Chapter 17 Test Bank

Chapter 17 Test Bank - CHAPTER 17 Working Capital...

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CHAPTER 17 Working Capital Management I. DEFINITIONS Topic: SPECULATIVE MOTIVE 1. The need to hold cash to take advantage of additional investment opportunities is called the: A) Speculative motive. B) Precautionary motive. C) Transaction motive. D) Float motive. E) Compensating balances motive. Answer: A Topic: PRECAUTIONARY MOTIVE 2. The need to hold cash as a safety margin to act as a financial reserve is called the: Topic: TRANSACTION MOTIVE 3. The need to hold cash to satisfy the ongoing disbursement and collection activities of the firm as part of its daily operations is called the: Topic: LEDGER BALANCE 4. The balance of cash shown by a firm on its books at any one time is the firm's _________.
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5. The balance of cash shown in the firm's bank account is the firm's _______. A) tax balance B) market value of cash C) float D) ledger balance E) available balance Answer: E Topic: FLOAT 6. The difference between a firm's book balance and its bank cash is called the firm's _________. Topic: LOCKBOXES 7. _____________ are special post office boxes often set up by the firm to expedite the receipt and processing of its accounts receivable payments. Topic: CASH CONCENTRATION 8. The practice of and procedures for moving cash from multiple banks into a firm's centralized bank account(s) is known as _______________.
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9. A disbursement account for which the firm maintains no balance, transferring in funds from a master account only when needed to cover demands for payment, is called a ___________________. A) lockbox account B) cleanup account C) compensating balance account D) zero-balance account E) revolving account Answer: D Topic: CONTROLLED DISBURSEMENT ACCOUNT
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