Quiz Ch 15 – T/F Reducing Trade Credit Costs by Delaying Payment
Fundamentals of Financial Management, Concise
Brigham and Houston
09th Edition
True or false: Delaying payment can reduce the calculated cost of trade credit.
True or false: Delaying payment can reduce the calculated cost of trade credit.
True or false: Any rise in a current asset must be matched by a corresponding increase in a current liability.
True or false: Net operating working capital is equivalent to the current ratio minus the quick ratio.
True or false: Long-term loan agreements invariably include covenants that restrict a firm’s future actions, while short-term credit agreements are equally restrictive, serving to safeguard the lender’s interests.
True or false: A firm with a revolving credit agreement with a bank typically faces lower funding risk compared to having an informal line of credit.
True or false: The firm’s risk associated with short-term credit borrowing is typically higher than when using long-term debt. This increased risk results from the greater interest cost variability on short-term debt and the possibility that lenders may not renew short-term loans even if the firm has good long-term prospects but temporarily struggles with repayment.
True or false: The cash budget and the capital budget are typically treated as separate processes, and although both are significant, they are generally developed independently of each other.
True or false: Using short-term debt extensively is considered an aggressive strategy for financing current assets, despite historically lower short-term interest rates, due to the inherent risks.
True or false: The synchronization of cash flows is a crucial cash management technique, as it can lower the necessary cash balance and enhance a firm’s profitability.
True or false: The target cash balance is usually set in a way that doesn’t require adjustment for either seasonal patterns or unforeseen random fluctuations, which is both logical and typical.