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ANSWER Midterm Financial Management

This document is a midterm examination for a Financial Management course. It consists of 15 multiple choice questions testing concepts related to cash management, motives for holding cash, credit analysis, credit policy effects, and receivables management. The exam covers key objectives like determining appropriate cash levels, cash collection methods, and tools for evaluating customer credit risk and monitoring receivables.

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Symon Esaga
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546 views

ANSWER Midterm Financial Management

This document is a midterm examination for a Financial Management course. It consists of 15 multiple choice questions testing concepts related to cash management, motives for holding cash, credit analysis, credit policy effects, and receivables management. The exam covers key objectives like determining appropriate cash levels, cash collection methods, and tools for evaluating customer credit risk and monitoring receivables.

Uploaded by

Symon Esaga
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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College of Business, Entrepreneurship & Accountancy


1st Semester/S.Y. 2021-2022

FINANCIAL MANAGEMENT
Midterm Examination

NAME:__ DATE:__11/5/21_______________
COURSE: ______BSA 5_______ RAW SCORE:___________

Multiple Choice: Encircle the letter of the correct answer

E 1.) Which (one or more) of the following correctly completes this sentence: One of the
objectives of the cash management process is to
I. determine the appropriate level of cash that must be kept on hand
II. determine the best means by which to collect cash owed to the firm
III. determine the best way to invest the temporary excess cash reserves of the firm
IV. determine the best way to pay for materials, services, etc., provided to the firm
A. I and III only
B. II and IV only
C. I, II, and III only
D. II, III, and IV only
E. I, II, III, and IV

D 2.) If a firm holds cash in order to take advantage of unexpected opportunities that might arise,
its reason for holding cash is called ____________ motive.
A. a transactions
B. a precautionary
C. an adjustment
D. a speculative
E. a non-financial

A 3.) The need for cash that arises from the normal activities of the firm is ___________ for
holding cash.
A. a transactions motive
B. a precautionary motive
C. an adjustment motive
D. a speculative motive
E. a financial motive

B 4.) Chrysler Corp. held large sums of cash during the mid-1990's primarily because it would
need a large amount of cash to weather a recession if one came. This is ___________ for holding
cash.*
A. a transactions motive
B. a precautionary motive
C. an adjustment motive
D. a speculative motive
E. a non-financial motive

A 5.) The manager of a firm called Warehouse Liquidators, which specializes in selling consumer
goods at very low prices, keeps excess cash on hand, particularly after the holiday season, to take
advantage of retailers looking to sell excess inventory at below cost in order to raise cash.
The manager is holding cash for
A. speculative reasons
B. transactions reasons
C. precautionary reasons
D. compensating balance reasons
E. non-financial reasons

B 6.)CameApart, Inc., a leading retailer of consumer goods, keeps excess cash on hand in
October to pay for its huge increase in inventory prior to the holiday season. CameApart is keeping
this cash for
A. speculative reasons
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B. transactions reasons
C. precautionary reasons
D. compensating balances
E. collateral reasons

C 7.) Which of the following is/are true?


I. Collection time is the time that elapses between when a customer mails a payment and when the
check clears the banking system
II. Collection time is equal to the sum of mail delay and availability delay
III. Collection float increases book balances but does not immediately change available balances
A. I only
B. I and II only
C. I and III only
D. II and III only
E. I, II and III

E 8.) ABC Co. is considering granting credit to a new corporate customer. ABC is concerned about the
new customer's credit history. ABC would likely find each of the following useful EXCEPT
A. the customer's financial statements
B. a Dun & Bradstreet report
C. a TRW report
D. a credit report from the customer's bank
E. an aging of receivables

A 9.)McCaw Hill Co., a wholesaler of college textbooks, is concerned about the ability of your college
bookstore to meet its credit obligations out of operating cash flows in a timely fashion, that
is, McCaw is concerned about the bookstore's
A. capacity
B. character
C. capital
D. collateral
E. economic condition

B 10.)Lately, Inc., is having trouble arranging for credit from new suppliers primarily because Lately has a
policy of paying suppliers at a minimum 20 days late. Lately has been rejected because of its
A. capacity
B. character
C. capital
D. collateral
E. economic condition

B 11.) A basic tool that is useful for monitoring outstanding receivables is


A. a credit policy
B. an aging schedule
C. credit scoring
D. collection policy
E. collateral

C 12.) A typical first step in the collection of an overdue account is to


A. employ a collection agency
B. send the customer an aging schedule
C. send the customer a delinquency letter
D. take legal action against the customer
E. call the customer's bank

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A 13.) Gnome, Inc., begins a credit policy of selling on credit for the first time in the firm's life. Gnome
finds, much to its dismay, that it must pay to produce the merchandise but it now experiences
a delay in collection of revenues. Gnome's problem describes the __________ factor of credit policy effects.
A. cost
B. cost of debt
C. revenue
D. probability of nonpayment
E. cash discount

B 14.) A __________ factor of credit policy effects occurs when a firm that institutes a credit policy and
begins selling on credit finds it must arrange financing for its increased receivables?
A. cost
B. cost of debt
C. revenue
D. probability of nonpayment
E. cash discount

D 15.)A __________ factor of credit policy effects occurs when a firm that institutes a credit policy and
begins selling on credit finds it must bear the cost of some of its customers defaulting on their obligations.
A. cost
B. cost of debt
C. revenue
D. probability of nonpayment
E. cash discount

END OF EXAMINATION

Prepared By: Reviewed and Checked By:

Mr. August J. San Antonio,CPA Ms. Alma C. Centeno, CPA,DBA


Faculty-CBEA Program Head - Accountancy

Approved By:

Dr. Maria Corazon D. Segismundo, CPA,FRIAcc


Dean - CBEA

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