Chapter 7. Current Asset Management
Cash flow cycle - answer The pattern in which cash moves in and out of the firm. The
primary consideration in managing the cash flow cycle is to ensure that inflows and
outflows of cash are properly synchronized for transaction purposes.
float - answer the difference between the corporations recorded cash balance on its
books and the amount credited to the corporation by the bank
Check Clearing for the 21st Century Act (Check 21) – answer a 2003 law that allows
banks and others to electronically process checks
lockbox system – answer A procedure used to expedite cash inflows to a business.
Customers are requested to forward their checks to a post office box in their geographic
region, and a local bank picks up the checks and processes them for rapid collection.
Funds are then wired to the corporate home office for immediate use.
cost benefit analysis - answera study that compares the costs and benefits to society of
providing a public good
electronic funds transfer - answerA system in which funds are moved between financial
institutions using computers.
Automated Clearing House (ACH) - answerAn electronic network for financial
transactions in the U.S. The network processes batches of debits and credits to various
financial institutions allowing for fast, safe and efficient transfer of funds.
international electronic funds transfer - answerThe movement of funds across
international boundaries. It is mainly carried out through SWIFT (Society for Worldwide
Interbank Financial Telecommunications).
sweep account - answerAn account that allows companies to maintain zero balances
with all excess cash swept into an interest-earning account.
treasury bills - answershort-term obligations issued by the U.S. government
federal agency securities - answerSecurities issued by agencies such as the Federal
Home Loan Banks and the Federal Land Bank.
Certificate of Deposit (CD) - answera certificate issued by a bank to a person depositing
money for a specified length of time.
commercial paper - answershort-term unsecured debt issued by large corporations
Cash flow cycle - answer The pattern in which cash moves in and out of the firm. The
primary consideration in managing the cash flow cycle is to ensure that inflows and
outflows of cash are properly synchronized for transaction purposes.
float - answer the difference between the corporations recorded cash balance on its
books and the amount credited to the corporation by the bank
Check Clearing for the 21st Century Act (Check 21) – answer a 2003 law that allows
banks and others to electronically process checks
lockbox system – answer A procedure used to expedite cash inflows to a business.
Customers are requested to forward their checks to a post office box in their geographic
region, and a local bank picks up the checks and processes them for rapid collection.
Funds are then wired to the corporate home office for immediate use.
cost benefit analysis - answera study that compares the costs and benefits to society of
providing a public good
electronic funds transfer - answerA system in which funds are moved between financial
institutions using computers.
Automated Clearing House (ACH) - answerAn electronic network for financial
transactions in the U.S. The network processes batches of debits and credits to various
financial institutions allowing for fast, safe and efficient transfer of funds.
international electronic funds transfer - answerThe movement of funds across
international boundaries. It is mainly carried out through SWIFT (Society for Worldwide
Interbank Financial Telecommunications).
sweep account - answerAn account that allows companies to maintain zero balances
with all excess cash swept into an interest-earning account.
treasury bills - answershort-term obligations issued by the U.S. government
federal agency securities - answerSecurities issued by agencies such as the Federal
Home Loan Banks and the Federal Land Bank.
Certificate of Deposit (CD) - answera certificate issued by a bank to a person depositing
money for a specified length of time.
commercial paper - answershort-term unsecured debt issued by large corporations
