Fundamentals of Financial Management, Third Edition

OBJECTIVE-TYPE QUESTIONS

1. Mark true or false.
   1. Cash required for precautionary purposes is normally held in form of near-cash assets.
   2. Negative float occurs when a firm makes payment.
   3. Float is normally the sum of mailing, processing and clearing delays expressed in number of days.
   4. A firm can invest the cash meant for payment during the positive float.
   5. Baumol explains the cash holding principle under conditions of certainty.
   6. Intra-firm transfer of funds is common among multinational firms.
2. Choose the most suitable answer.
   1. Size of cash holding under precautionary motive is:
      1. almost fixed
      2. variable
      3. highly variable
   2. Float exists when:
      1. cash balance in the cash book differs from that with the bank
      2. company floats shares in the market
      3. none of the ...