88. International cash management systems are more complex than domestic cash management systems
because of
89. The corporate sweep account is an account
90. A multinational company may prefer to hold sizeable cash balances in one currency rather than another
because
91. The problem in stretching out the maturity of marketable securities is that
92. Which of the following is not a factor influencing the selection of a marketable security?
93. Generally, the safest and most marketable instrument for short-term investment is
94. Which of the following securities typically trades on a discount basis?
95. A firm that wishes to minimize risk when investing idle cash would be LEAST likely to buy
96. A banker’s acceptance
97. Eurodollar certificates of deposit
98. In comparison to securities issued by the U.S. Treasury, securities issued by U.S. government
agencies
99. Which of the following securities represents an unsecured promissory note issued by a corporation?
100. Eurodollars
101. Money market funds are
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102. Characteristics of a money market mutual fund include
103. Characteristics of a money market deposit account include
104. Which of the following are characteristics of money market investments?
105. Money market funds
106. The three primary policy variables to consider when extending credit include all of the following except
107. The most subjective and also significant segment of the 5 Cs of credit for giving final approval is
108. Dun & Bradstreet is known for providing
109. When developing a credit scoring report, many variables would be considered. Which of the following
best represents the major factors Dun & Bradstreet would examine?
110. Which of the following is not a valid quantitative measure for accounts receivable collection policies?
111. Variables important to credit scoring models include
112. Inventory is usually divided into three basic categories except
113. Which of the following is generally considered to be the least liquid of current assets?
114. Companies that are mostly influenced by seasonal sales have to make a choice between
115. The costs of carrying inventory do not include
116. For a given firm, holding other factors constant, ordering costs per unit generally
117. Use of the economic order quantity
118. The economic order quantity
119. When using the economic order quantity model
120. The amount of safety stock that a firm carries depends upon
121. A Just-In-Time (JIT) inventory management program has all but which of the following requirements?
122. Cost savings from Just-In-Time (JIT) inventory management include(s)
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123. All of the following are benefits of just-in-time inventory ordering systems except that JIT
124. If average daily remittances are $6 million, and “extended disbursement float” adds two days to the
disbursement schedule, how much should the firm be willing to pay for a cash management system if the
firm earns 7% on excess funds?
125. Price Corp. is considering selling to a group of new customers and creating new annual sales of
$90,000. Five percent will be uncollectible. The collection cost on all accounts is 3% of new sales, the cost
of producing and selling is 80% of sales, and the firm is in the 30% tax bracket. What is the profit on new
sales?
126. Waldron Inc. is considering selling to a group of new customers that will bring in credit sales of
$24,000 with a return on sales of 5%. The only new investment will be in accounts receivable. Waldron has
a turnover ratio of 6 to 1 between sales and accounts receivable. What is Waldron Inc’s expected return on
investment?
127. Modos Company has deposited $3,500 in checks received from customers. It has written $1,400 in
checks to its suppliers. The initial bank and book balance was $600. If $1,600 of its customers’ checks
have cleared, but only $600 of its own, calculate its float.
128. Massa Machine Tool expects total sales of $60,000. The price per unit is $10. The firm estimates an
ordering cost of $25 per order, with an inventory cost of $0.70 per unit. What is the optimum order size?
129. Assuming that we can earn a 10% return on accounts receivable, which of the following strategies to
finance an increase in our accounts receivable balance would be optimal?
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130. If a company can implement cash management systems and save three days by reducing remittance
time and one day by increasing disbursement time based on $2,000,000 in average daily remittances and
$2,500,000 in average daily disbursements and its return on freed–up funds is 10%, what is the maximum
that it should spend on the system?
131. All of the following are methods of controlling receivables except
132. Level production offers all of the following benefits except
133. We expect that we can receive annual incremental income after taxes of $25,000, including an
adjustment for uncollectible accounts. What is the maximum commitment to A/R that we should be willing
to assume if our firm’s minimum required after-tax return is 8%?
134. All of the following are examples of carrying costs except
135. The inventory decision model provides which type of information?
136. Which of the following should require the highest rate of return?
137. Which of the following should require the lowest rate of return?
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138. Warren Enterprises expects 20,000 unit sales, has ordering costs of $20 per order, carrying costs of
$1.00 per unit, and desires to keep 100 units in safety stock. Assuming level production, what should be its
average inventory?
Chapter 07 Test Bank – Static Summary
Category
#of
Questions
AACSB: Analytical Thinking
102
AACSB: Ethics
1
AACSB: Reflective Thinking
36
Accessibility: Keyboard Navigation
134
Blooms: Analyze
4
Blooms: Apply
12
Blooms: Evaluate
7
Blooms: Remember
36
Blooms: Understand
80
Difficulty: Basic
42
Difficulty: Challenge
9
Difficulty: Intermediate
87
Learning Objective: 07-01 Current asset management is an extension of concepts discussed in the previous
chapter and involves the management of cash, marketable securities, accounts receivable, and inventory.
7
Learning Objective: 07-02 Cash management involves control over the receipt and payment of cash so as to
minimize nonearning cash balances.
53
Learning Objective: 07-03 The management of marketable securities involves selecting between various short
term investments.
28
Learning Objective: 07-04 Accounts receivable management requires credit policy decisions aimed at
maximizing profitability.
23
Learning Objective: 07-05 Inventory management requires determining the level of inventory necessary to
30
07–27
enhance sales and profitability.
Learning Objective: 07-06 An overriding concept is that the less liquid an asset is, the higher the required
return.
8
Topic: Asset Management
3
Topic: Bankruptcy prediction
1
Topic: Bond yields and returns
2
Topic: Cash budget
1
Topic: Cash collections management
6
Topic: Cash disbursements management
1
Topic: Cash management – general
19
Topic: Collection policy
2
Topic: Credit analysis
7
Topic: Credit policy analysis
11
Topic: Credit terms
4
Topic: Derived-demand inventory management
5
Topic: Economic order quantity (EOQ) model
14
Topic: Float costs and management
14
Topic: International corporate finance
1
Topic: International transactions
6
Topic: Inventory costs
1
Topic: Inventory management
5
Topic: Inventory types
1
Topic: Liquidity
2
Topic: Money market securities
18
Topic: Reasons to hold cash
2
Topic: Short-term finance and planning
9
Topic: Treasury yield curve
1