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Finance MCQ




Question;1. A credit policy includes each of the following except;A. credit;standards;B. the;company's approach to credit investigation and corrections;C.whether a "just in;time"system will be used;D. credit;terms;2. Cash application should be done;as quickly as possible by a seller because;A. it may prevent the bankruptcy of;a customer;B. it involves shipping to the most;profitable customer accounts;C. it enables customers to order;more merchandise;D. it usually results in the seller;being given a higher Dun & Bradstreet rating;E. none of the above;3.;The PRIMARY reason given by those companies that impose credit limits is;A. to control;risk exposure;B. because of;customer's financial position;C. because of;experience with customer;D. to improve the supplier's perceived status by;signaling selectivity;4.;The number of days inventory held method and the balance fraction method;A. Provide the;same conclusion with regard to inventory usage;B. Provide;conflicting conclusions with regard to inventory usage;C. Provide the;same conclusion with regard to inventory purchases;D. Provide conflicting conclusions with regard;to inventory purchases;5.;Which of the following is the order of evolution for resource requirements;planning systems?;A. ERP, MRP;MRP I, MRP II;B. MRP I, MRP;II, MRP, ERP;C. ERP, MRP I;MRP II, MRP;D. MRP, MRP I, MRP II,ERP;6.;The general manager of a steel mill is pretty sure that the demand for and;price of steel will be increasing sharply within the next six months due to a;sudden boom in the housing market. If he increases current production and;inventories corresponding to his belief, his action would be indicative of the;motive for holding inventory.;A. Speculative;B.;Precautionary;C. transaction;D.;just-in-time;7.;The move from an aggressive financing strategy to a moderate financing strategy;should __________ a company's liquidity by increasing the use of ________-term;funds.;A. Increase, long;B. Increase;short;C. Decrease, long;D. Decrease;short;8.;Security A is a fully taxable security that earns 5% annually. Security B is a;tax-exempt municipal security. If a short-term investment manager uses a tax;rate of 33%, what yield must security B earn such that the investment manager;would be indifferent between securities A and B?;A.;2.5%;B.;3.35%;C.;4.67%;D.;7.46%;9.;The ABC Company paid total interest of $2,000 on its line of credit borrowings;for the year. ABC paid a $100 commitment fee on an average borrowing of $20,000;for the year. What is ABC's annual effective rate of interest?;A. 9.95%;B.10.00%;C.10.50%;D.12.71%;10.;The effective cost of commercial paper is 6%, and the effective cost of a bank;credit line is also 6%. All other considerations aside, the treasurer should;A. finance with the commercial paper;B. finance;with the bank credit line;C. be;indifferent to the commercial paper or the credit line;D. wait for;interest rates to change before making a decision;11.;The coupon-equivalent yield is _______ than the discount yield of a 91-day;Treasury bill with the gap ______ at higher interest rates.;A. Lower;widening;B. Greater, narrowing;C. Greater;widening;D. Lower;narrowing;12. The financial motive for extending trade credit posits;that credit sellers;A. have a;non-price marketing advantage;B. charge a;higher selling price;C. charge higher service charges applied to;credit customers;D. have lower;operating costs;13.;A credit analyst is going over a Dun & Bradstreet report on a potential new;customer. The credit history shows that the company paid two of its many;suppliers late within the last six months. The least likely conclusion to be;drawn is;A. that the;company would be a poor credit risk.;B. that the company;is a good credit risk.;C. that the company may have disputes with its;supplier(s).;D. that the;company is experiencing a cash crisis;14.;The most liquid security, and the one that has the least default risk in the;world, is the;A. 91-day Treasury;bill;B. 3-month CD;C. loan;participations;D. commercial paper;15.;Supply chain management systems are as;A.;just-in-time inventory management systems;B.;distribution;C. logistics;D. ?a? and ?b?;E. ?b? and ?c?;16.;The major motives for trade credit extension include all of the following;except;A. pricing;motive;B. operating;motive;C. contracting cost motive;D. production;motive;17.;Borque Manufacturing forecasts that its production will require 500,000 tons of;bauxite over its planning period. Demand for Torque's products is stable over;time. Ordering costs amount to an average of $20.00 per order. Holding costs;are estimated at $1.25per ton of bauxite. EOQ for Torque is;A. 2,200 tons;B. 6,000,000;tons;C. 4,000 tons;D. 5.6tons;18.;The aggressive financing