21 Jul Southern New Hampshire FIN 610 Mid Term
1) It is most commonly assumed that the manager’s objective is to:
a. Minimizing the price of the firm’s common stock
b. Maximizing shareholder value
c. Maximize accounts receivables
d. Minimize accounts payables
2) In adjusting a company’s income statement to arrive at cash flow from operations, the proper treatment of the period’s change in interest payable is:
a. to ignore it, in that it represents a non-operating item
b. to add it to interest expense
c. to subtract it from interest expense
d. none of the above
3) The number of site combinations evaluated by the complete enumeration algorithm is equal to:
a. the number of bank sites n multiplied by the number of customer groups.
b. the number of bank sites minus 1.
c. 2 times the number of bank sites minus 1.
d. 2 raised to the power of the number of bank sites minus 1.
4) A given period’s net cash from operations differs from that period’s net income due to
a. the depreciation expense, depletion, and amortization for the period
b. the change in accounts receivable over the period
c. the change in gross fixed assets over the period
d. a and b
e. a, b, and c
5) Compensating balances have the following advantages EXCEPT:
a. Have the effect of increasing total deposits and assets
b. Can be re-loaned to another customer
c. Are directly comparable between banks
d. Form a cushion
6) Daylight overdrafts occur:
a. When a bank’s Federal Reserve account is positive during the day
b. When a bank’s Federal Reserve account is negative during the day
c. Mainly because of international funds transfers of government securities transactions
d. ‘a’ and ‘c’
e. ‘b’ and ‘c’
7) The main benefits associated with a well-designed concentration system include:
a. greater control over balances
b. economies of scale
c. the absence of dual balances
d. ‘a’ and ‘b’
e. ‘b’ and ‘c’
8) Location, service quality and breadth, bank specialties, _____________, and _______________ are the major factors companies evaluate banks on when first establishing a banking relationship.
a. bank/company fit, price
b. knowledge of the bank’s cash management personnel, price
c. existence of a lending arrangement with the bank, bank/company fit
d. bank size, how long the bank has been offering cash management services
9) In order to justify the cost of using a wire transfer instead of an EDT (electronic depository transfer), your company must transfer a minimum of $200,000. The EDT has a one business day availability. If the EDT availability were two business days, what is the minimum transfer amount that would justify a wire transfer?
a. $100,000
b. $200,000
c. $400,000
d. the amount cannot be calculated without more information
10) (An)_________ lockbox system is set up to use standardized invoice materials in large volumes.
a. Retail
b. wholesale
c. network
d. ACH
11) The financial statement approach involves:
a. Estimating additional unit sales
b. Estimating the cost of capital of additional investment in payables
c. Determining the additional bad debt loss
d. ‘a’ and ‘c’
e. ‘a’, ‘b’ and ‘c’
12) Checks drawn on banks that do not participate in a bank’s local clearing house or exchange are called
a. remote items
b. presentment items
c. courier items
d. transit items
13) Decisions regarding when and how much to transfer in a concentration system are primarily complicated by:
a. new federal regulations
b. higher banking fees for electronic transfers
c. constantly changing reserve requirements
d. fluctuations in daily deposit amounts
14) If a firm has purchases of $50,000, a starting inventory of $35,000 and the cost of goods sold is $45000, what is the dollar amount of its ending inventory?
a. $40,000
b. $80,000
c. $85,000
d. $130,000
Purchases $50,000
Add: Opening inventory $35,000
Less: Cost of goods sold ($45,000)
Ending inventory $40,000
15) A bank service that offers detailed “checks outstanding” information along with the “checks paid” data (based on company-supplied check issue detail) is called
a. paid-only reconciliation
b. comprehensive reconciliation
c. range reconciliation
d. full reconciliation
16) Wire transfers represent a “real-time transfer of account balances.” This implies that:
a. there is no availability float
b. there is no charge to the user because no time is involved in the transfer processing
c. there is very large dual balances in the “transferred from” and “transferred to” accounts
d. the user does not have to keep compensating balances or reserve requirements for deposit accounts from which the transfer takes place
17) The major paper-based payment (or funds transfer) mechanisms are
a. checks, CHIPs
b. checks, ACHs
c. checks, drafts
d. checks, Western Union transfers
18) A central location where representatives of area banks meet and settle balances with only one institution is termed a (an)
a. automated clearing house (ACH)
b. Regional Check Processing Center
c. clearing house
d. communications and records center
19) A ___________ draft is initiated by the payee, who has been approved to draw against the payor’s account.
a. payable through
b. sight
c. preauthorized
d. depository
20) Fed float occurs because the Fed
a. is no longer involved in the check clearing process
b. cannot immediately transfer funds to the pay in its wire transfer system
c. grants check availability to the clearing bank before debiting the pay bank
d. debits the pay bank for check amounts before granting availability to the clearing bank
21) Guiding principles for corporate disbursement system decisions include each of the following EXCEPT:
a. information should be accurate and timely
b. balances in disbursement accounts should be minimized
c. the value of payment timing should be maximized
d. individual service costs should be minimized
22) Advantages of wire transfers include all of the following EXCEPT:
a. best method for quickly moving large sums of money
b. achieve immediate final transfer of money
c. inexpensive relative to automated clearing house transactions
d. can be completed in manner of minutes
23) Lambda is developed from a function of the likelihood that a firm will exhaust its
a. Its cash resources
b. Its resources in total assets
c. Its liquid resources
d. Its resources in fixed assets
24) “Double-counting”
a. never occurs at small banks
b. is consider unethical by cash managers
c. never occurs on intra-bank transfers
d. can never be created by lateral transfers
25) In the 1970s, remote disbursing practices in the U.S. were best characterized as
a. widely used by corporations
b. used by customers in remote locations
c. used only by companies with cash management expertise
d. very rarely used
26) If a firm has a target inventory of $40,000, a starting inventory of $25,000 and the cost of goods sold is $35000, what is the dollar amount of its purchases?
