Float is important in the cash conversion cycle of a firm because ________. A) its presence reduces a firm’s average collection period B) its presence reduces a firm’s average payment period C) its presence lengthens both a firm’s average collection period and its average payment period D) its presence reduces the investment that a firm […]
The yields on negotiable certificates of deposit are typically above those on U.S. Treasury issues and comparable to the yields on commercial paper with similar maturities. Indicate whether the statement is true or false ANSWER TRUE
The Solar Inc has daily cash receipts of $90,000. A recent analysis of its collections indicated that customers’ payments were in the mail for an average of 4 days. Once received,the payments are processed in one and a half days. After payments are deposited, it takes an average of two and a half days for […]
A banker’s acceptance is a low-risk security because at least two, and sometimes three, parties may be liable for its payment at maturity. Indicate whether the statement is true or false ANSWER TRUE
________ float results from the delay between the time when a customer deducts a payment from the checking account ledger and the time when the vendor actually receives the funds in a spendable form. A) Mail B) Processing C) Collection D) Disbursement ANSWER C
In exchange for the tailor-made maturity date provided by the repurchase agreement, a bank or security dealer provides a return slightly below than obtainable through outright purchase of similar marketable securities. Indicate whether the statement is true or false ANSWER TRUE
Which of the following is true of collection float? A) It represents the time delay between when payment is placed in the mail and when it is received. B) It represents the time between receipt of a payment and its deposit into a firm’s account. C) It results from the lapse between the time when […]
The higher yields on Eurodollar deposits compared with nearly all other marketable securities, governmental or nongovernmental, with similar maturities are attributable to 1. the fact that the depository banks are generally less closely regulated than U.S. banks and are therefore more risky, and 2. some foreign exchange risk may be present. Indicate whether the statement […]
A customer sends payment to a post office box which is emptied by a firm’s bank daily. The bank then processes the payments and notifies the firm of the day’s collections. This collection technique is known as ________. A) a direct send B) concentration banking C) the lockbox system D) controlled disbursing ANSWER […]
When people describe what they think an exchange rate value should be, they often use a benchmark model, known as ________. A) purchasing power parity B) interest rate parity C) the Fisher effect D) the International Fisher effect ANSWER Answer: A
