Question 1

Cash management primarily involves:

Accepted Answer

A)  optimizing a firm's collections and disbursements of cash.
B)  maximizing the income a firm earns on its cash reserves.
C)  reconciling a firm's book balance with its bank balance.
D)  determining the optimal level of liquidity a firm should maintain.
E)  determining the best method of raising capital.F) D) and E)
G) A) and B)

Question 2

Explain how a lockbox system operates and why a firm might consider implementing such a system.

Accepted Answer

A lockbox system entails opening post of...

Question 3

Penco Supply spends $325,000 a week to pay bills and maintains a lower cash balance limit of $75,000.The standard deviation of its disbursements is $18,900.The applicable interest rate is 5 percent and the fixed cost of transferring funds is $65.What is the firm's optimal initial cash balance based on the BAT model?

Accepted Answer

A)  $150,600
B)  $158,929
C)  $170,096
D)  $221,506
E)  $209,619F) A) and C)
G) B) and E)

Question 4

A money market preferred stock:

Accepted Answer

A)  has a floating dividend.
B)  is sold only under a repurchase agreement.
C)  is a special form of commercial paper.
D)  has more price volatility than an ordinary preferred.
E)  has its interest rate reset daily.F) A) and B)
G) B) and C)

Question 5

Your firm spends $54,000 a week to pay bills and maintains a lower cash balance limit of $45,000.The standard deviation of your disbursements is $12,100.The applicable interest rate is 4.5 percent and the fixed cost of transferring funds is $55.What is your opportunity cost of holding cash based on the BAT model?

Accepted Answer

A)  $1,318
B)  $1,864
C)  $2,204
D)  $2,311E) A) and D)
F) B) and C)

Question 6

Hoyes Lumber generally receives 3 checks a month.The check amounts and the collection delay for each check are shown below.Given this information,what is the amount of the average daily float? Assume each month has 30 days.

Accepted Answer

A)  $1,386.67
B)  $1,407.19
C)  $4,750.00
D)  $6,833.33
E)  $6,933.33F) D) and E)
G) None of the above

Question 7

Explain how the unethical use of uncollected funds has been impacted by the growth of on-line retailing and banking.

Accepted Answer

Whenever cash is moved electro...

Question 8

Explain how the Check Clearing Act for the 21st Century affects both collection and disbursement float.

Accepted Answer

Check 21 eliminated the need to present ...

Question 9

The Metallurgical Specialty Co.deals strictly with four customers.The average amount each customer pays per month along with the collection delay associated with each payment is shown below.Given this information,what is the weighted average delay? Assume each month has 30 days.

Accepted Answer

A)  1.98 days
B)  2.04 days
C)  2.09 days
D)  2.16 days
E)  2.23 daysF) C) and E)
G) C) and D)

Question 10

Float is defined as the:

Accepted Answer

A)  amount of cash a firm can immediately withdraw from its bank account.
B)  difference between book cash and bank cash.
C)  change in a firm's cash balance from one accounting period to the next.
D)  amount of cash a firm has on hand.
E)  cash balance according to a firm's records.F) B) and C)
G) A) and E)

Question 11

Your average customer is located 4.3 mailing days away from your firm.You have determined that,on average,it is taking your staff 1.5 days to process payments received from customers.In addition,it takes an average of 2.8 days for your funds to be available for use once you have made your bank deposit.What is your firm's collection time?

Accepted Answer

A)  2.2 days
B)  3.7 days
C)  4.3 days
D)  5.8 days
E)  8.6 daysF) All of the above
G) A) and D)

Question 12

An account into which a firm transfers funds,usually from a master account,in an amount sufficient to cover the checks presented for payment that day is called a _____ account.

Accepted Answer

A)  lockbox
B)  cleanup
C)  compensating balance
D)  revolving
E)  controlled disbursementF) A) and C)
G) A) and D)

Question 13

A zero-balance account:

Accepted Answer

A)  is used to cover the compensating balance requirement of a line of credit agreement.
B)  is only used to deposit funds received at local lockboxes.
C)  is funded on an as-needed basis only.
D)  is limited to handling payroll disbursements.
E)  requires a compensating balance.F) C) and D)
G) A) and D)

Question 14

You are considering implementing a lockbox system for your firm.The system is expected to reduce the average collection time by 1.3 days.On an average day,your firm receives 136 checks with an average value of $219 each.The daily interest rate on Treasury bills is 0.021 percent.The bank charge per check is $0.26.What is the anticipated daily cost of the lockbox system?

Accepted Answer

A)  $3.48
B)  $6.25
C)  $12.60
D)  $35.36
E)  $36.17F) A) and B)
G) None of the above

Question 15

Your neighbor goes to the post office once a month and picks up two checks,one for $18,000 and one for $4,000.The larger check takes 4 days to clear after it is deposited; the smaller one takes 6 days.Assume 30 days per month.What is the weighted average delay?

Accepted Answer

A)  4.21 days
B)  4.36 days
C)  4.78 days
D)  5.00 days
E)  6.00 daysF) A) and C)
G) None of the above

Question 16

Adjustment costs is another name for which one of the following?

