Davenport FIN620 week 6 quiz

Jun 25th, 2016
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Question Question 1 Firms hold cash to satisfy the transaction motive. This means that cash is held: A. to meet disbursements for normal operations. B. to balance the flow between cash inflows and outflows. C. to make unexpected payments such as special price discounts. D. Both to meet disbursements for normal operations; and to balance the flow between cash inflows and outflows. E. None of these. 2 points Question 2 If the total long term financing of the firm is greater than the total financing needs for part of the year, and less than the needs for some of the year due to seasonal fluctuations, the company will most likely: A. hold excess cash. B. borrow short term and hold excess cash. C. hold excess cash and reduce business activities. D. invest in marketable securities and borrow short term. E. None of these. 2 points Question 3 The Timberline firm expects a total cash need of $12,500 over the next 3 months. They have a beginning cash balance of $1,500, and cash i

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Davenport FIN620 week 6 quizQuestionQuestion 1Firms hold cash to satisfy the transaction motive. This means that cash is held:A. to meet disbursements for normal operations.B. to balance the flow between cash inflows and outflows.C. to make unexpected payments such as special price discounts.D. Both to meet disbursements for normal operations; and to balance the flow between cashinflows and outflows.E. None of these.2 pointsQuestion 2If the total long term financing of the firm is greater than the total financing needs for part of theyear, and less than the needs for some of the year due to seasonal fluctuations, the company willmost likely:A. hold excess cash.B. borrow short term and hold excess cash.C. hold excess cash and reduce business activities.D. invest in marketable securities and borrow short term.E. None of these.2 pointsQuestion 3The Timberline firm expects a total cash need of $12,500 over the next 3 months. They have abeginning cash balance of $1,500, and cash is replenished when it hits zero. The fixed cost ofselling securities to replenish cash balances is $3.50. The interest rate on marketable securities is8% per annum. There is a constant rate of cash disbursement and no cash receipts during themonth. Based on the firm's current practice, what is the average daily cash balance (a month has30 days)?A. $50.00B. $69.44C. $94.44D. $138.89E. None of these.2 pointsAverage daily cash balance = [(($12,500/3)+$1,500)/2]/30=$94.44Q

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