Cash Management

Which of the following describes the transaction motive for holding cash, as identified by John Maynard Keynes?

What is the term for the difference between a firm's available balance at the bank and its book (or ledger) balance?

A company receives a check for $200,000. It deposits the check, which increases its book balance by $200,000. However, the funds are not yet available at the bank. What type of float does this situation create?

A firm mails a check for $750. The total delay for mailing, processing, and clearing is 6 days. What is the total float generated by this check?

A company has average daily receipts of $500,000 and a weighted average delay of 4 days. What is the average daily float?

What is the primary benefit to a firm of eliminating collection float?

A lockbox system is a cash management tool primarily designed to reduce which components of collection time?

What is the primary objective of cash disbursement management from a firm's perspective?

A company is considering a lockbox system that will reduce its collection time by 3 days. The company's average number of daily payments is 1,000, and the average size of a payment is $400. The daily interest rate is 0.02 percent. What is the present value of the benefit of the lockbox system?

Which of the following describes a zero-balance account (ZBA) system?

What is the key advantage of using a zero-balance account system for controlling disbursements?

Which of the following is NOT a primary characteristic to consider when a firm invests in short-term marketable securities?

A firm needs to invest idle cash for a short period. Which of the following securities generally has the lowest default risk?

What is the primary reason for the existence of float in the cash management cycle?

According to the text, what is the impact of the Check Clearing for the 21st Century Act (Check 21) on float?

A firm receives two checks in a month. The first is for $3,000,000 and is delayed for 5 days. The second is for $5,000,000 and is delayed for 9 days. What is the weighted average delay for these receipts?

Atlantic Corporation is considering a lockbox system that reduces collection time by 2 days. Its average daily collections are $1.2 million. The lockbox service costs 25 cents per check, and the company processes 2,000 checks per day. What is the daily net profit from this lockbox system?

Which of the following are the three components that make up the total collection or disbursement time for a check?

What is the primary difference between cash management and liquidity management?

What is a key ethical consideration for a cash manager when dealing with float?

When a firm invests temporary cash surpluses, what is the primary reason it would be concerned with the maturity of a short-term security?

What is commercial paper?

A firm has average daily disbursements of $50,000, and the total time for a check to clear is 5 days. What is the firm's average daily disbursement float?

What is the primary motivation for a firm to have a seasonal or cyclical temporary cash surplus?

A firm has a disbursement float of $500,000 and a collection float of negative $300,000. What is the firm's net float, and what does it signify?

Which of the following describes a preauthorized payment arrangement?

What is cash concentration?

Which of the following is the most expensive method for transferring funds to a concentration bank, but provides the fastest availability?

A company is considering using a lockbox system. Average daily collections are $200,000, and the system would reduce collection time by 1.5 days. The bank charges a fee of 30 cents per check, and the company processes 500 checks per day. The daily interest rate is 0.02 percent. Should the company adopt the system?

What is the primary difference between disbursement float and collection float in terms of how the components of float time are measured?

A firm has average daily receipts of $20,000, and the weighted average delay is 5 days. What is the total opportunity cost of this float for a 30-day month, assuming a daily interest rate of 0.01 percent?

Which of the following is NOT a common type of inventory loan?

According to the text, what is the speculative motive for holding cash?

What does a positive net float indicate about a firm's cash position?

A company with average daily collections of $50,000 can reduce its float by 2 days. The relevant discount rate is 8 percent per year. What is the Net Present Value of this float reduction, assuming it is a one-time benefit and there are no costs?

For what reason do firms with temporary cash surpluses invest in money market securities?

What is the primary feature of money market preferred stock that makes it a suitable short-term investment?

A firm has a book balance of $1.5 million. At the ATM, the cash manager discovers the bank balance is $2.0 million. This is a recurring situation. What is the firm's net float?

What does a compensating balance requirement from a bank do to the effective interest rate on a loan?

Which of the following describes a controlled disbursement account?

A firm has an average daily float of $500,000. It can eliminate this float at a one-time cost of $450,000. What is the NPV of this action?

What is a repurchase agreement (repo)?

What is the primary trade-off a firm faces when deciding on the optimal level of cash to hold?

If a firm writes a check for $10,000, its book balance immediately decreases by $10,000. The firm's available balance at the bank does not decrease until the check is presented for payment. This situation creates a:

For the Atlantic Corporation example, a lockbox system reduces collection time by 2 days, and average daily collections are $1.2 million. The daily interest rate is 0.025 percent. A bank offers to run the system for 25 cents per check on 2,000 checks per day, plus an annual fixed fee of $20,000. Is the system still a good idea?

Which of the following short-term securities are generally exempt from federal taxes but may be taxed at the state level?

What is the precautionary motive for holding cash?

A firm reduces its collection float from 4 days to 2 days. Its average daily receipts are $250,000. What is the maximum one-time amount the firm should be willing to pay for this service?

Why might a firm's financial manager be more concerned with the firm's available cash balance than its book balance?