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: A) Speculative motive. B) Precautionary motive. C) Transaction motive. D) Float motive. E) Compensating balances motive. Answer: B 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: A) Speculative motive. B) Precautionary motive. C) Transaction motive. D) Float motive. E) Compensating balances motive. Answer: C Topic: LEDGER BALANCE 4. The balance of cash shown by a firm on its books at any one time is the firm's _________. A) tax balance B) market value of cash C) speculative cash D) ledger balance E) available balance Answer: D
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Topic: AVAILABLE BALANCE 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 _________. A) tax balance B) market value of cash C) float D) ledger balance E) available balance Answer: C 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. A) Float managers B) Lockboxes C) Open accounts D) Openboxes E) List-on-demand receipts Answer: B 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 _______________. A) cash concentration B) strategic cash disbursement C) transfer flotation D) payables management E) float management Answer: A
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Topic: ZERO-BALANCE ACCOUNT 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 10. An account where the firm transfers in funds, usually from a master account, in an amount sufficient to cover demands for payment, is called a _________________________. A) lockbox account B) cleanup account C) compensating balance account D) revolving account E) controlled disbursement account Answer: E Topic: TERMS OF SALE 11. The conditions under which a firm sells its goods and services for cash or credit are called the: A) Terms of sale.
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This note was uploaded on 05/10/2011 for the course FIN 3716 taught by Professor Fang during the Spring '10 term at LSU.

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

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