1. Most retail stores are mainly concerned with:
a) their buyers' forecasts for the coming season
b) matching sales and inventory levels
c) decreasing inventory turnover
d) their investment in capital assets
2. The liquidity premium theory suggests that long-term interest rates are higher than short-term
interest rates because:
a) investors generally prefer to invest short periods of time.
b) government policy maintains this relationship.
c) there is greater risk in long-term bonds.
d) exchange rate fluctuations establish this relationship.
3. Using a lockbox system to improve collections:
a) is more expensive than the use of collection centers
b) utilizes local banks to clear local payments made to the collection center
c) provides more float than collection centers
d) results in checks being forward to a P.O. box and clearing through local banks
4. All of the following are factors influencing the choice of marketable securities except:
a) yield
b) maturity
c) marketability
d) maximum investment allowed
5. In establishing credit standards, the firm must consider the nature of the credit risk based on all of
the following, except:
a) prior record of payment
b) terms of credit
c) financial stability
d) current net worth
6. A cash discount may best be defined as:
a) a reduction in price if payment is made within the specified time period
b) a discount offered to critical suppliers
c) a discount applied to volume sales
d) a discount or the repayment of the firm's debt
7. The extent to which inventory financing may be employed is based on all of the following, except:
a) the marketability of the pledged goods
b) their associated price stability of the goods
c) the perishability of the goods
d) the control of the goods by the manufacturer
8. If interest or compounding is done on other than an annual basis, adjust by
a) dividing the number of years by the number of compounding periods
b) multiplying the number of years by the number of compounding periods
c) dividing the interest rate by the number of compounding period
d) multiplying the years and dividing the interest rate by the number of compounding periods
9. Commercial paper may best be defined as:
a) a short term obligation of the government issued to commercial investors
b) short term unsecured promissory notes issued by corporations
c) an insignificant source of funds to large corporations
d) the debt obligations of chartered banks
10. Annuity payments are generally assumed to occur:
a) during the period
b) at the beginning of the period
c) at the end of the period
d) it doesn't matter when they occur