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Multiple Choice
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1

The transaction motive for holding cash is for:
A)a safety cushion
B)daily operating requirements
C)compensating balance requirements
D)none of the above
2

Which of the following motives for holding cash is required by the bank before loaning money?
A)compensating balance motive
B)transactions motive
C)precautionary motive
D)none of the above
3

The difference between the cash balance on the firm's books and the balance shown on the bank's books is called:
A)the compensating balance
B)float
C)a safety cushion
D)none of the above
4

Electronic funds transfer has __________ the use of float.
A)reduced
B)increased
C)had no effect on
D)none of the above
5

The most utilized marketable security by most firms is the:
A)Treasury bond
B)Agency security
C)Certificate of Deposit
D)Treasury bill
6

Of the following marketable securities, which are guaranteed by the Federal government?
A)agency securities
B)negotiable certificates of deposit
C)banker's acceptances
D)none of the above
7

The 5 C's of credit include:
A)conditions
B)collateral
C)character
D)all of the above
8

The use of safety stock by a firm will:
A)reduce inventory costs
B)increase inventory costs
C)have no effect on inventory costs
D)none of the above
9

All of these factors are used in credit policy administration except:
A)credit standards
B)terms of trade
C)dollar amount of receivables
D)collection policy
10

Firms aim to hold ______ cash balances since cash is a non-interest earning asset.
A)low
B)average
C)high
D)none of the above





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