1. Companies must be large, wellknown, and financially strong in order to use commercial paper financing. Because commercial paper borrowers are generally less risky than prime loan borrowers, and because commercial paper is more liquid than a promissory note, we should expect the average rate charged on commercial paper to be below the prime rate. True or false?

2. The stronger a firm's financial position, the easier it is for it to borrow on good terms. Consequently, the firm's optimal holdings of cash and securities will be smaller than if its financial position were weak. True or false?

3. Suppose Keys implemented a plan to produce and sell goods faster, collect faster, and delay its own payments still more, all without lowering sales or increasing operating costs, which would reduce its CCC. How would you expect these actions to impact its profits and ROE? a. No change b. Raise c. Lower

4. A UCC1 is a document filed with a state agency that indicates specific assets, such as inventory, accounts receivable, and equipment, have been pledged as collateral for a loan. This prevents firms from using the same assets as collateral to secure loans from different lenders. It is terribly important that potential lenders check with the state to see if the UCC1 has already been filed before agreeing to make a secured loan, and then to file the UCC1 if they do make a loan. True or false?

5. Unlike bank loans and costly trade credit, accruals are typically considered to have a zero cost. True or false?