chap020 - Chapter 020 Cash and Liquidity Management...

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Chapter 020 Cash and Liquidity Management Multiple Choice Questions 1. The speculative motive is the need to hold cash: a. to pay outstanding checks. b. to maintain a firm's daily operations. C . to invest in opportunities which may arise. d. to compensate a bank for services rendered. e. as an emergency fund. SECTION: 20.1 TOPIC: SPECULATIVE MOTIVE TYPE: DEFINITIONS 2. The need to hold cash as a safety margin to act as a financial reserve is called the _____ motive. a. speculative B . precautionary c. transaction d. float e. compensating balance SECTION: 20.1 TOPIC: PRECAUTIONARY MOTIVE TYPE: DEFINITIONS 3. The need to hold cash to satisfy the normal daily disbursement and collection activities of a firm is called the _____ motive. a. speculative b. daily float c. compensating balance d. precautionary E . transaction SECTION: 20.1 TOPIC: TRANSACTION MOTIVE TYPE: DEFINITIONS 20-1
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Chapter 020 Cash and Liquidity Management 4. Float is defined as the: a. amount of cash a bank will allow a customer to currently withdraw. B . difference between book cash and bank cash. c. difference between the check book balance and the financial statement balance. d. amount of a deposit that is currently unavailable for spending by the depositing firm. e. cash balance according to a firm's records. SECTION: 20.2 TOPIC: FLOAT TYPE: DEFINITIONS 5. A lockbox is a: a. special safe used by a firm for overnight storage of any cash or undeposited checks. b. special safe used by a firm that can only be opened at prespecified times of the day. c. separate box office box where all accounts receivable payments are sent. d. special post office box which can only be opened only by prespecified postal inspectors for direct delivery to the addressee. E . post office box located geographically so that payments can be collected faster. SECTION: 20.3 TOPIC: LOCKBOX TYPE: DEFINITIONS 6. The practice of and procedures for moving cash from multiple banks into a firm's centralized bank account is known as: A . cash concentration. b. strategic cash disbursement. c. transfer flotation. d. payables management. e. float management. SECTION: 20.3 TOPIC: CASH CONCENTRATION TYPE: DEFINITIONS 20-2
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Chapter 020 Cash and Liquidity Management 7. An account into which funds are deposited only in an amount equal to the value of the checks presented for payment that day is called a _____ account. a. lockbox b. concentration C . zero-balance d. compensating balance e. revolving SECTION: 20.4 TOPIC: ZERO-BALANCE ACCOUNT TYPE: DEFINITIONS 8. An account into which a firm transfers funds, usually from a master account, in an amount sufficient to cover demands for payment, is called a _____ account. a. lockbox b. cleanup c. compensating balance d. revolving E . controlled disbursement SECTION: 20.4 TOPIC: CONTROLLED DISBURSEMENT ACCOUNT TYPE: DEFINITIONS 9. A desired cash level as determined by the tradeoff between carrying costs and shortage costs is called a firm's: A . target cash balance. b. concentration balance.
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chap020 - Chapter 020 Cash and Liquidity Management...

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