PRIN.OF CORPORATE FINANCE >BI<
12th Edition
ISBN: 9781260431230
Author: BREALEY
Publisher: MCG CUSTOM
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Textbook Question
Chapter 30, Problem 9PS
Cash management Complete the passage that follows by choosing the appropriate terms from the following list: lockbox banking, Fedwire, CHIPS, concentration banking.
Firms can increase their cash resources by speeding up collections. One way to do this is to arrange for payments to be made to regional offices that pay the checks into local banks. This is known as ______. Surplus funds are then transferred from the local bank to one of the company’s main banks. Transfers can be made electronically by the ______ or ______ systems. Another technique is to arrange for a local bank to collect the checks directly from a post office box. This is known as ______.
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Students have asked these similar questions
One objective of managing a firm's cash is to process its cash receipts as quickly as possible. Banks provide many services to process incoming payments quickly and efficiently. Consider the case of Sandberg Industries: Sandberg Industries owns an office building that it fents to Graham Company. Sandberg Industries and Graham have an agreement in which Graham's bank transfers the monthly rent automatically to Sandberg Industries' account. Which cash management technique is Sandberg using?
Concentration banking
A preauthorized check
A lockbox arrangement
This refers to a bank that has agreement with the clearinghouse to exchange checks.
A. Commercial Bank
B. Correspondent Bank
C. Universal Bank
D. Concentration Banking
2. Firms hold cash for the purpose of taking advantage of investment opportunities.
A. Precautionary Motive
B. Transaction Balance
C. Compensating Balance
D. Speculative Motive
3.
This refers to the process of monitoring and analyzing the amount of cash needed and how it can be generated.
A. Cash Monitoring
B. Cash Balances
C. Cash Management
D. Cash Forecasting
. Which one of the following best defines cash concentration?
A.
Combining all of a firm's receipts into one bank deposit
B.
Combining a week's worth of cash receipts into one bank deposit
C.
Combining cash from multiple banks into a firm's main bank accounts
D.
Using multiple lockboxes for collecting cash payments
E.
Combining a firm's bills so that disbursement checks are mailed only monthly
Chapter 30 Solutions
PRIN.OF CORPORATE FINANCE >BI<
Ch. 30 - Inventory What are the trade-offs involved in the...Ch. 30 - Prob. 2PSCh. 30 - Prob. 3PSCh. 30 - Prob. 4PSCh. 30 - Prob. 5PSCh. 30 - Prob. 6PSCh. 30 - Prob. 7PSCh. 30 - Credit policy How should your willingness to grant...Ch. 30 - Cash management Complete the passage that follows...Ch. 30 - Prob. 10PS
Ch. 30 - Prob. 11PSCh. 30 - Prob. 12PSCh. 30 - Prob. 13PSCh. 30 - Prob. 14PSCh. 30 - Credit terms Phoenix Lambert currently sells its...Ch. 30 - Prob. 16PSCh. 30 - Prob. 17PSCh. 30 - Prob. 18PSCh. 30 - Prob. 19PSCh. 30 - Prob. 20PSCh. 30 - Prob. 21PSCh. 30 - Prob. 22PSCh. 30 - Prob. 23PSCh. 30 - Prob. 24PSCh. 30 - Prob. 25PSCh. 30 - Money-market yields In Section 30-4 we described a...Ch. 30 - Money-market yields Look again at the previous...Ch. 30 - Prob. 29PSCh. 30 - Prob. 30PSCh. 30 - Prob. 31PSCh. 30 - Prob. 33PS
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Select a business in your community and observe its internal controls over cash receipts and cash payments. The business could be a bank or a bookstore, a restaurant, a department store, or another retailer. In groups of three or four, identify and discuss the similarities and differences in each business’s cash internal controls.arrow_forwardFrom page 4-4 of the VLN, what is the goal of a bank reconciliation? Group of answer choices A. To make sure the company cash account is increasing. B. To make sure the company is profitable. C. To make sure the bank records and our company records are the same. D. To make sure the bank is competitive with other banks.arrow_forwardThe owner of Zeke's Landscaping Designs just hired an office manager to handle all the office functions for him. Among other responsibilities, the office manager will handle key accounting functions such as processing customer payments, writing cheques to employees to pay the payroll, handle daily bank deposits at the bank pay suppliers, and reconcile the company bank account bank reconciliations. What internal cash control practice is being overlooked by the owner? Multiple Choice A Making daily cash deposits B Frequent preparation of bank reconciliations C Separation of cash payment from cash disbursement function D Ensuring all cash disbursements are tracked by making payments by cheque E Performing external auditarrow_forward
