Site MapHelpFeedbackFundamentals of Corporate Finance: Multiple Choice Quiz
Multiple Choice Quiz
(See related pages)



1

Most trade credit is offered on open account although, at times, a firm may require the customer sign a promissory note.
A)True
B)False
2

The probability of nonpayment is not one of the five basic factors that affect credit policy.
A)True
B)False
3

A firm's short-term borrowing is a factor in the decision to grant credit.
A)True
B)False
4

The optimal amount of trade credit for a firm is determined to be the point at which carrying costs and opportunity costs are equal.
A)True
B)False
5

Small firms often extend credit through a captive finance company.
A)True
B)False
6

The decision to grant credit depends on whether the customer represents a one-time sale or possible repeat business.
A)True
B)False
7

According to the ABC inventory management approach inventory items are arranged alphabetically and then monitored to prevent stockouts.
A)True
B)False
8

When ABC Co. makes a sale of inventory on credit to XYZ Co., I. a receivable is created for ABC II. cash is paid to ABC III. a payable is created for ABC IV. XYZ's inventory is increased
A)I only
B)I and III only
C)I and IV only
D)II and III only
E)II, III and IV only
9

Which of the following is NOT true regarding trade credit?
A)Trade credit is created when a firm uses cash to make purchases from another firm
B)Trade credit is not usually an interest-bearing asset for the firm granting the credit
C)Trade credit possesses a degree of default risk
D)Collection of trade receivables can be sped up by offering discounts
E)Trade credit is an important source of external financing for U.S. firms
10

There is a saying in banking that says that when a business is experiencing financial problems, trade creditors are the first to know. Why would this be true?
A)Trade creditors perform credit checks less often than banks do
B)Trade creditors get all of their information about credit risks from the banks
C)Trade creditors can always take back the merchandise they sold the borrower if they don't get paid
D)Trade creditors extend credit only to the most creditworthy businesses while banks extend short-term loans to almost any borrower
E)Trade creditors typically extend credit more often and for a shorter maturity to a business than other creditors such as banks





To learn more about the book this website supports, please visit its Information Center.
(c)2003 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.


Fundamentals of Corporate FinaOnline Learning Center with Powerweb

Home > Chapter 21 > Multiple Choice Quiz