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

decline as average inventory increases

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

to earn the highest return possi

can be carried out with a futures contract.

If we can earn 13.5% on A/R, chose an action to finance this increase in our A/R balance ?

an increase in bank loans that would cost us 11.5%.

The economic order quantity

is the lowest cost amount to order considering all costs

Int'l cash management systems are more complex than domestic cash management systems because

Currencies change daily & have to be managed across borders

When using the economic order quantity model

costs are min. when carrying costs and ordering costs are =

One of the most popular uses of automated clearing houses is the

direct deposit of checks: FICA payments, gov't and private.

Money market funds are accounts that

allow small investors to buy lg.-denomin. securities

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BAC 300 Chapter 7

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A review of chapter 7 concepts

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Questions 19

Answers

1
For a given firm, holding other factors constant, ordering costs per unit generally
are negotiated
increase in proportion to increases in inventory.
are considered fixed costs
decline as average inventory increases
2
Which of the following is not a valid reason for holding cash?
to satisfy emergency needs for funds
to meet transaction requirements
to provide a compensating balance for a bank
to earn the highest return possi
3
The most subjective and significant segment of the 5 C's of credit for final approval is
capacity.
conditions
collateral
character
4
Which of the following is not a valid quantitative measure for A/R collection policies
ratio of debt to equity
average collection period
ratio of bad debts to credit sales
aging of accounts receivables
5
3 policy variables to consider when extending credit include all of the following except
the level of interest rates
the terms of trade
collection policy
credit standards
6
A Just-In-Time (JIT) inventory mgt. program has all but which of the following requirements?
large safety stocks
quality production
minimizing inventory levels
close ties between suppliers, manufacturers, and customers
7
Hedging
can be carried out with a futures contract.
is a way to protect your accounts receivable position
increases risk
legal agreement to buy or sell a financial futures contract
8
If we can earn 13.5% on A/R, chose an action to finance this increase in our A/R balance ?
an increase in bank loans that would cost us 11.5%.
a reduction in marketable securities that earn 14.2%.
an increase in accounts payable that would cost our firm 15%
decrease in inventories which are earning a 17.6% return.
9
Which of the following is not a factor influencing the selection of a marketable security?
float
safety
yield
maturity
10
The economic order quantity
all of the above
determines the reorder point
is the lowest cost amount to order considering all costs
determines the safety stock
11
EOQ Exercise
463 units
327 units
207 units
147 units
12
Int'l cash management systems are more complex than domestic cash management systems because
electronic funds transfer is more common more than the U.S.
Currencies change daily & have to be managed across borders
none of the above
many developing countries only use a cash payments system
13
When using the economic order quantity model
none of the above
carrying costs decrease as the level of inventory increases
costs are min. when carrying costs and ordering costs are =
ordering costs increase as the level of inventory increases
14
The corporate sweep account is an account that
allows you to maintain zero balances
allows you to write checks on zero balance accounts
a and b are correct
allows lock box collections to earn interest
15
Probably the safest and most marketable instrument for short-term investment is
Treasury bills
large denomination certificates
commercial paper
Treasury notes
16
One of the most popular uses of automated clearing houses is the
transfer of funds between U.S. banks and foreign banks.
transfer of funds between government agencies
collection of accounts receivable from customers
direct deposit of checks: FICA payments, gov't and private.
17
Inventory is usually divided into three basic categories except
raw materials
projected sales
finished goods
work in progress
18
How would electronic funds transfer affect the use of "float"?
Have no effect on its use
Decrease its use somewhat
Increase its use somewhat
Virtually eliminate its use
19
Money market funds are accounts that
allow small investors to buy lg.-denomin. securities
create pools of bonds held by large utility companies
are high-yielding accts. used by corp. to finance operations
allow small investors to buy shares in preferred stock

BAC 300 Chapter 7 Flashcards | StudBud