Multiple choice 1) Risk exposure due to heavy short-term borrowing can be compensated for by

Multiple choice


1) Risk exposure due to heavy short-term borrowing can be compensated for by

A.-carrying illiquid assets.

B.-carrying highly liquid assets.

C.-carrying longer term, more profitable current assets.

D.-carrying more receivables to increase cash flow.





2) An aggressive working capital policy would have which of following characteristics?

A.-A low ratio of short-term debt to fixed assets.

B.-A high ratio of long-term debt to fixed assets.

C.-A high ratio of short-term debt to long-term sources of funds.

D.-A short average collection period.





3) Which of the following combinations of asset structures and financing patterns is likely to create the most volatile earnings?

A.-Illiquid assets and heavy long-term borrowing

B.-Illiquid assets and heavy short-term borrowing

C.-Liquid assets and heavy long-term borrowing

D.-Liquid assets and heavy short-term borrowing





4) "Float" takes place because

A.-the level of cash on the firm's books is equal to the level of cash in the bank.

B.-a firm is early in paying its bills.

C.-a lag exists between writing a check and clearing it through the banking system.

D.-a customer writes "hot" checks.