Reference no: EM132899822

Problem 1: A compensating balance

Option 1: Is the amount of prepaid interest on a loan.

Option 2: Is a level of inventory held to compensate for variations in usage rate and lead-time.

Option 3: Compensates a financial institution for services rendered by providing it with deposit of funds.

Option 4: Is used to compensate for possible losses on a marketable securities portfolio.

Problem 2: The goal of credit policy is to

Option 1: Maximize sales

Option 2: Minimize collection expenses

Option 3: Minimize bad debts losses

Option 4: Extend credit to the point where marginal profits equal marginal costs.

Problem 3: If a firm had been extending trade credit on a 2/10, net 30 basis, what change would be expected on the balance sheet/statement of financial position of its CUSTOMER if the firm went to a net cash 30 policy?

Option 1: Increased payables

Option 2: Decreased in cash

Option 3: Increased receivables

Option 4: Decreased payables