Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 27, Problem 7CQ
Summary Introduction
To identify: That what ethical dilemmas will be raised, if the book balance of a firm is $2 million and at the ATM, the cash manager finds it representing as $2.5 million.
Introduction:
Float is defined as the difference between the balance shown in ledger of the company and the balance that is available at the bank. Available balance refers to the balance that is shown by the banks of that particular company.
Disbursement float is the difference between the payment paid to the customers and distributors that is subtracted from the ledger and the amount that is be deducted from the available bank account in the later days.
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Students have asked these similar questions
The speculative motive is the need to hold cash
O a. To pay outstanding checks
b. To maintain a firm's daily operations
c. To invest in opportunities which may arise
Od. To compensate a bank for services rendered
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
Explain how each of the following factors would probably affect a firm’s target cash balance if all other factors were held constant. d. The firm arranges to use an overdraft system for its checking account.
Chapter 27 Solutions
Corporate Finance
Ch. 27 - Cash Management Is it possible for a firm to have...Ch. 27 - Cash Management What options are available to a...Ch. 27 - Prob. 3CQCh. 27 - Cash Management versus Liquidity Management What...Ch. 27 - Prob. 5CQCh. 27 - Collection and Disbursement Floats Which would a...Ch. 27 - Prob. 7CQCh. 27 - Short-Term Investments For each of the short-term...Ch. 27 - Prob. 9CQCh. 27 - Prob. 10CQ
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- a) Prepare an adjusted cash book for the month b) Prepare a bank reconciliation statement. c) Given your knowledge in bank reconciliation statement, do you think digital banking products like SMS alert and e-statements have rendered the use of bank reconciliation statement irrelevant? Discussarrow_forwardWhich of the following is a benefit of online banking a business can reconcile to the banks balance at any time be a companies book balance will always equal the banks balance see the bank reconciliation is not necessary D the business can reduce their internal controls over cash receiptsarrow_forwardIf you were the banker, what information would you want from a company to evaluate their riskiness and their ability to repay a loan? What specific information would you need to begin a cash receipts forecast? Identify three items that would be helpful.arrow_forward
- What do you mean by Duration theory? a. Bank customer must have maximum balance in his account b. Bank customer must have continuous dealings with the bank c. Bank customer must minimum balance in his account d. Bank customer must not withdraw money from his accountarrow_forwardConstruct a list of steps for making a cash withdrawal from an automated teller machine (ATM). Assume that the process begins at the ATM with your bank card in hand. Then identify the potential failure points (i.e., where problems might arise in the process). For each failure point, state onepotential problem.arrow_forwardThe two most pressing demands for liquidity from a bank come from, first, customers withdrawing their deposits. Identify and discuss the second demand on the bank for liquidity.arrow_forward
- A. What is a bank reconciliation and why is it important for companies to do it periodically?arrow_forward. Which one of the following best represents the transaction motive for holding cash? A. Buying extra inventory in response to an unexpected sale offered by a supplier B. Distributing the weekly paychecks C. Increasing the minimum cash balance for the firm's main bank account D. Unexpectedly purchasing a competitor's firm E. Holding cash in anticipation that the firm may need to close for a few days if floodwaters keep risingarrow_forwardHow can I calculate using a financial indicator, which of the companies has the greatest possibility of obtaining more money borrowed from a bank?arrow_forward
- Which of the following transactions leaves a bank's total asset and liability unchanged? A bank receives deposits from a customer in the form of cash. O A bank writes off a bad loan it made to a local business. O A bank pays out cash to a customer who wants to withdraw money from his checking account. A bank makes a consumer loan with its cash reserves.arrow_forward1. During the reconciliation of the company’s cash account with its bank statement, what should the account holders look for?arrow_forwardQ1-1 What risks are present if you take too long to col- lect our accounts receivable? Q1-2. What are some analyses you could perform that would provide insight into how efficiently your company is collecting cash from customers? Are there any KPIS that would be appropriate here? Q1-3. In your opinion, what would be an appropriate benchmark for the average number of days sales outstanding (i.e., Accounts receivable/Sales x 365)? Would management want this number higher or lower?arrow_forward
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