FIN 571 Final Exams 10 Multiple choice Questions 100% Grantee Work Q# 21-30 - 21390

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21. Risk exposure due to heavy short-term borrowing can be compensated for by
A) carrying highly liquid assets.
B) carrying illiquid assets.
C) carrying longer term, more profitable current assets.
D) carrying more receivables to increase cash flow.

  


22. When actual sales are greater than forecasted sales
A) inventory will decline.
B) production schedules might have to be revised upward.
C) accounts receivable will rise.
D) all of the above

  


23. Yield curves change daily to reflect
A) changing conditions in the money and capital markets.
B) new inflation expectations.
C) changing conditions in the overall economy.
D) all of the above.

  

24. Retail companies like Target and Limited Brands are more likely to have
A) stable sales and earnings per share.
B) cyclical sales but less volatile earnings per share.
C) cyclical sales and more volatile earnings per share.
D) cyclical sales but stable accounts receivable and inventory.

 

 

25. When using the economic order quantity model
A) ordering costs increase as the level of inventory increases.
B) carrying costs decrease as the level of inventory increases.
C) costs are minimized when total carrying costs and total ordering costs are equal.
D) none of the above

  


26. Hedging
A) is a way to protect your accounts receivable position.
B) increases risk.
C) is a legal agreement to buy or sell a financial futures contract.
D) can be carried out with a futures contract.

  

27. Which of the following is not a true statement about commercial paper?
A) Finance paper is sold directly to the lender by the finance company.
B) Finance paper is also referred to as direct paper.
C) Dealer paper is sold directly to the lender by a finance company.
D) Industrial companies, utility firms or finance companies too small to sell direct paper sell dealer paper.

 

28. Which of the following best describes the benefits to the borrower of selling asset backed securities?
A) Due to the portfolio effect, the borrower can package up low quality accounts receivable and sell them for a premium price.
B) The borrower trades future cash flows for current cash flows.
C) The asset-backed security is likely to carry a high credit rating of AA or better.
D) b and c are correct.

 


29. Price Corp. is considering selling to a group of new customers and creating new annual sales of $70,000. 5% will be uncollectible. The collection cost on these accounts is 3.5% of new sales, the cost of producing and selling is 80% of sales and the firm is in the 31% tax bracket. What is the profit on new sales?
A) $5,554.50
B) $9,660.00
C) $7,245.00
D) none of the above.

  


 

30. Mr. Jones borrows $2,000 for 90 days and pays $35 interest. What is his effective rate of interest?
A) 9.3%
B) 7.0%
C) 11.7%
D) None of the above

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21. Risk exposure due to heavy short-term borrowing can be compensated for by
A) carrying highly liquid assets.
B) carrying illiquid assets.
C) carrying longer term, more profitable current assets.
D) carrying more receivables to increase cash flow.

Answer: A Difficulty: Medium Type: Conceptual


22. When actual sales are greater than forecasted sales
A) inventory will decline.
B) production schedules might have to be revised upward.
C) accounts receivable will rise.
D) all of the above

Answer: