The Management Of Cash And Marketable Securities

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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?

Choose correct answer/s
A

wire transfers

B

electronic depository transfer checks

C

(mail) depository transfer checks

D

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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A

Drafts

B

Wire transfers

C

Check-like electronic images

D

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.

Choose correct answer/s
A

Negotiable certificates of deposit

B

Commercial paper

C

Repurchase agreements

D

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.

Choose correct answer/s
A

Negotiable certificates of deposit

B

Commercial paper

C

Repurchase agreements

D

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?

Choose correct answer/s
A

The price of the stock stays near par.

B

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

C

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

D

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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A
for transactions purposes
B
for precautionary purposes
C
to compensate its broker for various services rendered to the firm
D
for transaction and precautionary purposes
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Question 7
Multiple Choice

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

Choose correct answer/s
A
higher cash discounts
B
possible financial insolvency
C
lower interest expense
D
possible financial insolvency and lower interest expense
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Question 8
Multiple Choice

Liquid asset balances include all of the following except

Choose correct answer/s
A
accounts receivable
B
checking account balances
C
marketable securities
D
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.

Choose correct answer/s
A
borrowing
B
compensating balance
C
shortage
D
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

Choose correct answer/s
A
overdraft
B
compensating balances
C
surplus balances
D
float
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Question 11
Multiple Choice

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

Choose correct answer/s
A
wire transfers
B
lockboxes
C
drafts
D
decentralized collection centers and concentration banks
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Question 12
Multiple Choice

The costs of a lockbox collection system include

Choose correct answer/s
A
foregone returns on the required compensating balances
B
service fees charged by the bank
C
increased bad-debt expenses
D
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

Choose correct answer/s
A
special courier services
B
wire transfers
C
drafts
D
float
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Question 14
Multiple Choice

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

Choose correct answer/s
A
Zero balance systems help utilize disbursement float more effectively.
B
Exactly enough funds are transferred into the zero balance accounts each day to cover the checks that have cleared.
C
The function of the concentration account is to receive all deposits coming into the zero balance system.
D
all of these answers are correct
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Question 15
Multiple Choice

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

Choose correct answer/s
A
Drafts require the firm to keep larger balances in its disbursement account.
B
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.
C
Both a and b are correct.
D
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

Choose correct answer/s
A
the interest earned over the expected holding period
B
the transaction cost involved in buying and selling the securities
C
the spread between long-term and short-term interest rates
D
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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A
length of maturity
B
yield
C
marketability
D
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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A
bankers' acceptances
B
U.S. Treasury issues
C
repurchase agreements
D
commercial paper
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Question 19
Multiple Choice

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

Choose correct answer/s
A
Federal agency issues
B
Treasury bills
C
repurchase agreements
D
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?

Choose correct answer/s
A
money market mutual funds
B
Treasury bills
C
Federal agency issues
D
commercial paper
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