Which of the Following Statement Completions Is Correct? If the Yield

Question 77

Multiple Choice

Which of the following statement completions is CORRECT? If the yield curve is upward sloping,then the marketable securities held in a firm's portfolio,assumed to be held for emergencies,should A) consist mainly of long-term securities because they pay higher rates. B) consist mainly of short-term securities because they pay higher rates. C) consist mainly of U.S.Treasury securities to minimize interest rate risk. D) consist mainly of short-term securities to minimize interest rate risk. E) be balanced between long- and short-term securities to minimize the adverse effects of either an upward or a downward trend in interest rates.

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Q 78

Which of the following statements is most consistent with efficient inventory management? The firm has a A) below-average inventory turnover ratio. B) low incidence of production schedule disruptions. C) below-average total assets turnover ratio. D) relatively high current ratio. E) relatively low DSO.

Q 79

Which of the following statements is CORRECT? A) A firm that makes 90% of its sales on credit and 10% for cash is growing at a constant rate of 10% annually.Such a firm will be able to keep its accounts receivable at the current level,since the 10% cash sales can be used to finance the 10% growth rate. B) In managing a firm's accounts receivable,it is possible to increase credit sales per day yet still keep accounts receivable fairly steady,provided the firm can shorten the length of its collection period (its DSO)sufficiently. C) Because of the costs of granting credit,it is not possible for credit sales to be more profitable than cash sales. D) Since receivables and payables both result from sales transactions,a firm with a high receivables-to-sales ratio must also have a high payables-to-sales ratio. E) Other things held constant,if a firm can shorten its DSO,this will lead to a higher current ratio.

Q 80

Which of the following statements is CORRECT? A) Other things held constant,the higher a firm's days sales outstanding (DSO),the better its credit department. B) If a firm that sells on terms of net 30 changes its policy to 2/10,net 30,and if no change in sales volume occurs,then the firm's DSO will probably increase. C) If a firm sells on terms of 2/10,net 30,and its DSO is 30 days,then the firm probably has some past due accounts. D) If a firm sells on terms of net 60,and if its sales are highly seasonal,with a sharp peak in December,then its DSO as it is typically calculated (with sales per day = Sales for past 12 months/365)would probably be lower in January than in July. E) If a firm changed the credit terms offered to its customers from 2/10,net 30 to 2/10,net 60,then its sales should increase,and this should lead to an increase in sales per day,and that should lead to a decrease in the DSO.