Reference no: EM132769602

Problem 1: A lockbox plan is

a. A method of safe-keeping of marketable securities
b. Used to identify inventory safety stock
c. A system of slowing down the collection of checks wriiten by a firm
d. Not described by any of the statements above
e. All of the above

Problem 2: Offering trade credit discounts is costly to a firm and as a result, firms that offer trade discounts are usually those that are performing poorly and need cash quickly

True
False

Problem 2: Which of the following statements is most correct?

a. Net working captital may be defined as current assets minus current liabilities. Any increase in the current ratio will automatically lead to an increase in net working capital.
b. Although short-term interest rates have historically averaged less than long term rates, the heavy use of short-term debt is considered to be an aggressive strategy because of the inherent risks of using short-term financing.
c. If a company follows a policy of matching securities, this means its use of common stock with its use of long-term debt as opposed to short-term debt.
d. Each of the above statements is true
e. Each of the above statements is false