Improvements to cash management include ________. A) a reduction in the cash turnover B) a reduction in the cash conversion cycle C) an increase in the average age of inventory D) an increase in the credit period allowed to customers ANSWER B
A firm with a cash conversion cycle of 175 days wants to stretch its average payment period from 30 days to 45 days. This will result in a(n) ________ in the cash conversion cycle of ________ days. A) increase; 15 B) decrease; 15 C) increase; 45 D) decrease; 45 ANSWER B
In the text’s equity management model based on Myers (2000), a firm’s net cash flow is allocated in three directions. Which of the following is NOT one of these directions? a. acquisitions b. dividends and share repurchases c. reinvestment d. management’s private benefits of control (i.e., perks) ANSWER A
A is a seasoned equity offering (SEO) of a firm that has recently gone public. a. follow-on b. supplemental IPO c. lockup offering d. quasi-seasoned equity offering ANSWER A
If the firm’s current liabilities in December were $40,000, the net working capital was ________. (See Table 14.1) A) $140,000 B) $60,000 C) $10,000 D) -$10,000 ANSWER C
An increase in the average payment period will ________ the operating cycle and ________ the cash conversion cycle. A) increase; decrease B) decrease; decrease C) decrease; not affect D) not affect; decrease ANSWER D
Myers (2000) recognizes three imperfect solutions to the basic contracting problem between diffuse shareholders and management. Which of the following is NOT one of these solutions? a. dividends b. monitoring c. incentive compensation d. contingent shareholder intervention ANSWER D
TRUE or FALSE. The dollar value of aggregate share repurchases has grown relative to aggregate dividends in recent years. a. TRUE b. FALSE ANSWER A
One shortcoming of the traditional capital budgeting paradigm is that: a. it does not recognize that projects must be evaluated on the basis of their NPVs. b. it does not recognize that the firm may face capital rationing. c. it does not deal with why some firms have multiple activities ANSWER C
The difference between the number of days resources are tied up in the operating cycle and the number of days a firm can use spontaneous financing before payment is made is the ________. A) cash conversion cycle B) average payment period C) operating cycle D) average age of inventory ANSWER A