Chapter 17 Cash, Receivables, and Inventory Management

41) Because poor credit-worthy customers may cause bad debt losses, credit sales to them should not be allowed.

42) Available yields on financial securities depend on their financial risk, interest rate risk, liquidity, and taxability.

43) A company concerned about the liquidity of its near-cash securities should invest in U.S. Treasury bills because the secondary market for U.S. Treasury bills is excellent.

44) U.S. Treasury Bills are exempt from federal, state, and local income taxes.

45) Money market mutual funds are diversified portfolios of short-term, high-grade debt instruments.

46) U.S. Treasury Bills are extremely liquid due to excellent secondary markets.

47) Commercial paper is much more liquid than money-market mutual funds because commercial paper is available to only the most creditworthy corporations.

48) U.S. Treasury Bills, bankers' acceptances and commercial paper are all sold on a discount basis.

49) Cash inflows come from

A) purchase of marketable securities.

B) purchase of fixed assets.

C) credit sales.

D) cash sales.

50) John Maynard Keynes segmented a firm's demand for cash into the following motives:

A) risk, investment, and liquidity.

B) transaction, speculative and precautionary.

C) transaction, liquidity, and speculative.

D) transaction, speculative, and risky.