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Exam 7: Current Asset Management

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Question 1

True/False

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Level production allows a company to reduce inventory and maximize efficiency as compared to seasonal production.

A) True
B) False

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Question 2

Multiple Choice

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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

E) B) and C)
F) None of the above

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Question 3

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Inventory is usually divided into three basic categories except

Use of the economic order quantity

Lower ordering costs would tend to increase a firm's economic order quantity. By reducing the numerator in the basic EOQ formula, quantity (the quotient) is reduced.

International cash management is more complex than domestic-based cash management because of

Which of the following securities typically trades on a discount basis?

The three primary policy variables to consider when extending credit include all of the following except

The use of automated clearinghouses (ACHs) saves money for consumers, corporations, and financial institutions by reducing transaction costs.

The "economic ordering quantity" helps a firm determine the most efficient order size to place.

Dun & Bradstreet is known for providing

SWIFT has combated the growing issue of electronic fraud with smart card technology that no longer requires users to manually log in to the network, and thus eliminates any paper trail.

The costs of carrying inventory do not include

International cash management systems are more complex than domestic cash management systems because

Mountain Home Systems Inc. is a well-known and reputable supplier of integrated circuits to manufacturers of telecommunications devices. The firm is currently debating whether to expand its sales to car-telephone manufacturers. While the firm expects an extra $3 million in sales if it enters this market, it also knows that 15% of its sales will ultimately be uncollectible. In addition, collection costs will be 3% on all new sales, and the firm's production and selling costs are 80% of sales. Mountain Home's tax rate is 30%. a) Calculate Mountain Home's additional net income from the new sales. b) If Mountain Home can turn its receivables over four times per year, what will its additional investment in accounts receivable be and what will the firm earn as an after-tax return on that investment? c) Mountain Home management requires that any new project earn a minimum of 10% return on investment. Should the firm enter the car-telephone manufacturer market?

Automated clearinghouses are commonly used by consumers to make direct payments for

"Float" has been largely reduced because of electronic payments and improvements in B2B business relationships.

SWIFT's implementation of the "smart card" is expected to

The use of "float" has dramatically increased since the Check Clearing for the 21^st Century Act was passed.

Small-denomination certificates of deposit are usually more liquid than large-denomination CDs.