finance online multiple choice exam 3

Time consumed in clearing a check through the banking system is

availability float

US Treasury bills are now sold in minimum amounts of ____ and multiples of ____ above the minimum.

$100; $100

Financing a long-lived asset with short-term financing would be

an example of "high risk --- high (potential) profitability" asset financing

Depository transfer check (DTC)

A non-negotiable check payable to a company account at a concentration bank.

The risk-free security has a beta equal to _____________, while the market portfolio's beta is equal to ________________.

zero; one

A line that describes the relationship between an individual security's returns and returns on the market portfolio.

Characteristic line

A measure of "risk per unit of expected return."

Coefficient of variation

A statistical measure of the degree to which two variables (e.g. securities' returns) move together.

Covariance

Which of the following would be consistent with a more aggressive approach to financing working capital?

Financing some long-term needs with short-term funds

The US Federal National Mortgage Association (FNMA, "Fannie Mae") and the US Federal Home Loan Mortgage Corporation (FHLMC, "Freddie Mac") are ______. Interest and principal on debit securities that they issue ______ explicitly guaranteed by they US government.

Government sponsored enterprises (GSEs); are not

_______ varies inversely with profitability.

Liquidity

The credit policy of Spurling Products is "1.5/10, net 35." At present 30% of the customers take the discount, 62% pay within the net period, and the rest pay within 45 days of invoice. What would receivables be if all customers took the cash discount?

Lower than the present level

Which of the following marketable securities is the obligation of a commercial bank?

Negotiable certificate of deposit

Which would be an appropriate investment for temporarily idle corporate cash that will be used to pay quarterly dividends three months from now?

Ninety-day commercial paper with a current annual yield of 6.2 percent.

Which of the following illustrates the use of a hedging (or matching) approach to financing?

Permanent working capital financed with long-term liabilities

JIT

Receiving a required inventory item at the exact time needed.

Which asset-liability combination would most likely result in the firm's having the greatest risk of technical insolvency?

Reducing current assets, increasing current liabilities, and reducing long-term debt

Which of the following relationships hold true for safety stock?

The higher the profit margin per unit, the higher the safety stock necessary

Safety

The most basic requirement for a firm's marketable securities.

EDI

The movement of business data electronically in a structured, computer-readable format.

Ready cash segment

The portion of a firm's total marketable securities portfolio held to take care of probable deficiencies in the firm's cash account.

This type of risk is avoidable through proper diversification.

Unsystematic risk

Increasing the credit period from 30 to 60 days, in response to a similar action taken by all of our competitors, would likely result in:

an increase in the average collection period

Beta is the slope of

a characteristic line

In deciding the appropriate level of current assets for the firm, management is confronted with

a trade-off between profitability and risk

Spontaneous financing includes

accounts payable

Accounts receivable conversion (aka check conversion) is the conversion of a paper check to ______.

an ACH debit transaction

According to the capital-asset pricing model (CAPM), a security's expected (required) return is equal to risk-free rate plus a premium

based on the systematic risk of the security

A B2B exchange is a ____ Internet marketplace that matches supply and demand by real-time auction bidding.

business-to-business

Concentration banking improves control over

corporate cash

In finance, "working capital" means the same thing as

current assets

Net working capital refers to

current assets minus current liabilities

An "aggressive" common stock would have a "beta"

greater than one

The greater the beta, the ____ of the security involved.

greater the unavoidable risk

permanent working capital

is the amount of current assets required to meet a firm's long-term minimum needs

An increase in the firm's receivable turnover means that:

it is collecting credit sales more quickly than before

Costs of not carrying enough inventory include:

lost sales, customer disappointment, and possible worker layoffs

EOQ is the order quantity that ______ over our planning horizon.

minimizes total inventory costs

Carrie has a "certainty equivalent" to a risky gamble's expected value that is less than the gamble's expected value. Carrie shows

risk aversion

Marketable securities are primarily

short-term debt instruments

Commercial paper is essentially a

short-term unsecured corporate IOU