BUSI 320 TERM 2 EXAM Questions and Answers
Verified Solutions Latest Update
Question 1.
rates on short term loans may become very high
short term funds may be difficult to find
Correct Answer: As a rule, during "tight money" periods: True
In designing working capital policy, the astute financial manager is interested in not
only the
term structure of interest rates but also the relative volatility and the historical level
of short-term
and long-term rates.
Question 2.
False
Correct Answer: A higher use of long term financing is the more conservative
financing approach and can lead
to potentially higher profitability
Question 3.
if sales increase inventory will decrease inventory will change with changes in
sales if sales decrease
inventory will increase If a company utilizes level production:
When interest rates are high and expected to decline, the financial manager
would generally try to borrow short-term funds.
If interest rates are low, financial manager will try to lock in the lower rates with
long-term
borrowing.
Correct Answer: How should the financial manager respond to fluctuating interest
rates and changing term
structures?
Question 4.
if a tight money situation occurs, interest rates may increase if a
tight money situation occurs, loans may be hard to obtain
Correct Answer: A risk of using short term funds to finance operations is a credit
crunch in which funds become scarce.
An aggressive firm utilizing short term financing may be vulnerable to Both
increase Generally, when a
company's sales increase, the affect on temporary and permanent assets is:
permanent current assets Your
company's inventory valuation reaches a high of $100,000 before its busy season
and a
low of $30,000 during its slow season. The $30,000 level of inventory is considered
to be: inventory will
decrease If sales increase while production stays level: True
Verified Solutions Latest Update
Question 1.
rates on short term loans may become very high
short term funds may be difficult to find
Correct Answer: As a rule, during "tight money" periods: True
In designing working capital policy, the astute financial manager is interested in not
only the
term structure of interest rates but also the relative volatility and the historical level
of short-term
and long-term rates.
Question 2.
False
Correct Answer: A higher use of long term financing is the more conservative
financing approach and can lead
to potentially higher profitability
Question 3.
if sales increase inventory will decrease inventory will change with changes in
sales if sales decrease
inventory will increase If a company utilizes level production:
When interest rates are high and expected to decline, the financial manager
would generally try to borrow short-term funds.
If interest rates are low, financial manager will try to lock in the lower rates with
long-term
borrowing.
Correct Answer: How should the financial manager respond to fluctuating interest
rates and changing term
structures?
Question 4.
if a tight money situation occurs, interest rates may increase if a
tight money situation occurs, loans may be hard to obtain
Correct Answer: A risk of using short term funds to finance operations is a credit
crunch in which funds become scarce.
An aggressive firm utilizing short term financing may be vulnerable to Both
increase Generally, when a
company's sales increase, the affect on temporary and permanent assets is:
permanent current assets Your
company's inventory valuation reaches a high of $100,000 before its busy season
and a
low of $30,000 during its slow season. The $30,000 level of inventory is considered
to be: inventory will
decrease If sales increase while production stays level: True
