Question

11. Which of the following is a correct statement?
A. The objective of short-term financial management is to maximize carrying costs.
B. Managing short-term cash flows involves minimizing liquidity.
C. In managing short-term finances, a financial manager should seek the optimal level of investment in fixed assets.
D. A financial manager should use a cash budget to identify short-term financial needs.
E. In an ideal economy, the optimal level of net working capital is positive.

12. A firm needs to raise cash and at the same time reduce the level of its accounts receivable. This firm would likely benefit most by _______________________.
A. obtaining an unsecured short-term loan.
B. applying for a committed line of credit.
C. assigning its receivables on a short-term loan.
D. factoring its receivables.
E. securing any short-term credit with a blanket inventory lien.

13. Mycale's has always paid its suppliers in 30 days. The company just hired a new financial officer who is changing the policy such that suppliers will now be paid in 45 days. This change will ______ the accounts payable period and _______ the cash cycle.
A. Increase; not affect
B. Increase; increase
C. Increase; decrease
D. Decrease; increase
E. Decrease; decrease

14. Which of the following are sources of cash?
I. marketable securities are sold
II. the amount of inventory on hand is increased
III. the firm takes out a long-term bank loan
IV. payments are paid on accounts payable
A. I and III only
B. II and IV only
C. I and IV only
D. II and III only
E. II, III and IV only

15. The ABC Company contacts the shareholders of XYZ Company and offers to buy their shares at a premium. This is an illustration of a:
A. Leveraged buyout.
B. Going-private transaction.
C. Tender offer.
D. Vertical acquisition.
E. Conglomerate acquisition.

Answer 1

answer1 (D)a financial manager should use a cash budget to identify short-term financial needs.

cash budget is an estimated projection of the company's cash position in the future.

answer2 (B)factoring its recievables

it is a financial transaction in which company sells its recievables to third party at a discount.

answer3 (C)increases,decrease

when accounts payable period increases,cash cycle decreases.

the reason behind the decrease is that when payment period increases the frequencies of payment to be made decreases leading to the decrease of cash cycle.

answer4 (A)I and III only

marketable securities are sold and the firm takes out long term bank loan boyh result in inlow of cash and bank. therefore,source of cash.

answer5 (C)tender offer

it is a offer made by prospective acquirer to all shareholders of a publicly traded companies to tender their stock for sale at a specified price during a specified time subject to tendering of the minimum and maximum number of shares.