Unequal Lives
Appendix: Breakeven Analysis
Appendix: Bond Refunding Analysis
Appendix: Taxes

All Questions

Question 1

Free

Multiple Choice

Which of the following methods is (are) used to transfer surplus funds from local (collection) bank accounts to concentration (disbursement) bank accounts?

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wire transfers

electronic depository transfer checks

(mail) depository transfer checks

all of these answers are correct

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Question 2

Free

Multiple Choice

____ are processed through the Automated Clearing House (ACH) System.

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Drafts

Wire transfers

Check-like electronic images

Floats

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Question 3

Free

Multiple Choice

____ consists of short-term unsecured promissory notes issued by large, well-known corporations and finance companies.

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Negotiable certificates of deposit

Commercial paper

Repurchase agreements

Bankers' acceptances

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Question 4

Free

Multiple Choice

____ are short-term debt instruments issued as part of a commercial transaction, with payment guaranteed by a commercial bank.

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Negotiable certificates of deposit

Commercial paper

Repurchase agreements

Bankers' acceptances

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Question 5

Free

Multiple Choice

Which of the following statements concerning auction rate money market preferred stocks is (are) true?

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The price of the stock stays near par.

Fifty percent of the dividends are exempt from corporate income taxes.

The dividend yield on these securities is adjusted every 20 days through an auction process, where investors can exchange their stock for cash.

The price of the stock stays well above par.

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Question 6

Multiple Choice

The primary reason(s) why firms hold liquid asset balances is (are):

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for transactions purposes

for precautionary purposes

to compensate its broker for various services rendered to the firm

for transaction and precautionary purposes

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Question 7

Multiple Choice

The "shortage" costs associated with inadequate liquid asset balances include

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higher cash discounts

possible financial insolvency

lower interest expense

possible financial insolvency and lower interest expense

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Question 8

Multiple Choice

Liquid asset balances include all of the following except

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accounts receivable

checking account balances

marketable securities

currency on hand

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Question 9

Multiple Choice

The firm's optimal liquid asset balance occurs where the sum of the opportunity holding and ____ costs is minimized.

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borrowing

compensating balance

shortage

capital

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Question 10

Multiple Choice

The difference between the firm's checking account balance shown on the books of the bank and the account balance shown on its own books is known as

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overdraft

compensating balances

surplus balances

float

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Question 11

Multiple Choice

All of the following are methods used in expediting the collection of cash except

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wire transfers

lockboxes

drafts

decentralized collection centers and concentration banks

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Question 12

Multiple Choice

The costs of a lockbox collection system include

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foregone returns on the required compensating balances

service fees charged by the bank

increased bad-debt expenses

foregone returns on the required compensating balances and service fees charged by the bank

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Question 13

Multiple Choice

The fastest method for moving funds between banks is

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special courier services

wire transfers

drafts

float

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Question 14

Multiple Choice

Which of the following statements concerning "zero balance" systems is (are) correct?

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Zero balance systems help utilize disbursement float more effectively.

Exactly enough funds are transferred into the zero balance accounts each day to cover the checks that have cleared.

The function of the concentration account is to receive all deposits coming into the zero balance system.

all of these answers are correct

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Question 15

Multiple Choice

Which of the following statements concerning drafts is (are) correct?

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Drafts require the firm to keep larger balances in its disbursement account.

When a draft is transmitted to the firm's bank for collection, the bank must present the draft to the firm for acceptance before payment is made.

Both a and b are correct.

Neither a nor b is correct.

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Question 16

Multiple Choice

The optimal amount of the firm's liquid asset balance to be invested in marketable securities is a function of

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the interest earned over the expected holding period

the transaction cost involved in buying and selling the securities

the spread between long-term and short-term interest rates

the interest earned over the expected holding period and the transaction cost involved in buying and selling the securities

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Question 17

Multiple Choice

Which of the following criteria is generally least important in selecting marketable securities for inclusion in the firm's portfolio?

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length of maturity

yield

marketability

default risk

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Question 18

Multiple Choice

Which of the following types of marketable securities is considered to have the lowest default risk?

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bankers' acceptances

U.S. Treasury issues

repurchase agreements

commercial paper

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Question 19

Multiple Choice

Which of the following types of marketable securities normally has the lowest yields?

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Federal agency issues

Treasury bills

repurchase agreements

commercial paper

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Question 20

Multiple Choice

Which of the following types of marketable securities is most suitable for a smaller firm with only a few thousand dollars to invest at any given time?

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money market mutual funds

Treasury bills

Federal agency issues

commercial paper

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