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

to earn the highest return possi

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

decline as average inventory increases

Money market funds are accounts that

allow small investors to buy lg.-denomin. securities

can be carried out with a futures contract.

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

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

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

Currencies change daily & have to be managed across borders

The economic order quantity

is the lowest cost amount to order considering all costs

When using the economic order quantity model

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

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%.

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

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