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In: Finance

8. A firm's target cash balance should be set as the smaller of (1) its transaction...

8. A firm's target cash balance should be set as the smaller of (1) its transaction balance plus a precautionary (safety stock) balance or (2) its required compensating balance.

a. True b. False

9. Target cash balances are generally not affected by compensating balance requirements except during periods of high interest rates and tight money.

a. True b. False

10. The primary purpose of compensating balances required of borrowers is to compensate the bank in the event the borrower defaults on the loan.

a. True b. False

11. If a firm has a large percentage of accounts over 30 days old, it is a sign that the firm's receivables management needs to be reviewed and improved.

a. True b. False

13. If you receive some goods on April 1 with the following terms; 3/20, net 30, June 1 dating, it means that you will receive a 3 percent discount if the bill is paid on or before June 20 and that the full amount must be paid 30 days after receipt of the goods.

a. True                             b. False

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Expert Solution

jeff jeffy answered 11 months ago
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