Chap007 - Chapter 07 - Current Asset Management Chapter 07...

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Unformatted text preview: Chapter 07 - Current Asset Management Chapter 07 Current Asset Management True / False Questions 1. In the management of cash and marketable securities, the primary concern is profitability. True False 2. For modern corporations, the more cash they have, the better off they are. True False 3. Minimizing cash balances can improve overall corporate profitability. True False 4. For most firms, the primary motive for holding cash is the transaction motive. True False 5. Cash balances are usually determined by the amount of cash flowing through the firm on a yearly basis. True False 6. A goal of cash management is to insure that the inflows and outflows of cash are synchronized. True False 7. Sales, receivables, and inventory form the basis of cash flow. True False 7-1 Chapter 07 - Current Asset Management 8. The cash generating process for a firm is continuous, even though cash flow can be sporadic. True False 9. Computerized cash management and electronic funds transfer allow firms to carry smaller cash balances. True False 10. Float is the difference between the cash balance on the corporate books and the amount credited to the corporation by the bank. True False 11. "Float" is the name given for a short-term loan between suppliers and buyers. True False 12. Checks can be cleared only through the Federal Reserve System. True False 13. Unfortunately, float is too complicated to be effectively managed through any combination of disbursement and collection strategies. True False 14. It is possible for companies to operate with negative cash balances on their books. True False 15. A lock-box system is a method of extending disbursements. True False 7-2 Chapter 07 - Current Asset Management 16. A lock-box is used to safeguard the corporation's marketable securities. True False 17. A lock-box is used by the selling corporation to speed up the check collection and check- clearing process. True False 18. "Extended disbursement float" has to do with the length of time a corporation takes to collect bills. True False 19. Cost-benefit is not a consideration in development of a cash management system; only safety and liquidity. True False 20. Electronic funds transfer will likely increase the use of float. True False 21. The use of automated clearinghouses (ACHs) saves money for consumers, corporations and financial institutions by reducing transactions costs. True False 22. It is less expensive to clear a check through the Federal Reserve System than to process an automatic fund transfer through an automated clearinghouse. True False 7-3 Chapter 07 - Current Asset Management 23. The "SWIFT" transfer system was developed to aid regional bank fund transfers within the United States....
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