Question

1. A financial manager should be more interested / concerned with the book balance than the net float and bank cash. True&False

2. ..........refers to the time required to clear a cheque through the banking system.

a. Mail float

b. Availability float

c. Disbursement float

3. Short term marketable securities are usually referred and considered as cash equivalents?

True&False

4. The differnce between bank cash and book cash is called float. True&False

5. .................are incurred with a firm runs out of cash and needs to sell Marketable Securities or borrow money from lenders.

a. Operating Costs

b. Trading Costs

c. Investment Costs

d. None of the above

6. As a measurement of long-term solvency, a company that has a low total debt ratio is a sign of a healthy firm. True&False

7. the decision to grant credit to a client depends only on:

a. the inmediate costs of granting credit

b. all of the above

c. the required rate of return for delay cash flows

d. the probability of payment

e. The delayed revenues from granting credit

Answer 1

1. FALSE.

a firm should be more concerned with the net float and the bank cash than the book balance.

net float is the sum of the the collection float and the disbursements. Book balance is the balance on the books whereas bank cash is the actual cash in hand.

2.Disbursement float : when a person deposits a check with the bank it takes a few days for the cheque to clear .the correct option is option c.

3. True. short term marketable securities are considered as cash equivalents because they are liquid and not subject to material fluctuations in value.

4. True the difference between back cash and book cash is called float.

5. shortage costs are incurred if the firm does not have enough cash and have to sell marketable securities or borrow from lenders. This situation is generally called a cash out. the correct option is d none of the above.

6. the low debt ratio is a sign of a healthy firm . It is a true statement

taking on too much debt is harmful to the financial health of the company.

7. all of the above, the correct option is option b.