CH19TBV7

Fundamentals of Corporate Finance Standard Edition

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CHAPTER 19 Short-Term Finance and Planning I. DEFINITIONS OPERATING CYCLE a 1. The length of time between the acquisition of inventory and the collection of cash from receivables is called the: a. operating cycle. b. inventory period. c. accounts receivable period. d. accounts payable period. e. cash cycle. INVENTORY PERIOD b 2. The length of time between the acquisition of inventory and its sale is called the: a. operating cycle. b. inventory period. c. accounts receivable period. d. accounts payable period. e. cash cycle. ACCOUNTS RECEIVABLE PERIOD c 3. The length of time between the sale of inventory and the collection of cash from receivables is called the: a. operating cycle. b. inventory period. c. accounts receivable period. d. accounts payable period. e. cash cycle. ACCOUNTS PAYABLE PERIOD d 4. The length of time between the acquisition of inventory by a firm and the payment by the firm for that inventory is called the: a. operating cycle. b. inventory period. c. accounts receivable period. d. accounts payable period. e. cash cycle. CASH CYCLE e 5. The length of time between the payment for inventory and the collection of cash from receivables is called the: a. operating cycle. b. inventory period. c. accounts receivable period. d. accounts payable period. e. cash cycle.
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CHAPTER 19 CARRYING COSTS a 6. Costs of the firm that rise with increased levels of investment in its current assets are called _____ costs. a. carrying b. shortage c. order d. safety e. trading SHORTAGE COSTS b 7. Costs of the firm that fall with increased levels of investment in its current assets are called _____ costs. a. carrying b. shortage c. debt d. equity e. payables CASH BUDGET c 8. The forecast of cash receipts and disbursements for the next planning period is called a: a. pro forma income statement. b. statement of cash flows. c. cash budget. d. receivables analysis. e. credit analysis. LINE OF CREDIT d 9. A prearranged, short-term bank loan made on a formal or informal basis, and typically reviewed for renewal annually, is called a: a. letter of credit. b. cleanup loan. c. compensating balance. d. line of credit. e. roll-over. REVOLVING CREDIT ARRANGEMENT e 10. A prearranged credit agreement with a bank typically open for two or more years is called a: a. letter of credit. b. cleanup loan. c. compensating balance. d. line of credit. e. revolving credit arrangement.
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CHAPTER 19 COMPENSATING BALANCE a 11. A fraction of the available credit on a loan agreement deposited by the borrower with the bank in a low or non-interest-bearing account is called a: a. compensating balance. b. cleanup loan. c. letter of credit. d. line of credit. e. roll-over. LETTER OF CREDIT c 12. A _____ issued by a bank is a promise by that bank to make a loan if certain conditions are met. a.
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CH19TBV7 - CHAPTER 19 Short-Term Finance and Planning I....

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