Question

Please answer any or all, thank you!!

______ 30. Most industrialized nations in the world now use a _____________________________, where

exchange rates fluctuate due to changes in demand.

                                                          A. floating exchange rate system

                                                          B. fixed exchange rate system

                                                          C. purchasing power parity exchange rate system

                                                          D. central bank regulatory system

______ 31. Firms hold cash balances

                                                          A. to complete transactions that are necessary in business operations.

                                                          B. as compensation to banks for providing loans and services.

                                                          C. to earn “Interest Revenue.”

                                                          D. A and B.

                                                          E. A and B and C.

______ 32. To reduce the length of its “Cash Conversion Cycle” (CCC), a company could

                                                          A. adopt a new inventory system that reduces the inventory conversion period.

                                                          B. reduce the average “Days Sales Outstanding” (DSO) on its “Accounts                                                            Receivable.”

                                                          C. reduce the amount of time the company takes to pay its suppliers.

                                                          D. A and B.

                                                          E. A and B and C.

______ 33. A lock box system for cash collections from customers is most beneficial to firms which    

                                                          A. make collections over a wide geographic area.

                                                          B. have widely dispersed manufacturing facilities.

                                                          C. have a large marketable securities account to protect.

                                                          D. hold inventories at many different sites.

______ 34. A(n) ____________________ opportunity exists if a currency trader has the opportunity to earn a

                      positive cash flow with no risk involved in the transaction.

                      A. gold standard

                      B. arbitrage

                      C. interest rate parity

D. market equilibrium

Answer 1

As per rules I am answering the first 4 subparts of the question

30: floating exchange system

Under floating exchange rate system, the exchange rate of the currency fluctuates with market demand and supply. Under the fixed rate system, the exchange rate remains fixed. Purchasing power parity is a concept whereby the currencies of different countries are compared with the prices of a basket of goods. The central bank regulatory system is a system whereby the central bank in every country regulates the other banks.

31: A

Cash balances are held to meet the immediate expenses and liabilities of the business in the day to day operations. There is no interest earned on the cash balance. It is held by the company itself and hence does not compensate banks.

32:D

Cash conversion period is calculated as the sum of days inventory outstanding and days sales outstanding minus days payable outstanding. To reduce the cash conversion the day’s inventory outstanding and sales outstanding will have to be reduced by the day’s payable outstanding must be increased.

33: A

The lockbox system is useful to reduce collection float. Hence it is useful when collections take a long time to receive. Other options do not reduce the float and hence are invalid.