Question 1 The principle of hedging calls for the matching of a firm’s average: Answer liquidity of its assets with its liabilities and equity liquidity of its accounts receivable with its accounts payable maturities of its assets with its liabilities and equity maturities of its sales with its assets 2 points Question 2 Taking advantage of unusual cash discounts or price bargains is an example of the: Answer transactions motive precautionary motive speculative motive leverage motive 2 points Question 3 The portion of current assets financed through long-term financing is referred to as the: Answer net working capital current ratio seasonal current assets fixed assets 2 points Question 4 Holding all other factors constant, if a firm increases its current assets relative to total assets, Answer it increases return and reduces risk. it increases return and increases risk. it reduces return and reduces risk. it reduces return and increases risk. 2 points Question 5 The objective of managing current assets and liabilities is to Answer achieve as low a level of current assets as possible. achieve as low a level of current liabilities as possible. achieve a balance between profitability and risk that contributes to the firm's value. achieve as high a level of current liabilities as possible. 2 points Question 6 ___________ 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 7 A firm’s excess cash balance during a particular month could be best deployed if it were Answer financed with short term investments financed with long term investments invested in short term investments invested in long term investments 2 points Question 8 The time between when a payee sends payment and the funds are credited to the payer’s bank account is called the: Answer collection float disbursement float total float transmittal float 2 points Question 9 Which of the following marketable securities is sold at a discount throughout competitive bidding in a weekly auction? Answer U.S. Treasury bills federal funds commercial paper negotiable certificates of deposit 2 points Question 10 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 11 Net working capital is defined as: Answer current assets plus current liabilities current assets less fixed assets current assets less current liabilities current liabilities plus long-term liabilities 2 points Question 12 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 13 The prime rate offered by commercial banks is their _____________ rate to their ______________ quality business customers. Answer highest, highest lowest, lowest lowest, highest highest, lowest 2 points Question 14 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 15 Commercial finance companies: Answer make riskier unsecured business loans but charge higher interest rates specialize in loans secured by inventories and real estate concentrate their lending activity to firms pledging the notes receivable of their customers are primarily interested in loans secured by a business customer’s accounts receivable and inventories 2 points Question 16 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 17 For most lines of business the basic source of short-term loan financing is: Answer commercial banks finance companies the commercial paper market factors 2 points Question 18 The most important form of short-term business financing is: Answer a revolving credit agreement accounts-receivable financing inventory loans trade credit 2 points Question 19 Commercial paper issued by large U.S. corporations is backed by: Answer accounts receivable inventories credit quality of the issuer fixed assets 2 points

Question 20