Chapter 18 MC - CHAPTER EIGHTEEN Multiple Choice Questions...

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CHAPTER EIGHTEEN Multiple Choice Questions 18-1. A firm’s cash balances are best described as: a. currency only b. checking accounts and currency only c. checking accounts, currency, and small savings only d. currency and coin only 18-2. The size of a firm’s minimum cash balance depends on all but which of the following? a. how quickly and cheaply a firm can raise cash when needed b. the availability of long-term investment opportunities c. how accurately the firm’s managers can predict when cash payment requirements will occur d. how much precautionary cash the firm’s managers want to have for emergencies 18-3. The more difficult or expensive it is to get cash when needed: a. the less currency kept at the firm b. the more currency kept on hand c. the greater the investment in plant and equipment d the less liquidity that is needed 18-4. All but which of the following are factors affecting the maximum cash balances of the firm? a. the expected return from investment opportunities b. the transaction costs of making investments c. how quickly and cheaply a firm can raise cash when needed d. the availability of investment opportunities 18-5. Which of the following best describes marketable securities? a. high risk, high yield b. long-term investments c. short-term investments d. fixed assets 217
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18-6. Which of the following investments is the least appropriate for excess cash investments? a. Treasury bill b. negotiable CD c. commercial paper d. recently issued Treasury bond 18-7. If the ending cash balance in your cash budget is negative, then: a. excess cash balance must be positive b. cash outflows must be greater than cash inflows c. cash disbursements were more than beginning cash d. beginning cash plus cash inflows is less than cash outflows 18.8. A company with high sales volatility would need: a. no cash b. a small cash balance c. to abandon its lock-boxes d. a large cash balance Use the following information to answer question 18-9: Variance of net daily cash flows is $100,000 The lower cash limit is set at $5,000 Transaction costs are $25 each Rate of return on investments is 8.5% annually 18-9. Calculate the upper cash limit per the Miller-Orr model: a. $2,003 b. $7,004 c. $4,012 d. $11,013 218
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Use the following information to answer question 18-10: Target cash balance is $4,000 Maximum cash balance is $19,000 The lower cash limit is $1,000 18-10. If the firm with the above figures reaches a cash position of $19,000, how many dollars worth of securities should it purchase to meet its target balance? a.
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This note was uploaded on 01/21/2011 for the course ACC 452 taught by Professor Mr.cula during the Spring '10 term at Abraham Baldwin Agricultural College.

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Chapter 18 MC - CHAPTER EIGHTEEN Multiple Choice Questions...

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