BUS 320 Chapter 6 – Flashcards
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Working capital management is relatively unimportant for the small business.
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False
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Liquidating current assets are really fixed assets since they have lives greater than one year.
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False
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One of the big benefits of implementing supply chain management, is a reduction in inventory on hand.
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True
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The cash budget combines the cash receipts and cash payments schedules in determining cash flow.
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True
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Ideally, permanent current assets should be financed with short-term borrowings.
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False
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Increased use of long-term financing is generally a more conservative approach to current asset financing.
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True
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A risky financial plan will use long-term financing for fixed assets, permanent current assets, and a portion of temporary current assets.
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False
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The "term structure of interest rates" depicts the competitive cost of funds for the various short-term sources of funds such as Treasury bills, commercial paper, and bank CDs.
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False
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It is not necessary to understand interest rate movements when deciding the structure of short-term debt relative to long-term debt.
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False
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According to the expectations hypothesis, when long-term interest rates are higher than short-term interest rates, long-term rates are expected to decline.
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False
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During tight money periods, short-term financing may be difficult to find.
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True
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Long-term financing is usually less expensive than short-term financing because it is not as advantageous to the corporation as short-term financing.
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False
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The three most important factors when selecting a financing plan are risk, asset liquidity, and timing.
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True
