75) One of the first considerations in cash management is
A) to have as much cash as possible on hand.
B) synchronization of cash inflows and cash outflows.
C) profitability.
D) to put any excess cash into accounts receivable.
76) Which of the following is not a valid reason for holding cash?
A) To meet transaction requirements.
B) To earn the highest return possible.
C) To satisfy emergency needs for funds.
D) To provide a compensating balance for a bank.
77) Cash flow does not rely on which of the following?
A) The payment arrangements of customers.
B) The monetary policy of the Federal Reserve.
C) The speed at which suppliers and creditors process checks.
D) The efficiency of the banking system.
78) The difference between the amount of cash on the firm’s books and the amount credited to it
by its bank is
A) an overdraft.
B) interest revenue.
C) extended disbursement.
D) float.
79) “Float” takes place because
A) a firm is early in paying its bills.
B) the level of cash on the firm’s books is equal to the level of cash in the bank.
C) a lag exists between writing a check and clearing it through the banking system.
D) a customer writes checks without adequate supporting balances.
80) Which of the following is the most liquid asset?
A) Prepaid expenses
B) Inventory
C) Cash equivalents
D) Accounts receivable
81) Which of the following is not a method of speeding up collections of cash?
A) Lock-box system.
B) Regional collection centers.
C) Extended disbursement float.
D) All of the options are methods for speeding up collections.
82) The system whereby funds are moved between computer terminals without use of checks is
A) electronic funds transfer.
B) float.
C) a lock-box system.
D) magnetic character recognition.
83) How will widespread adoption of electronic funds transfer affect the use of “float”?
A) It will increase its use somewhat.
B) It will decrease its use somewhat.
C) It will virtually eliminate its use.
D) It will have no effect on its use.
84) Which of the following is not a strategy to expedite the collection and check-clearing
process?
A) Utilizing a variety of collection centers throughout a marketing area.
B) Utilizing a lockbox system.
C) Mailing checks and waiting for the check to clear.
D) Utilizing electronic payment between banks.
85) Automated clearinghouses are commonly used by consumers to make direct payments for
A) insurance premiums.
B) mortgage payments.
C) utility bills.
D) All of the options are true.
86) One of the major cost savings for consumers using automated clearinghouses is
A) saving great amounts of money on postage.
B) saving time paying bills through check writing.
C) the security of having the payments and deposits directly deposited or deducted from your
account.
D) All of the options are true.
87) Which of the following is not a true statement about automated clearinghouses (ACHs)?
A) Automated clearinghouses are responsible for the check clearing process between commercial
banks and the Federal Reserve Banks.
B) Commercial transactions using automated clearinghouses have been growing at close to 17%
per year since 1989.
C) Debits drawn on automated clearinghouses cost less than half that of checks processed
through financial institutions.
D) The ability to reduce transactions costs and create convenience is driving the growth of
automated clearinghouses.
88) Some of the services provided around the clock by SWIFT are
A) international payments between banks.
B) foreign exchange.
C) trade finance transactions.
D) All of the options are true.
89) International cash management is more complex than domestic-based cash management
because of
A) liquidity management issues.
B) different banking systems.
C) currency fluctuation risk.
D) All of the options are true.
90) SWIFT’s implementation of the “smart card” is expected to
A) decrease the likelihood of electronic fraud.
B) remove the need for secret information to be sent through the mail.
C) guarantee the identity of the sender.
D) All of the options are true.
91) International cash management systems are more complex than domestic cash management
systems because
A) many developing countries still use a cash payments system.
B) some countries rely on electronic funds transfer more than the U.S.
C) liquidity management, involving short-term cash balances and deficits, has to be managed
across international boundaries and time zones and is subject to the risks of currency
fluctuations.
D) None of the options are true.
92) International cash management systems are more complex than domestic cash management
systems because of
A) the risk involved in currency fluctuations.
B) the changing interest rates across countries.
C) varying time zones across countries.
D) All of the options are true.
93) The corporate sweep account is an account
A) that allows companies to maintain zero balances in their checking accounts, with their excess
cash moved into an interest-earning account.
