The Hobby Shop has a checking account with a ledger balance of $692. The firm has $1,063 in uncollected deposits

The BAT model is used to:    A.  maximize the benefits of leverage. B.  determine the optimal cash position of a firm. C.  eliminate all daily cash surpluses. D.  analyze the cash balance given fluctuating cash inflows and outflows. E.  maximize the opportunity costs of holding cash. Refer to section 19.A

42.

The Miller-Orr model assumes that:    A.  the cash balance is depleted at regular intervals. B.  all cash flows are known with certainty. C.  the average change in the daily cash flows is positive. D.  management will set both the lower and the upper desired levels of cash. E.  the cash balance fluctuates in a random manner. Refer to section 19.A

43.

The Miller-Orr model:    A.  recommends selling securities in an amount equal to (U* - C) when the cash balance reaches L. B.  requires that marketable securities be sold whenever the cash balance falls below the target level. C.  bases the optimal level of cash solely on the opportunity costs of holding cash. D.  supports the argument that the target cash balance declines as order costs increase. E.  advocates investing an amount described as (U* - C) in marketable securities when the cash balance reaches U*. Refer to section 19.A

44.

Which of the following statements is correct?    A.  A firm has a greater likelihood of needing an unexpected loan when its cash flows are relatively constant over time. B.  The cost of borrowing affects the target cash balance of a firm. C.  Management's desire to maintain a low cash balance has no effect on the borrowing needs of a firm. D.  The target cash balance increases as the interest rate rises. E.  The target cash balance decreases as the order costs increase. Refer to section 19.A

45.	The Hobby Shop has a checking account with a ledger balance of $692. The firm has $1,063 in uncollected deposits and $930 in outstanding checks. What is the amount of the disbursement float on this account?    A.  $0 B.  $217 C.  $930 D.  $990 E.  $1,063 Disbursement float = $930

46.

On an average day, Plastics Enterprises writes 42 checks with an average amount of $587. These checks clear the bank in an average of 2 days. What is the average amount of the disbursement float?    A.  $1,174 B.  $5,805 C.  $24,654 D.  $49,308 E.  $73,962 Disbursement float = 42 × $587 × 2 = $49,308

47.

On average, your firm receives 65 checks a day from customers. These checks, on average, are worth $39.90 each and clear the bank in 1.5 days. In addition, your firm disburses 38 checks a day with an average amount of $89.50. These checks clear your bank in 2 days. What is the average amount of the collection float?    A.  $2,473.80 B.  $3,401.00 C.  $3,890.25 D.  $5,101.50 E.  $6,802.00 Collection float = 65 × $39.90 × 1.5 = $3,890.25