Multiple choice
1) Risk exposure due to heavy short-term borrowing can be compensated for by
A.-carrying illiquid assets.
B.-carrying highly liquid assets.
C.-carrying longer term, more profitable current assets.
D.-carrying more receivables to increase cash flow.
2) An aggressive working capital policy would have which of following characteristics?
A.-A low ratio of short-term debt to fixed assets.
B.-A high ratio of long-term debt to fixed assets.
C.-A high ratio of short-term debt to long-term sources of funds.
D.-A short average collection period.
3) Which of the following combinations of asset structures and financing patterns is likely to create the most volatile earnings?
A.-Illiquid assets and heavy long-term borrowing
B.-Illiquid assets and heavy short-term borrowing
C.-Liquid assets and heavy long-term borrowing
D.-Liquid assets and heavy short-term borrowing
4) "Float" takes place because
A.-the level of cash on the firm's books is equal to the level of cash in the bank.
B.-a firm is early in paying its bills.
C.-a lag exists between writing a check and clearing it through the banking system.
D.-a customer writes "hot" checks.
1) Risk exposure due to heavy short-term borrowing can be compensated for by
A.-carrying illiquid assets.
B.-carrying highly liquid assets.
C.-carrying longer term, more profitable current assets.
D.-carrying more receivables to increase cash flow.
2) An aggressive working capital policy would have which of following characteristics?
A.-A low ratio of short-term debt to fixed assets.
B.-A high ratio of long-term debt to fixed assets.
C.-A high ratio of short-term debt to long-term sources of funds.
D.-A short average collection period.
3) Which of the following combinations of asset structures and financing patterns is likely to create the most volatile earnings?
A.-Illiquid assets and heavy long-term borrowing
B.-Illiquid assets and heavy short-term borrowing
C.-Liquid assets and heavy long-term borrowing
D.-Liquid assets and heavy short-term borrowing
4) "Float" takes place because
A.-the level of cash on the firm's books is equal to the level of cash in the bank.
B.-a firm is early in paying its bills.
C.-a lag exists between writing a check and clearing it through the banking system.
D.-a customer writes "hot" checks.
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