B) that allows companies to write checks on zero balance accounts with the understanding that
when the check is presented for payment, money will be moved from the interest-bearing
account to the appropriate payment account.
C) that allows companies to move their lockbox collections into an interest-bearing checking
account.
D) that allows companies to maintain zero balances in their checking accounts, with their excess
cash moved into an interest-earning account and lets companies write checks on zero balance
accounts with the understanding that when the check is presented for payment, money will be
moved from the interest-bearing account to the appropriate payment account.
94) A multinational company may prefer to hold sizeable cash balances in one currency rather
than another because
A) of high interest rates existing in one country.
B) one country’s currency may be weak relative to the other.
C) the company is looking to do business in the country with that currency in the future.
D) all of the options are true.
95) The problem in stretching out the maturity of marketable securities is that
A) you are legally locked in until the maturity date.
B) longer-term securities always make less interest than shorter-term securities.
C) there is a greater possibility that the value of the security will drop because of interest rate
fluctuations.
D) interest rates are generally lower over time.
96) Which of the following is not a factor influencing the selection of a marketable security?
A) Yield
B) Maturity
C) Float
D) Safety
97) Generally, the safest and most marketable instrument for short-term investment is
A) commercial paper.
B) large denomination certificate.
C) Treasury notes.
D) Treasury bills.
98) Which of the following securities typically trades on a discount basis?
A) Treasury notes
B) Treasury bills
C) Money market funds
D) Certificates of deposit
99) A firm that wishes to minimize risk when investing idle cash would be LEAST likely to buy
A) commercial paper.
B) long-term corporate bonds.
C) certificates of deposit.
D) Treasury bills of the U.S. government.
100) A banker’s acceptance
A) is a draft drawn on a bank and paid by that bank when presented to it.
B) may be accepted by the bank for future payment.
C) can be traded in a relatively liquid market until maturity.
D) All of the options are true.
101) Eurodollar certificates of deposit
A) are not marketable investments.
B) are used by banks to loan out funds to anyone seeking U.S. dollars.
C) pay interest rates usually lower than the rates on U.S. treasury bills.
D) are European currencies deposited into international U.S. branch banks.
102) In comparison to securities issued by the U.S. Treasury, securities issued by U.S.
government agencies
A) are significantly riskier than Treasury securities.
B) are much less liquid than Treasury securities.
C) yield slightly more than Treasury securities.
D) usually require the payment of higher commissions than Treasury securities.
103) Which of the following securities represents an unsecured promissory note issued by a
corporation?
A) Certificates of deposit
B) Savings accounts
C) Commercial paper
D) Money market fund
104) Eurodollars
A) can only be redeemed at U.S. banks or their branches in European countries.
B) are U.S. dollars that have been converted into several European currencies.
C) may be borrowed by anyone who wishes to hold U.S. dollars.
D) can only be redeemed at U.S. banks or their branches in any foreign country.
105) Money market funds are
A) accounts that allow small investors to participate in buying large-denomination securities.
B) extremely risky but high-yielding accounts used by large corporations to finance operations.
C) accounts that allow small investors to buy shares in companies that then buy shares of
common stock.
D) pools of bonds held by large utility companies.
106) Characteristics of a money market mutual fund include
A) the purchase of shares by investors, the proceeds of which are reinvested into liquid short-
term securities.
B) a required minimum balance of $2,500.
C) the ability to be readily marketable.
D) None of the options are true.
107) Characteristics of a money market deposit account include
A) a lower risk than money market funds.
B) insurance by federal agencies.
C) generally a limit of three deposits or withdrawals per month.
D) All of the options are true.
108) Which of the following are characteristics of money market investments?
A) Money market funds are offered by banks.
B) Money market funds are insured up to $100,000 by federal agencies.
C) The minimum balance for money market deposit accounts is normally $5,000.
D) None of the options are true.
109) Money market funds
A) are modeled after money market deposit accounts.
B) are insured up to $100,000.
C) have a minimum balance of $2,500.
D) earn competitive market rates of return.