FIN 200 CheckPoint Week Six Quiz

In this paperwork of FIN 200 CheckPoint Week Six Quiz you will find the answers on the next questions:

1) Permanent current assets are not a factor in a manager’s decision making process when all current assets will be

A. self-liquidating.

B. long-term in nature.

C. financed by short-term debt.

D. internally financed.

2) A “normal” term structure of interest rates would depict

A. no general relationship between short- and long-term rates.

B. long-term rates higher than short-term rates.

C. short-term rates higher than long-term rates.

D. medium rates (1-5 years) lower than both short-term and long-term rates.

3) The theory of the term structure of interest rates which suggests that long-term rates are determined by the average of short-term rates expected over the time that a long-term bond is outstanding is the

A. liquidity premium theory.

B. segmentation theory.

C. expectations hypothesis.

D. market average rate theory.

4) Frisch Fish Corp expects net income next year to be $600,000. Inventory and accounts receivable will have to be increased by $300,000 to accommodate this sales level. Frisch will pay dividends of $400,000. How much external financing will Frisch Fish need assuming no organically generated increase in liabilities?

A. $200,000

B. $100,000

C. No external financing is required.

D. $300,000

5) Which of the following is not a true statement about automated clearinghouses (ACHs)?

A. Debits drawn on automated clearinghouses cost less than half that of checks processed through financial institutions.

B. Commercial transactions using automated clearinghouses have been growing at close to 17% per year since 1989.

C. Automated clearinghouses are responsible for the check clearing process between commercial banks and the Federal Reserve Banks.

D. The ability to reduce transactions costs and create convenience is driving the growth of automated clearinghouses.

6) One of the first considerations in cash management is

A. profitability.

B. synchronization of cash inflows and cash outflows.

C. to have as much cash as possible on hand.

D. to put any excess cash into accounts receivable.

7) Assuming that we can earn a 13.5% return on accounts receivable, which of the following actions to finance an increase in our accounts receivable balance would be optimal?

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

B. a decrease in inventories which are earning a 17.6% return.

C. a reduction in marketable securities which are earning a return of 14.2%.

D. an increase in accounts payable that would cost our firm 15%.

8) Hedging

A. is a legal agreement to buy or sell a financial futures contract.

B. increases risk.

C. is a way to protect your accounts receivable position.

D. can be carried out with a futures contract.

POSSIBLE QUESTIONS

When the yield curve is downward sloping, generally a financial manager should

A. utilize short-term financing

B. increase investment and level of financing overall

C. expect an economic boom

D. utilize long-term financing

Which of the following is not a method of speeding up collections?

A. All of these are methods for speeding up collections.

B. Extended disbursement float.

C. Lock-box system.

D. Regional collection centers.

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