lOMoARcPSD|8411136 Chapter 21 - Reading Assignment (CONNECT) intro to fin (University of Guelph) Studocu is not sponsored or endorsed by any college or university Downloaded by Ogochukwu A.D. (shantezelforlife@gmail.com) lOMoARcPSD|8411136 Firms hold cash balances to meet transaction needs. This includes paying monthly bills, meeting payroll requirements and making _______________. If a financial manager decides to hold large cash balances, they are willing to accept the ____________________. Cheques that have been mailed but not yet cleared are known as _____. Downloaded by Ogochukwu A.D. (shantezelforlife@gmail.com) lOMoARcPSD|8411136 Identify the major payment systems that the Canadian Payments Association (CPA) owns and operates. (Check all that apply.) An account where customers make payments to a regional collection centre, which then transfers funds to an account at a principal bank, is called a _____. Downloaded by Ogochukwu A.D. (shantezelforlife@gmail.com) lOMoARcPSD|8411136 To hedge against an uncertain future, firms may obtain a line of credit from a bank or invest their cash in _____________. A financial manager's decision to hold cash versus investing in short-term securities is the trade-off between the cost of lost interest (holding cash) versus the benefits of ________________. - Lower transaction costs Float are cheques that have been mailed but not yet ____________. - Cleared The ________________ operates national clearing and settlements systems among financial institutions in Canada. - Canadian Payments Association A system whereby customers send payments to a post-office box and a local bank collects and processes cheques is called a(n) _____. - Lock-box system Match the forms of payment with their definitions. Downloaded by Ogochukwu A.D. (shantezelforlife@gmail.com) lOMoARcPSD|8411136 Electric Funds Transfer (EFT) makes float management _______________. - Less important The direct, electronic information exchange between enterprises, eliminating the mailing and handling of paper invoices is known as - Electronic data intercharge Payments that are made electronically instead of using paper-based cheques are called Which of the following are advantages of electronic payment systems? (Check all that apply.) - It reduces transaction costs Reduces float Besides cheque, which of the following are methods of paying bills? (Check all that apply.) Downloaded by Ogochukwu A.D. (shantezelforlife@gmail.com) lOMoARcPSD|8411136 True or false: Cash management in domestic firms is easier compared to that in large multinational corporations. - True Which of the following are order costs of inventory? (Check all that apply.) - Delivery charge Handling expense Electronic Data Interchange (EDI) allows companies to electronically send purchase orders and invoices to customers, which is then followed by _____________. - Electronic payments Electronic payment systems greatly reduce _________, generating substantial savings. - Float To minimize total inventory costs, managers must find the balance between ______ costs and ________ costs. - Order and carrying Cash management for large multinational corporations is more difficult because each country has its own currency, banking system and ____________. - Legal structure Which of the following are carrying costs of inventory? (Check all that apply.) - Storage costs Insurance costs Mahan Corporation has sales of 300,000 units, carrying costs of $30 per unit, and ordering costs of $200 per order. Using the economic order quantity, the optimal order size is _____ units. - 2000 Downloaded by Ogochukwu A.D. (shantezelforlife@gmail.com) lOMoARcPSD|8411136 To minimize carrying costs, inventory levels should be kept _______, but to minimize order costs, inventory levels should be kept __________. - Low, high One strong feature of the economic order quantity model is that it shows inventory levels should be _________ when carrying costs are high. - Lower A system of inventory management that requires minimal inventories of materials and very frequent deliveries by suppliers is known as _____ inventory management. - just-in-time The Baumol model for optimal cash balances is almost identical to the ____________ model. - Economic order quantity According to Baumol's model of optimal cash balances, a firm should hold smaller cash balances when _____. - Interest rates are high According to Baumol's model of optimal cash balances, _____ when the cost of selling securities is high. - A firm should hold larger average cash balances A more realistic approach to the Baumol model of optimal cash balances is to let the cash holdings wander freely until they hit ____________. - Upper and lower limits The economic order quantity is used to calculate the _____. - Optimal order size One unrealistic assumption of the economic order quantity model is that most firms would not let their inventory levels _________ before reordering. - Approach zero Under which of the following circumstances can a firm set its upper and lower limit of cash balance far apart? (Check all that apply.) Downloaded by Ogochukwu A.D. (shantezelforlife@gmail.com) lOMoARcPSD|8411136 The just-in-time approach to inventory management was established by _____. - Toyota in Japan True or false: Good cash management nevertheless implies some degree of centralization - True Ben can invest spare cash in Canadian Treasury bills at an interest rate of 8%, but every sale of bills costs him $20. His firm pays out cash at a rate of $105,000 per per month, or $1,260,000 per year. Thus, his firm would sell _____ of Treasury bills. (Round your answer to the nearest dollar.) - 25100 Which of the following are characteristics of money market funds? (Check all that apply.) - Low risk Liquid Maturities of less than 1 year Cash management from __________ is especially effective for multinational corporations. - A centralized location Money market securities are _________, meaning that it is easy and cheap to convert them to cash. - Very liquid Under which of the following circumstances can a firm set its upper and lower limit of cash balance far apart? (Check all that apply.) Downloaded by Ogochukwu A.D. (shantezelforlife@gmail.com) lOMoARcPSD|8411136 The safest and most liquid of money market securities are ________. - Treasury bills Which of the following are important money market instruments? (Check all that apply.) According to Baumol's model of optimal cash balances, the optimal level of cash of a firm _____ when its annual cash outflows increase. - Increases less than proportionally When asset-backed commercial paper was first established, the underlying assets were primarily __________ and various types of consumer loans and receivables. - mortgages Guaranteed Investment Certificates (GIC) are ________ at Canadian banks with maturities of 6 months to 10 years. - Term deposits Repurchase agreements are usually very ________ with minimum denominations of ___________. - Short-term, 100,000 Treasury bills in Canada are sold in weekly auctions by the __________ a with original maturities of either 1, 3, 6 or 12 months. - Bank of Canada Despite the high quality of money market investments, there are often significant differences in yield between corporate and government securities. Which of the following statements are differences between corporate and government securities in terms of yield? (Check all that apply.) A short-term security with cash flows coming from a pool of assets such as mortgage or credit card receivables is called (blank blank) commercial paper. - Asset backed Downloaded by Ogochukwu A.D. (shantezelforlife@gmail.com) lOMoARcPSD|8411136 Identify the characteristics of guaranteed investment certificates (GIC). (Check all that apply.) A government bond dealer sells Treasury bills to an investor, with an agreement to repurchase them at a later date at a higher price. This type of agreement is called a(n) _____. - repo Money market instruments that are more liquid and safer offer ________ yields. - lower Downloaded by Ogochukwu A.D. (shantezelforlife@gmail.com)