- Which of the following generally would be considered good internal control of cash disbursements? a. Make all cash disbursements using cash rather than debit cards or credit cards. b. Set maximum purchase limits on debit cards and credit cards. c. The employee responsible for making cash disbursements should be in charge of cash receipts. d. The employee who authorizes payments should also prepare the check.arrow_forwardIn a similar vein you could study how cash restrictions affect practices of individual bank customers. Again, which customers adapt easier and faster to regulation changes and which customers need more time. Does it affect their purchase decisions? Do they try to circumvent these regulations? How?arrow_forwardFor the following two situations, select the statement that would be most helpful in managing cash in each situation which is consistent with effective cash management techniques. Situation 1: Sales of our products generated extra cash that is not needed until later in the year. Situation 2: A few of our suppliers are unhappy because some checks we issued have been returned marked NSF. We feel that we have enough money in the bank account. StatementSituation 1Situation 2Increase the speed of collection on receivables by offering a sales discount 1/10 or 2/10, net 30. Offer customers shorter credit terms, e.g., 30 instead of 45 days. Sell receivables to a factor. Keep inventory quantities down to a level that is adequate for meeting current orders. Delay payment of liabilities by negotiating longer credit terms from suppliers, e.g., 40 instead of 30 days. Plan the timing of major expenditures. Invest in idle cash. Balance the Cash account daily after recording all cash…arrow_forward
- Cash management involves keeping an eye on the business's cash balance to ensure that A.the business is generating a profit B.all cash payments are included in the purchases budget C.there is enough cash on hand to pay for planned operations during the current period D.all cash receipts are included in the sales budgetarrow_forwardEach situation below describes an internal control weakness in the cash receipts process. Identifywhich of the five internal control principles is violated, explain the weakness, and then suggest achange that would improve internal control.a. Cashiers prepare a cash count summary, attach tapes from the cash register showing total receipts,and then prepare a bank deposit slip, which they take to the bank for deposit. After the deposit ismade, all documents are forwarded to the accounting department for review and recordingarrow_forwardUnderstanding Sarbanes-Oxley and identifying internal control strengths and weaknesses The following situations suggest a strength or a weakness in internal control. a. Top managers delegate all internal control procedures to the accounting department. b. Accounting department staff (or the bookkeeper) orders merchandise and approves invoices for payment. c. Cash received over the counter is controlled by the sales clerk, who rings up the sale and places the cash in the register. The sales clerk matches the total recorded by the register to each day’s cash sales. d. The employee who signs checks need not examine the payment packet because he is confident the amounts are correct. Requirements 1. Define internal control 2. The system of internal control must be tested by external auditors. What law or rule requires this testing? 3. Identify each item in the list above as either a strength or a weakness in internal control, and give your reason for each answer.arrow_forward
- Some strategies in management can use to implement controls to ensure the integrity and existence of the client's cash balances. Reconciling cash can be a great control in most cases since receipts tie to deposits so it's accurate and cash exists since it hits the bank account. Now reconciling on a daily basis is important as well but would you be able to negotiate the cash box if the employee was using a lapping fraud to steal money? If they took $100 of cash and issued a manual receipt to the customer then used the next $100 to come in to clear the AR from the first customer on the cash receipt system, wouldn't I still reconcile? What could I do as a manager to prevent this type of fraud from occurring?arrow_forwardThis test of details of transactions for cash balances involves the counting of all undeposited cash receipts and change funds. Group of answer choices Tests to Detect Lapping Trace Bank Transfers Count Cash on Hand Perform Cash Cutoff Testsarrow_forwardSuppose that, as a result of increased use of electronic payments, banks no longer need to hold as much vault cash. Banks decide to reduce their vault cash holdings by $250million. a) Show the effects this would have on the balance sheets of commercial banks and the central bank. b) If, at the same time, depositors decide to reduce their cash holdings by $50million by depositing that amount with their banks, show the combined effect of these decisions on the balance sheets of commercial banks.arrow_forward
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