1)Question 2 The current ratio concept is particularly useful in: Answer analyzing large firms comparing the financial positions of firms of varying sizes examining firms with large seasonal sales comparing the financial structures of firms of varying sizes 2 points Question 3 Deposits placed in foreign banks that remain denominated in U.S. dollars are called: Answer bankers’ acceptances Eurodollars federal funds commercial paper 2 points Question 4 The key input to the short-run financial planning process that is easiest to estimate is Answer cash sales. cash receipts. cash disbursements. the amount of month to month short term borrowing. 2 points Question 5 Working capital does not include: Answer cash accounts receivable marketable securities property, plant, and equipment 2 points Question 6 In the cash budget, the firm’s final sales forecast us usually a function of Answer economic forecasts. the sales force estimate of demand. external and internal factors in combination. accounts payable experience. 2 points Question 7 Sources of short-term financing such as accounts payable, notes payable, and accruals should be used to finance: Answer all current assets all fixed assets a portion of the current assets needed to support nonseasonal sales levels plus all of the seasonal build-up in current assets a portion of the fixed assets plus all of the seasonal build-up in current assets 2 points Question 8 Marketable securities are held primarily to meet: Answer transactions motives precautionary motives speculative motives leverage motives 2 points Question 9 ___________ are short-term money market investments that are extremely safe and liquid; they can be quickly converted into cash at values very close to their intrinsic values. Answer preferred stocks. treasury bonds. corporate bonds. marketable securities. 2 points Question 10 A negative cash conversion cycle indicates that the Answer operating cycle exceeds the average payment period. average payment period exceeds the operating cycle. firm is shortening its average payment period and lengthening its average collection period. lengthening its average collection period and lengthening its inventory period. 2 points Question 11 The bank line of credit is: Answer the type of business activity on which a particular bank concentrates its lending the maximum amount of credit extended to a business customer during a period of one year the average of loans made to a business customer during a year theloanlimit that a bank has established for a business customer 2 points Question 12 Commercial banks lend unsecured short-term funds in the following three basic ways: Answer Commercial paper, lines of credit, and revolving credit agreements. Single-payment note, revolving credit agreements, and commercial paper. Single-payment note, lines of credit, and revolving credit agreements. Commercial paper, lines of credit, and revolving credit agreements. 2 points Question 13 Which of the following short-term sources of funds is available only to the financially strongest concerns? Answer trade credit commercial bank loans finance company loans commercial paper 2 points Question 14 A short-term bank loan that is unsecured is referred to as: Answer a line of credit an accounts-receivable loan an inventory loan a life insurance policy loan 2 points Question 15 Firms who wish to obtain short-term secured loans generally have two major current assets available as collateral in the form of: Answer cash and marketable securities receivables and inventory receivables and factoring inventory and floor planning 2 points Question 16 The cost of trade credit involving cash discounts as a form of short-term financing is: Answer usually greater than the cost of commercial bank credit usually greater than the cost of factoring receivables excessive and to be avoided if at all possible the lowest of any form of short-term financing 2 points Question 17 The factor, unlike the commercial finance company: Answer engages in accounts receivable financing purchases the accounts receivable outright assumes limited credit risks is not responsible for the collection of accounts 2 points Question 18 A __________________ is a claim against a customer’s inventory when the individual items are indistinguishable. Answer floor plan receipt trust receipt warehouse receipt blanket inventory lien 2 points Question 19 What is the most important overall source of short-term business financing both in the U.S. and worldwide? Answer lines of credit trade credit notes commercial paper 2 points Question 20 If a firm actually sells its accounts receivable, the process is known as: Answer wholesale financing floor planning field crediting factoring 2 points