a. $15,000
b. $20,000
c. $50,000
d. not enough information is provided.
Cost of goods sold $35,000
Add: Ending inventory $40,000
Less: Opening inventory ($25,000)
Purchases $50,000
27) The necessary adjustment to the sales amount shown on the income statement to arrive at cash collections from customers is:
a. subtract the change in accounts receivable
b. add all the change in purchases
c. add the total amount of orders not yet shipped
d. none of the above
28) Several independent banks operating under a contractual agreement to provide lockbox services for each other’s customers comprise:
a. a lockbox consortium
b. multiple processing centers
c. consolidated collection centers
d. an ACH system
29) The three basic components to collection or disbursement float for mailed checks are:
a. mail float, Fed float, processing float
b. mail float, processing float, clearing float
c. mail float, bank float, processing float
d. mail float, bank float, clearing float
30) _______________ is NOT an electronic means to transfer payments..
a. wire transfers
b. Time drafts
c. EDTs
d. Automated debits and credits
31) Profitable and growing firms may run short on cash because:
e. of rapid decrease in accounts receivables
f. of rapid growth in accruals
g. of rapid growth in accounts payable
h. of spontaneous increases in receivables and inventories
32) Which of the following statements is NOT true regarding the financial statement approach to evaluating financial alternatives?
a. it includes a calculation of the anticipated revenues and expenses of the alternatives
b. it includes a discounting of some of the alternatives’ revenue and expense flows
c. it implicitly defines project riskiness as the project’s effect on liquidity
d. it includes risk by portraying the company’s ability to pay near-term obligations
33) The three major delays which together comprise disbursement float are:
a. mail float, processing float, availability float
b. mail float, availability float, clearing slippage float
c. mail float, processing float, clearance float
d. none of the above
34) The ability of a company to augment its future cash flows, cover unforeseen cash needs, or take advantage of unforeseen opportunities, is referred to as:
a. liquidity
b. solvency
c. financial flexibility
d. the net liquidity balance
35) _________ lockbox systems will likely be phased out as companies increasingly use electronic corporate trade payments.
a. Retail
b. Wholesale
c. Network
d. ACH
36) Days inventory held is a measure of the
a. average time elapsing from the time an order is placed until it is shipped
b. average inventory level multiplied by the number of days in the period
c. average length of time an inventoried item is in stock before it is sold
d. none of the above
37) Some corporations have been reluctant to use the ACH system more than they do because
a. the payor loses some disbursement float and control
b. the mail offers greater security
c. the ACH system reduces funds availability forecasting
d. of the higher costs of banking, reconciliation and cash application
38) For a one-shot short-term project, which of the following is a reason a financial analyst may NOT consider conducting an NPV analysis?
a. money has time value
b. cash flows can usually be more accurately evaluated
c. difficulties in estimating the appropriate discount rate
d. ‘a’ and ‘b’
39) Compared to capital budgeting and capital structure decisions, consideration of the time value of money in short-term financial decision making (specially for ‘one-shot’ projects) is:
a. Equally important
b. Less important
c. More important
d. Not a consideration at all
40) Currently, the two basic methods by which cash managers transfer funds from accounts at one bank to accounts at another bank are:
a. EDTs, and wire transfers
b. overnight mail, and wire transfers
c. Western Union transfers, and wire transfers
d. courier, and EDTs
41) Which of the following is an example of an electronic debit?
a. a depository transfer check
b. an electronic depository transfer check
c. a wire transfer
d. draft
42) The bank of first deposit will select the clearing mechanism to use based on all of the following except:
a. the dollar amount of the check
b. the location of the draw bank
c. the desires of the party that wrote the check
d. the availability schedule the bank would be granted for each clearing alternative
43) A net increase in cash and equivalents from the 2002 statement of cash flows is equivalent to
a. the cash generated by operations for 2002
b. the change in cash and equivalents from 2001 to 2002 balance sheets
c. the change in retained earnings balances from 2001 to 2002 balance sheets
d. the net cash provided in 2002 by external funds
44) Even now remote disbursing practices by corporations in the U.S. are best characterized as
a. widely used by all corporations
b. widely used by large corporations
c. used by companies with cash management expertise
d. very rarely used
45) _________ float is a measure which incorporates both the time lag and the dollar amount of remittances.
a. Fed
b. Dollar-day
c. Aggregate
d. Consolidated
46) Sustainable growth rate is the sales growth rate that
a. requires new outside debt
b. can be supported by the firm’s current/ target financial policies
c. requires new external equity
d. can be achieved by the firm’s marketing department
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