True or False The cash conversion cycle is the sum of the inventory conversion period, the receivables collection period, and the days payables outstanding. * True False The best and most comprehensive picture of a firm's liquidity position is obtained by examining its cash budget. True False A firm's goal should be to lengthen the cash conversion cycle since shorter cash conversion cycles leads firms to increase their dependence on costly external financing. * True False The larger the investment a firm makes in its current assets, the higher its carrying costs will be. * True False Other things held constant, if a firm "stretches" (i.e., delays paying) its accounts payable, this will lengthen its cash conversion cycle (CCC). * True False Short-term financial policies that are flexible with regard to current assets includes keeping large balance of short-term debt. * True False Costs that fall with increases in the level of investment in current assets are called shortage costs. * True False The firm further increases the effective interest rate earned by the bank on the committed line of credit. * True False Short-term assets can always be financed with short-term debt, and long- term assets can be financed with long-term debt and equity, in an ideal economy. True False Security for short-term or long-term loans usually consists of accounts receivable, inventories, or both. * True False
True or False The cash conversion cycle is the sum of the inventory conversion period, the receivables collection period, and the days payables outstanding. * True False The best and most comprehensive picture of a firm's liquidity position is obtained by examining its cash budget. True False A firm's goal should be to lengthen the cash conversion cycle since shorter cash conversion cycles leads firms to increase their dependence on costly external financing. * True False The larger the investment a firm makes in its current assets, the higher its carrying costs will be. * True False Other things held constant, if a firm "stretches" (i.e., delays paying) its accounts payable, this will lengthen its cash conversion cycle (CCC). * True False Short-term financial policies that are flexible with regard to current assets includes keeping large balance of short-term debt. * True False Costs that fall with increases in the level of investment in current assets are called shortage costs. * True False The firm further increases the effective interest rate earned by the bank on the committed line of credit. * True False Short-term assets can always be financed with short-term debt, and long- term assets can be financed with long-term debt and equity, in an ideal economy. True False Security for short-term or long-term loans usually consists of accounts receivable, inventories, or both. * True False
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:True or False
The cash conversion cycle is the sum of the inventory conversion period,
the receivables collection period, and the days payables outstanding. *
True
False
The best and most comprehensive picture of a firm's liquidity position is
obtained by examining its cash budget. *
True
False
A firm's goal should be to lengthen the cash conversion cycle since shorter
cash conversion cycles leads firms to increase their dependence on costly
external financing. *
True
False
The larger the investment a firm makes in its current assets, the higher its
carrying costs will be. *
True
False
Other things held constant, if a firm "stretches" (i.e., delays paying) its
accounts payable, this will lengthen its cash conversion cycle (CCC). *
True
False
Short-term financial policies that are flexible with regard to current assets
includes keeping large balance of short-term debt. *
True
False
Costs that fall with increases in the level of investment in current assets are
called shortage costs. *
True
False
The firm further increases the effective interest rate earned by the bank on
the committed line of credit. *
True
False
Short-term assets can always be financed with short-term debt, and long-
term assets can be financed with long-term debt and equity, in an ideal
economy.
True
False
Security for short-term or long-term loans usually consists of accounts
receivable, inventories, or both. *
True
False
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