Accepted Answer

A)  borrowing costs
B)  shortage costs
C)  cash transfer costs
D)  cash wire costs
E)  excess cash costsF) B) and E)
G) A) and B)

Question 17

The Presque Isle Center has branch operations in three states.Each branch deals with a local bank.However,all excess funds in these branch bank accounts are transferred on a daily basis to the firm's primary bank located near the firm's home office.This routine of transferring cash to the primary bank on a regular basis is referred to as:

Accepted Answer

A)  cash concentration.
B)  strategic cash disbursement.
C)  transfer flotation.
D)  payables management.
E)  float management.F) B) and E)
G) B) and C)

Question 18

You are considering implementing a lockbox system for your firm.The system is expected to reduce the average collection time by 1.2 days.On an average day,your firm receives 320 checks with an average value of $99 each.The daily interest rate on Treasury bills is 0.014 percent.What is the anticipated amount of the daily savings if this system is implemented?

Accepted Answer

A)  $2.61
B)  $3.29
C)  $4.45
D)  $5.32
E)  $5.78F) D) and E)
G) None of the above

Question 19

When Chris balanced her business checkbook,she had an adjusted bank balance of $11,418.She had 2 outstanding deposits worth $879 each and 11 checks outstanding with a total value of $3,648.What is the amount of the collection float on this account?

Accepted Answer

A)  -$1,890
B)  $1,758
C)  $3,648
D)  $5,406
E)  $6,012F) B) and E)
G) B) and C)

Question 20

The Eliot Co.needs $185,000 a week to pay bills.The standard deviation of the weekly disbursements is $17,600.The firm has established a lower cash balance limit of $75,000.The applicable interest rate is 5.5 percent and the fixed cost of transferring funds is $47.Based on the BAT model,what is the optimal initial cash balance?

Accepted Answer

A)  $90,668
B)  $97,515
C)  $104,141
D)  $128,224
E)  $136,509F) C) and D)
G) A) and E)

Exam 19: Cash and Liquidity Management

Hoyes Lumber generally receives 3 checks a month.The check amounts and the collection delay for each check are shown below.Given this information,what is the amount of the average daily float? Assume each month has 30 days.

Correct Answer
verified

Correct Answer
verified

The Metallurgical Specialty Co.deals strictly with four customers.The average amount each customer pays per month along with the collection delay associated with each payment is shown below.Given this information,what is the weighted average delay? Assume each month has 30 days.

Correct Answer
verified

Float is defined as the:

Correct Answer
verified

Explain how the unethical use of uncollected funds has been impacted by the growth of on-line retailing and banking.

Correct Answer
verified
Whenever cash is moved electro...
View Answer

Explain how the Check Clearing Act for the 21^st Century affects both collection and disbursement float.

Correct Answer
verified
Check 21 eliminated the need to present ...
View Answer

Correct Answer
verified

When Chris balanced her business checkbook,she had an adjusted bank balance of $11,418.She had 2 outstanding deposits worth $879 each and 11 checks outstanding with a total value of $3,648.What is the amount of the collection float on this account?

Correct Answer
verified

An account into which a firm transfers funds,usually from a master account,in an amount sufficient to cover the checks presented for payment that day is called a _____ account.

Correct Answer
verified

Your neighbor goes to the post office once a month and picks up two checks,one for $18,000 and one for $4,000.The larger check takes 4 days to clear after it is deposited; the smaller one takes 6 days.Assume 30 days per month.What is the weighted average delay?

Correct Answer
verified

Adjustment costs is another name for which one of the following?

Correct Answer
verified

Correct Answer
verified

Explain how a lockbox system operates and why a firm might consider implementing such a system.

Correct Answer
verified
A lockbox system entails opening post of...
View Answer

A zero-balance account:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

A money market preferred stock:

Correct Answer
verified

Correct Answer
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Correct Answer
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Cash management primarily involves:

Correct Answer
verified

Exam 19: Cash and Liquidity Management

Hoyes Lumber generally receives 3 checks a month.The check amounts and the collection delay for each check are shown below.Given this information,what is the amount of the average daily float? Assume each month has 30 days.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Metallurgical Specialty Co.deals strictly with four customers.The average amount each customer pays per month along with the collection delay associated with each payment is shown below.Given this information,what is the weighted average delay? Assume each month has 30 days.

Correct AnswerverifiedShow Answer

Float is defined as the:

Correct AnswerverifiedShow Answer

Explain how the unethical use of uncollected funds has been impacted by the growth of on-line retailing and banking.

Correct AnswerverifiedWhenever cash is moved electro...View AnswerShow Answer

Explain how the Check Clearing Act for the 21st Century affects both collection and disbursement float.

Correct AnswerverifiedCheck 21 eliminated the need to present ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

When Chris balanced her business checkbook,she had an adjusted bank balance of $11,418.She had 2 outstanding deposits worth $879 each and 11 checks outstanding with a total value of $3,648.What is the amount of the collection float on this account?

Correct AnswerverifiedShow Answer

An account into which a firm transfers funds,usually from a master account,in an amount sufficient to cover the checks presented for payment that day is called a _____ account.

Correct AnswerverifiedShow Answer

Your neighbor goes to the post office once a month and picks up two checks,one for $18,000 and one for $4,000.The larger check takes 4 days to clear after it is deposited; the smaller one takes 6 days.Assume 30 days per month.What is the weighted average delay?

Correct AnswerverifiedShow Answer

Adjustment costs is another name for which one of the following?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Explain how a lockbox system operates and why a firm might consider implementing such a system.

Correct AnswerverifiedA lockbox system entails opening post of...View AnswerShow Answer

A zero-balance account:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A money market preferred stock:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Cash management primarily involves:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Whenever cash is moved electro...
View Answer

Explain how the Check Clearing Act for the 21^st Century affects both collection and disbursement float.

Correct Answer
verified
Check 21 eliminated the need to present ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A lockbox system entails opening post of...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified