27. Which of the following is not a valid reason for holding cash?

A. To meet transaction requirements.

B. To earn the highest return possible.

C. To satisfy emergency needs for funds.

D. To provide a compensating balance for a bank.

28. Accounts receivable may be used as a source of financing by:

A. Pledging the receivables as loan collateral.

B. Factoring the receivables to a finance company.

C. Selling securities backed by receivables.

D. All of the above.

29. The three primary policy variables to consider when extending credit include all of the following except:

A. Credit standards.

B. The level of interest rates.

C. The terms of trade.

D. Collection policy.

30. The amount of safety stock that a firm carries depends upon:

A. The predictability of inventory usage.

B. The time period necessary to fill inventory orders.

C. The riskiness of the storage facility.

D. A and B are correct.

31. A bankers acceptance:

A. Is a draft drawn on a bank and paid by that bank when presented to it.

B. May be accepted by the bank for future payment.

C. Is traded in a relatively liquid market until maturity.

D. All of the above.

32. International cash management systems are more complex than domestic cash management systems because of:

A. The risk involved in currency fluctuations.

B. The changing interest rates across countries.

C. Varying time zones across countries.

D. All of the above.

33. What is generally the largest source of short-term credit for small firms?

A. Bank loans.

B. Commercial paper.

C. Installment loans.

D. Accounts Payable to Suppliers.