Which of the following should help reduce the total collection time for a firm?

Cash management primarily involves:    A.  optimizing a firm's collections and disbursements of cash. B.  maximizing the income a firm earns on its cash reserves. C.  reconciling a firm's book balance with its bank balance. D.  determining the optimal level of liquidity a firm should maintain. E.  determining the best method of raising capital. Refer to section 19.1

13.

Disbursements float:    A.  occurs when a deposit is recorded but the funds are unavailable. B.  causes the book balance to exceed the bank balance. C.  has tended to increase since the enactment of the Check Clearing Act for the 21st Century. D.  is a recommended source of funds for short-term investments. E.  is eliminated when payments are made electronically. Refer to section 19.2

14.

Collection float:    A.  is more desirable to firms than disbursement float. B.  is totally eliminated by the installation of a lockbox system. C.  exists when a firm's available balance exceeds its book balance. D.  can be avoided by collecting payments electronically at the time of sale. E.  is eliminated by implementing a concentration banking system. Refer to section 19.2

15.

Which one of the following statements is correct?    A.  Net float decreases every time a firm issues a check to pay one of its suppliers. B.  A positive net float indicates that collection float exceeds disbursements float. C.  Firms prefer a zero net float over a positive net float. D.  Net float is equal to collection float minus disbursement float. E.  Net float is equal to a firm's available balance minus its book balance. Refer to section 19.2

16.

Check kiting is:    A.  used by most firms as an ethical means of handling its cash reserves. B.  the process of withdrawing all funds from a bank account as soon as the funds are available. C.  the central core of a good cash management system. D.  using uncollected cash to invest in short-term, liquid assets. E.  increasingly popular due to recent banking law changes. Refer to section 19.2

17.

Which of the following will reduce collection time? I. billing customers electronically rather than by mail II. accepting debit cards but not checks as payment for a sale III. offering cash discounts for early payment IV. reducing the processing delay by one day    A.  I and II only B.  I and III only C.  I, II, and III only D.  II, III, and IV only E.  I, II, III, and IV Refer to section 19.3

18.

Which of the following should help reduce the total collection time for a firm? I. opening a post office box so mail can be received earlier in the morning II. assigning additional staff in the morning to process incoming payments III. providing a discount for customers who pay electronically IV. establishing preauthorized payments from customers    A.  I and II only B.  III and IV only C.  II, III, and IV only D.  I, II, and IV only E.  I, II, III, and IV Refer to section 19.3

19.

Which one of the following collection times is correctly described?    A.  The processing delay starts when a firm mails out a billing statement and ends when the payment is received from a customer. B.  Mailing time begins when a firm mails out a billing statement and ends when the payment is received. C.  Collection time begins when a firm mails out a billing statement and ends when the cash payment for that billing is available to the firm. D.  Availability delay begins when a firm deposits a customer's check into its bank account and ends when the cash from that payment is available to the firm. E.  Processing delay begins when a firm mails out billing statements and ends when the firm deposits the payment for that statement into its bank account. Refer to section 19.3

20.

A lockbox system:    A.  entails the use of a bank which is centrally located to collect payments on a nationwide basis. B.  is designed to deposit a customer's check into the firm's bank account prior to recording the receipt of that check to a customer's account. C.  is used to reduce the disbursement float of a firm. D.  is efficient regardless of the locations selected for lockbox destinations. E.  automatically records payments to a customer's account when the customer's check is received at the lockbox location. Refer to section 19.3

21.

Lockboxes:    A.  should be geographically located close to a firm's primary customers. B.  should be located in remote locations to increase the net disbursement float. C.  offer no additional benefit to a firm now that the Check Clearing Act for the 21st Century has been enacted. D.  tend to be negative net present value projects for firms with a large number of sizeable transactions. E.  tend to also be used as concentration accounts. Refer to section 19.3

22.

Cash concentration accounts:    A.  tend to increase the funds available for short-term investing. B.  tend to increase the complexity of a firm's cash management system. C.  that utilize wire transfers rather than automated clearing house transfers are less expensive to maintain. D.  receive checks directly from all of a firm's customers. E.  are all zero-balance accounts. Refer to section 19.3

23.

Which one of the following statements is correct?    A.  Funds received via automated clearinghouse transfers are available that day. B.  A depository transfer check is the most costly means of transferring funds into a cash concentration account. C.  The means selected to transfer funds into a concentration account depends primarily upon the size of the transfers. D.  Concentration accounts are used to transfer funds to lockbox locations as needed. E.  The most expedient means of transferring funds into a concentration account is a wire transfer. Refer to section 19.3

24.

A cash concentration account:    A.  is frequently used as a source of funds for short-term investments. B.  cannot be used to cover a compensating balance requirement. C.  cannot be used to transfer funds into zero-balance accounts. D.  is generally the only bank account a firm needs to efficiently manage its cash. E.  is another name for a controlled disbursement account. Refer to section 19.3

25.	The main purpose of a cash concentration account is to:    A.  decrease collection float. B.  decrease disbursement float. C.  consolidate funds. D.  replace a lockbox system. E.  cover compensating balance requirements. Refer to section 19.3