strategy;A. Is;basically a maturity matching strategy;B. Heavily relies on short-term;funds;C. Uses only;long-term funds;D. ?a? and ?b?;E. ?a? and;?c?.;19.;Which of the following are advantages that credit sellers have over banks;A. Information;advantage;B. Control;advantage;C. Salvage;value advantage;D. ?a? and ?b?;E. all of the above;20.;Mortgage backed government agency securities are NOT suited to the short-term;investor because they;A. have high;interest rate risk;B. have uneven;cash flows;C. do not;permit prepayment of the mortgages backing them;D. all the;above are correct;E. ?a? and ?b?;21.;The manufacturer of bicycles has just implemented a new sales forecasting model;which is much more accurate than the "guesstimates" used in the past.;The company should consequently;A. reduce;finished goods inventories;B. increase;finished goods inventories;C. totally;eliminate finished goods inventories;D. not change its finished goods inventories;22.;An automobile manufacturer has just decided to outsource windshields instead of;making them itself. Using an outside supplier under the just-in-time approach;will have what immediate effect on the manufacturer's inventory management?;A. reduce;finished goods inventories;B. reduce raw;material inventories;C. reduce work;in process inventories;D. both a and;b;E. both b and c;23.;The primary determinants of credit limits include the following;A. Customer?s;requirements for the firm?s products;B. Customer?s;recent payment history;C. Customer?s;ability to pay its debts;D. ?b? and ?c?;E. all of the;above;24.;Estimated Financial Strength" in the Dun & Bradstreet ratings;system refers to;A. net worth;B. total;assets;C. total debt;D. total debt less cash and marketable;securities;E. none of the;above;25.;The valuation approach to making short-term financial decisions uses;discounting to assess shareholder wealth effects. Using a cash flow timeline to;assess various inventory purchase quantities is premised on an objective which;should lead to enhanced shareholder wealth, which is;A. maximizing return on inventory investment;B. minimizing;the sum of inventory holding and ordering costs;C. minimizing;the present value cost of inventory-related cash flows;D. maximizing;the gross margin return on inventory investment;E. none of the;above;26.;The minimum level of ongoing inventory and receivables is what is referred to;as ______________ current assets.;A.;transitory;B.;modifiable;C.;discretionary;D.;permanent;27.;Which of the following is not one of the advantages of money market mutual;funds?;A. enhanced;liquidity;B. greater;flexibility;C. higher yields;D. exemption;from state and local income taxes;28.;MNO, Inc. paid a total interest of $3,000 on its line of credit borrowings for;the year. MNO?s average annual borrowings are $30,000. The bank retains $6,000;as a compensating balance. What is the MNO's annual effective rate of interest?;A. 8.33%;B. 10.00%;C. 12.50%;D. 30.00%;29.;A company may wish to add a safety stock if it faces uncertain demand. The;inventory analyst should modify the following in light of the safety stock;A. recompute;the average inventory by adding the safety stock amount to the present;average inventory balance;B. recompute;the reorder point by adding the safety stock to the present reorder point;C. recompute;EOQ by adding the safety stock to period demand to arrive at a new usage rate;D. both a and;b;E. both b and c;30.;An investor trying to gain an understanding of what determines commercial paper;rates should focus on;A. only the;commercial paper market;B. the T-bill;market;C. the CD;rates;D. all of the above;31.;Resiliency in a secondary market refers to;A. The;existence of many large buyers of the instrument;B. the entrance of many new orders when the;price is in temporary imbalance;C.;the ability of the market to absorb a large quantity of a security without a;major change in the D. instrument's price;E. none of the;above;32.;Restrictive assumptions used to develop and use the basic EOQ model include all;of the following except;A. a non-constant order cost per order;B. a constant;cost of holding each unit of inventory;C. a very;accurate inventory demand forecast;D. a constant;rate of inventory usage;33.;Credit analyst John Adams is considering a $1,000 order from a new customer.;The cost of filling the order is $950. John estimates collection costs are $20.;The customer will pay in 60 days. If the appropriate cost of capital is 18%;what is the NPV of extending credit to the new customer?;A. $30.00;B. $26.87;C. $4.31;D. $1.84;34.;The _______ is the rate charged depository institutions when they borrow;reserves from the Fed, the _______ is the rate charged on reserve borrowings;transacted between banks.;A. Discount;rate, Fed funds rate;B. Fed