Financial Management Third Set of Quizlet

Why would we reject a project based on the IRR?

• a. The IRR is higher than the sum of the cash flows

• b. The discount rate is lower than the IRR

• c. The IRR is higher than the NPV

• d. The discount rate is higher than the IRR   

Company A wishes to keep 20% of its assets as cash. Company B keeps its cash balance at 5% of assets. Which of the following statements apply?

• a. Company A is less liquid than Company B

• b. Company B invests in more working current assets

• c. Company A uses better working capital management

• d. Company B has a more conservative cash policy 

Company A offers trade credit of 2% 10 / net 30 and Company B offers trade credit at net 30. What can be said about the credit policies of each company?

• a. Company B has a looser credit policy

• b. Company A keeps more of its Accounts Receivable

• c. Company A can attract more customers

• d. Company B can attract more customer     

Which of the following characterizes collection float

• a. Longer float indicates good financial practices

• b. Increased float indicates slower processing time

• c. Accounts receivable increase with shorter float

• d. Liquidity is enhanced with longer float    

Company A's inventory is larger than Company B. Both companies are competitors and are about the same size. What does this difference mean from a working capital management standpoint?

• a. Company B has lower inventory float

• b. Company A has more cash in hand

• c. Company B might have higher inventory turnover

• d. Company A has tighter credit.      

In regards to Accounts Payable balances, which of the following is true:

• a. Higher Accounts Payable is better than a lower balance

• b. Paying off A/P as soon as possible is good policy

• c. Increased Accounts Payable means faster collections

• d. Paying off A/P on the last day due is good policy

If two companies have earnings of $2,000,000, and Company X has a multiple of 1.2 and Company Z has a multiple of 2.0, what can we estimate about the value of each company?

• a. The value is the same

• b. The value of Company X is higher

• c. The value of Company Z is higher

• d. The relative value can't be determined     

Dodd-Frank regulates which segment of the U.S. Economy?

• a. Fannie Mae and Freddie Mac (Housing financing)

• b. Banking Industry

• c. Multi-level Marketing Industry

• d. Automobile Industry         

The SEC Securities & Exchange Commission requires companies to do the following: (pick two)

• a. Register all public offerings

• b. Change CEOs on a regular basis

• c. Regulates stock sales

• d. Prohibits foreign bribery

• e. Regulates the Money Supply         

Economics is a subfield of Finance (T/F)     

• True

• False