Question 1

The party that is lending funds using commercial bills is known as what?

Accepted Answer

A)  The drawer
B)  The acceptor
C)  The discounter
D)  The depositorE) B) and D)
F) A) and D)

Question 2

Under the Miller- Orr cash balance model,all of the following are incorrect except:

Accepted Answer

A)  The higher the variance of cash flows is,the greater the upper limit will be
B)  The lower the variance of cash flows is,the smaller the upper limit will be
C)  The higher the variance of cash flows is,the smaller the upper limit will be
D)  The lower the variance of cash flows is,the greater the upper limit will beE) All of the above
F) C) and D)

Question 3

Which of the following is a characteristic of trade credit?

Accepted Answer

A)  It is a form of permanent (long- term) financing.
B)  All of the above
C)  It appears on the balance sheet as accounts payable.
D)  Credit is arranged by buying goods from the company's suppliers.E) B) and C)
F) A) and C)

Question 4

Credit warning models provide definitive evidence on the financial health of potential customers.

Accepted Answer

A) True 
 B)False

Question 5

Holding cash in a bank cheque account creates:

Accepted Answer

A)  A sunk cost
B)  An opportunity cost
C)  A future cost
D)  None of the aboveE) A) and B)
F) A) and C)

Question 6

Which of the following does not apply to a bill of exchange?

Accepted Answer

A)  It is a discount security.
B)  It must have an acceptor.
C)  It is a commercial bill.
D)  It is a promissory note.E) None of the above
F) B) and D)

Question 7

From the following information for Murray River Swamp Boats Ltd,calculate the company's Z score and indicate its likelihood of failure.

Accepted Answer

Z = 1.2X1 + 1.4X2 + 3.3X3 + 0....

Question 8

Wombat Company draws a 90- day promissory note for $115,000 with an interest rate of 6% p.a.How much will Wombat receive for this note?

Accepted Answer

A)  $113,323
B)  $99,421
C)  $50,000
D)  $147,650E) C) and D)
F) A) and B)

Question 9

The Baumol model determines the minimum amount of cash that a company should hold.

Accepted Answer

A) True 
 B)False

Question 10

Net working capital is an indicator of:

Accepted Answer

A)  The company's ability to repay its immediate debts
B)  The company's ability to repay its long- term debt
C)  The company is insolvent
D)  Shareholders' wealthE) B) and C)
F) None of the above

Question 11

Which of the following is not a current asset?

Accepted Answer

A)  Accounts receivable
B)  Inventories
C)  Cash
D)  Accounts payableE) A) and C)
F) None of the above

Question 12

Which of the following can be both a current asset and a current liability?

Accepted Answer

A)  Treasury notes
B)  Commercial bills
C)  Promissory notes
D)  All of the above
E)  None of the aboveF) B) and E)
G) A) and E)

Question 13

The Baumol model considers a net cash outflow situation only,whereas the Miller- Orr model considers a fluctuating cash- flow stream that can be either inflow or outflow.

Accepted Answer

A) True 
 B)False

Question 14

Cash equivalents take time to be converted into cash.

Accepted Answer

A) True 
 B)False

Question 15

All of the following are assumptions of the Baumol Model except:

Accepted Answer

A)  The firm uses cash at a steady,predictable rate
B)  The firm's net cash outflows occur at a steady rate
C)  The firm's cash inflows from operations occur at a steady,predictable rate
D)  The optimum cash balance the firm should holdE) None of the above
F) B) and C)

Exam 14: Working Capital New

Cash equivalents take time to be converted into cash.

Correct Answer
verified

Which of the following can be both a current asset and a current liability?

Correct Answer
verified

From the following information for Murray River Swamp Boats Ltd,calculate the company's Z score and indicate its likelihood of failure.

Correct Answer
verified
Z = 1.2X1 + 1.4X2 + 3.3X3 + 0....
View Answer

Under the Miller- Orr cash balance model,all of the following are incorrect except:

Correct Answer
verified

Holding cash in a bank cheque account creates:

Correct Answer
verified

The party that is lending funds using commercial bills is known as what?

Correct Answer
verified

Wombat Company draws a 90- day promissory note for $115,000 with an interest rate of 6% p.a.How much will Wombat receive for this note?

Correct Answer
verified

Net working capital is an indicator of:

Correct Answer
verified

The Baumol model determines the minimum amount of cash that a company should hold.

Correct Answer
verified

All of the following are assumptions of the Baumol Model except:

Correct Answer
verified

Which of the following does not apply to a bill of exchange?

Correct Answer
verified

Credit warning models provide definitive evidence on the financial health of potential customers.

Correct Answer
verified

Which of the following is not a current asset?

Correct Answer
verified

The Baumol model considers a net cash outflow situation only,whereas the Miller- Orr model considers a fluctuating cash- flow stream that can be either inflow or outflow.

Correct Answer
verified

Which of the following is a characteristic of trade credit?

Correct Answer
verified

Exam 14: Working Capital New

Cash equivalents take time to be converted into cash.

Correct AnswerverifiedShow Answer

Which of the following can be both a current asset and a current liability?

Correct AnswerverifiedShow Answer

From the following information for Murray River Swamp Boats Ltd,calculate the company's Z score and indicate its likelihood of failure.

Correct AnswerverifiedZ = 1.2X1 + 1.4X2 + 3.3X3 + 0....View AnswerShow Answer

Under the Miller- Orr cash balance model,all of the following are incorrect except:

Correct AnswerverifiedShow Answer

Holding cash in a bank cheque account creates:

Correct AnswerverifiedShow Answer

The party that is lending funds using commercial bills is known as what?

Correct AnswerverifiedShow Answer

Wombat Company draws a 90- day promissory note for $115,000 with an interest rate of 6% p.a.How much will Wombat receive for this note?

Correct AnswerverifiedShow Answer

Net working capital is an indicator of:

Correct AnswerverifiedShow Answer

The Baumol model determines the minimum amount of cash that a company should hold.

Correct AnswerverifiedShow Answer

All of the following are assumptions of the Baumol Model except:

Correct AnswerverifiedShow Answer

Which of the following does not apply to a bill of exchange?

Correct AnswerverifiedShow Answer

Credit warning models provide definitive evidence on the financial health of potential customers.

Correct AnswerverifiedShow Answer

Which of the following is not a current asset?

Correct AnswerverifiedShow Answer

The Baumol model considers a net cash outflow situation only,whereas the Miller- Orr model considers a fluctuating cash- flow stream that can be either inflow or outflow.

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of trade credit?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
verified
Z = 1.2X1 + 1.4X2 + 3.3X3 + 0....
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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