funds;rate, Discount rate;C. LIBOR, Fed;funds rate;D. Fed funds rate, LIBOR;35.;Implementing a supply chain management system necessitates eliminating delays;waste and bottlenecks in;A. the;ordering process;B. the;production process;C. the storage;of finished goods;D. a and b;E. a, b, and c;36. Departments of local credit associations that;provide information in the form of "Business Credit Reports"and;other reports are called;A. credit reporting agencies;B.;credit analysis agencies;C.;credit information exchange bureaus;D.;credit interchange bureaus;E.;none of the above;37.;Rule-based computerized applications of artificial intelligence to credit;decision making are known as;A.;expert systems;B.;just in time;systems;C.;portfolio;analysis systems;D.;credit extension systems;38.;The money market is mainly a (an) ___________ market.;A. Wholesale;B. retail;C. brokered;D. offshore;39.;The conservative financing strategy;A. Is;basically a maturity matching strategy;B. Uses only;long-term funds;C. Uses only;short-term funds;D. Uses a mix of short-term and long-term funds;40.;Recent evidence shows that credit professionals work with;A. Marketing;and sales personnel;B. Other;finance personnel;C. Production;personnel;D. ?a? and ?b?;E. ?b? and ?c?;41.;The Brooks Company paid total interest of $3,000 on its line of credit;borrowings for the year. Also, Brooks paid a $50 commitment fee and borrowed on;average $30,000 for the year. Of the $30,000 average borrowings, $6,000;remained in the bank as a compensating balance. What is the Brook's annual;effective rate of interest?;A.10.17%;B. 11.26%;C. 12.50%;D. 12.71%;E. 13.22%;42. Which of the following is NOT one of the primary;ways a company can reduce its inventory investment?;A.;expand sales;B.;forecast sales more accurately;C.;find more reliable suppliers;D.;eliminate bottlenecks in the production process;43.;Focusing on the present value of total inventory-related cash flows instead of;the amount of inventory investment indicates the managers' emphasis should be;on;A.;all;inventory-related expenses;B.;the inventory turnover ratio;C.;the economic;order quantity;D.;none of the;above;44.;A company's marketing manager is worried about ____________ stock-outs while;production manger is concerned with _____________ stock-outs.;A.;raw material;work-in-process;B.;work-in-process;raw material;C.;work-in-process;finished goods;D.;finished goods, raw material and work-in-process;45.;According to the assumptions upon which the EOQ model is based, total inventory;costs _______________ with increases in the number of units ordered in each;order.;A.;first increases, then decreases;B.;first;decreases, then increases;C.;increases, but;at a slowing rate;D.;decreases, but;at a slowing rate;46.;Which of the following is NOT correct?;Euro;CP is not subject to several Securities and Exchange requirements;Euro;CP issues generally do not require a back-up credit facility;Euro CP issues do not require name recognition as the rating agencies;provide assessment of the default risk;Euro;CP issues typically have longer maturities than domestic CP;47.;A company is experiencing rapid build-up in its inventories and receivables.;Likely cause(s) for this is (are): I. Sales are declining significantly II.;Inefficient inventory and receivable management III. It has moved to;just-in-time inventory management and shortened its credit period IV. Sales are;growing rapidly;A.;I and II;B.;II and IV;C.;I and III;D.;III and IV;48.;The differences between interest rates on US domestic Certificates of Deposit;Treasury bills, Commercial Paper, Eurodollar Certificates of Deposit, and Fed;funds;A. tend to;persist when rates are rising, but not when rates are falling;B. tend to;persist when rates are falling, but not when rates are rising;C. are not;persistent when rate are rising or falling- hence, these instruments are not;close substitutes for the short-term investments manager;D. are persistent when rates are;rising or falling - hence, these instruments are close substitutes for the;short-term investments manager;49.;Typically, moving from a conservative to a moderate or aggressive financing;strategy will result in __________ profitability and in _________ solvency for;the company.;A. Lesser, greater;B. greater, lesser;C. lesser, lesser;D. greater;greater;50.;Inventory management is often viewed as the need to keep enough product on hand;to avoid stock-outs, however the financial manager is concerned about;A. having a;larger assortment than any of the competitors;B. earning a reasonable rate of return on;invested capital;C. ordering;the largest quantities possible to maximize quantity discounts;D. maximizing;the inventory


Paper#50412 | Written in 18-Jul-2015

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