Reference no: EM133113092

1) What is the most critical reason why increases in long term permanent assets should be financed with long-term debt?

a. Long-term interest rates fluctuate more than short term rates

b. long term interest rates can be accurately forecast but short term rates cannot

c. short-term interest rates are higher than long term rates

d. short term debt may not be renewable at maturity

e. none of the answers are correct

2. a firm using a "restrictive" policy for total capital requirement will possibly be:

a. a short term borrower

b. a long term borrower

c. a short term lender

d. a long term lender

e. neither a borrower nor a lender

3. The main objective of working capital management for a firm is to:

a. minimize its current assets

b. maximize that value of the firm

c. minimize interest expenses of the firm

d. maximize its current liabilities

e. minimize its inventory

4. While a firm has repaid a $5 million short term bank loan, it also has paid out cash dividends of $1 million. What happens to the firms net working capital?

a. a decrease of $6 million

b. a decrease of $5 million

c. a decrease of $4 million

d. a decrease o $1 million

e. no change

5. The operating cycle is the length of time from:

a. the purchase of raw materials to the collection of cash from customers.

b. the firms payment for materials and the date that it gets paid by customers.

c. the purchase of raw materials to the delivery of the finished product.

d. the purchase of raw materials to the payment for raw materials.

e. the payment of raw materials to the sale of finished goods

6. Which of the following transactions will increase a firms cash balance?

a. The firm sells some of its marketable securities

b. the firm sells short term bonds and uses the proceeds to purchase raw materials

c. the firm sells long term bonds and uses the proceeds to repurchase stock

d. the firm collects on its receivables and purchases marketable securities

e. the firm collects on its receivables and purchases marketable securities

f. the firm pays a previously declared cash dividend

7. which of the following would decrease the cash conversion cycle in financial planning?

a. buying fewer materials on credit

b. extending more credit on goods sold

c. increasing inventory levels

d. increasing sales without changing levels of inventory, accounts receivable, and accounts payable

8. A well established corporation with a high credit rating needs to borrow money for the next three months. It will likely get the best interest rate by:

a. issuing commercial papers

b. factoring its receivables

c. obtaining a loan secured by its inventory

d. getting an unsecured revolving line of credit

9. assume that a firm makes payments of $400 a day, which take an average of four days to clear, and that it receives $750c a day in cheques, which take an average of three days to clear. Calculate the firms net float.

a. $650

b.-$650

c. $1600

d. $2250

e.-$4450

10. One reason why firms hold cash is in anticipation of taking advantage of unforeseen opportunities. This is called:

a. speculation

b. the liquidity requirement

c. meeting transaction needs

d. hedging against uncertainty

e. arbitrage