1 . A credit policy includes each of the following except:
A. credit |
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B. the |
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C.whether a “just in |
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D. credit |
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 |
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B. because of |
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C. because of |
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D. to improve the supplier’s perceived status by |
4.
The number of days inventory held method and the balance fraction method
A. Provide the |
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B. Provide |
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C. Provide the |
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D. Provide conflicting conclusions with regard |
5.
Which of the following is the order of evolution for resource requirements
planning systems?
A. ERP, MRP, |
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B. MRP I, MRP |
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C. ERP, MRP I, |
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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 |
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B. |
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C. transaction |
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D. |
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 |
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B. Increase, |
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C. Decrease, long |
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D. Decrease, |
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% |
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B.10.00% |
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C.10.50% |
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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 |
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B. finance |
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C. be |
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D. wait for |
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, |
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B. Greater, narrowing |
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C. Greater, |
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D. Lower, |
12. The financial motive for extending trade credit posits
that credit sellers:
A. have a |
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B. charge a |
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C. charge higher service charges applied to |
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D. have lower |
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 |
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B. that the company |
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C. that the company may have disputes with its |
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D. that the |
14.
The most liquid security, and the one that has the least default risk in the
world, is the:
A. 91-day Treasury |
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B. 3-month CD |
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C. loan |
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D. commercial paper |
15.
Supply chain management systems are as:
A. |
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B. |
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C. logistics |
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D. ‘a’ and ‘b’ |
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E. ‘b’ and ‘c’ |
16.
The major motives for trade credit extension include all of the following
except:
A. pricing |
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B. operating |
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C. contracting cost motive |
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D. production |
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 |
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B. 6,000,000 |
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C. 4,000 tons |
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D. 5.6tons |
18.
The aggressive financing strategy:
A. Is |
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B. Heavily relies on short-term |
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C. Uses only |
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D. ‘a’ and ‘b’ |
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E. ‘a’ and |
19.
Which of the following are advantages that credit sellers have over banks
A. Information |
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B. Control |
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C. Salvage |
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D. ‘a’ and ‘b’ |
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E. all of the above |
20.
Mortgage backed government agency securities are NOT suited to the short-term
investor because they
A. have high |
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B. have uneven |
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C. do not |
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D. all the |
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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 |
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B. increase |
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C. totally |
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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 |
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B. reduce raw |
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C. reduce work |
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D. both a and |
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E. both b and c |
23.
The primary determinants of credit limits include the following:
A. Customer’s |
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B. Customer’s |
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C. Customer’s |
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D. ‘b’ and ‘c’ |
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E. all of the |
24.
“Estimated Financial Strength” in the Dun & Bradstreet ratings
system refers to
A. net worth |
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B. total |
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C. total debt |
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D. total debt less cash and marketable |
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E. none of the |
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 |
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B. minimizing |
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C. minimizing |
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D. maximizing |
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E. none of the |
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 |
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B. greater |
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C. higher yields |
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D. exemption |
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% |
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B. 10.00% |
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C. 12.50% |
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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 |
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B. recompute |
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C. recompute |
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D. both a and |
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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 |
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B. the T-bill |
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C. the CD |
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D. all of the above |
31.
Resiliency in a secondary market refers to
A. The |
|
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B. the entrance of many new orders when the |
C. |
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E. none of the |
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 |
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B. a constant |
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C. a very |
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D. a constant |
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 |
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B. $26.87 |
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C. $4.31 |
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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 |
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B. Fed funds |
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C. LIBOR, Fed |
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D. Fed funds rate, LIBOR |
35.
Implementing a supply chain management system necessitates eliminating delays,
waste and bottlenecks in
A. the |
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B. the |
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C. the storage |
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D. a and b |
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E. a, b, and c 36. Departments of local credit associations that
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37.
Rule-based computerized applications of artificial intelligence to credit
decision making are known as:
A. |
expert systems |
B. |
just in time |
C. |
portfolio |
D. |
credit extension systems |
38.
The money market is mainly a (an) ___________ market.
A. Wholesale |
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B. retail |
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C. brokered |
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D. offshore |
39.
The conservative financing strategy:
A. Is |
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B. Uses only |
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C. Uses only |
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D. Uses a mix of short-term and long-term funds |
40.
Recent evidence shows that credit professionals work with
A. Marketing |
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B. Other |
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C. Production |
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D. ‘a’ and ‘b’ |
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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% |
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B. 11.26% |
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C. 12.50% |
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D. 12.71% |
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E. 13.22% |
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42. Which of the following is NOT one of the primary
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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 |
B. |
the inventory turnover ratio |
C. |
the economic |
D. |
none of the |
44.
A company’s marketing manager is worried about ____________ stock-outs while
production manger is concerned with _____________ stock-outs.
A. |
raw material, |
B. |
work-in-process, |
C. |
work-in-process, |
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 |
C. |
increases, but |
D. |
decreases, but |
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 |
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B. tend to |
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C. are not |
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D. are persistent when rates are |
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 |
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B. greater, lesser |
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C. lesser, lesser |
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D. 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 |
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B. earning a reasonable rate of return on |
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C. ordering |
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D. maximizing |