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
