Quiz Ch 15 – Purpose of a Lockbox Plan
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
What is the primary purpose of a lockbox plan?
What is the primary purpose of a lockbox plan?
True or false: Implementing a lockbox arrangement is a means for a firm to expedite the receipt of payments from its customers.
True or false: The absence of explicit interest payments on accruals and the firm’s ability to adjust these accounts as needed make them an appealing source of funding for meeting working capital requirements.
True or false: Accruals are generated from a firm’s operations and typically do not entail explicit interest payments, making them a form of “free” capital.
True or false: Most bank loans to businesses are short-term, often provided as 90-day notes that are commonly rolled over instead of being repaid upon maturity. Nevertheless, if the borrower’s financial condition worsens, the bank may decline to renew the loan.
True or false: To decide on taking a trade discount, compare its cost with borrowing from a bank or elsewhere.
True or false: A firm’s credit policy comprises four main elements: (1) credit standards, (2) discounts provided, (3) credit period, and (4) collection policy.
True or false: Trade credit has two components: free trade credit after the discount period and the cost of unclaimed discounts, known as costly trade credit.
True or false: Accruals are “spontaneous” funds originating from a firm’s operations, but firms have limited control due to legal and economic factors.
True or false: Inventory management usually requires minimal coordination among sales, purchasing, and production personnel.