Fundamentals of Financial Management, Third Edition

OBJECTIVE-TYPE QUESTIONS

1. Mark true or false.
   1. Average size of receivables is the product of sales and accounts receivable turnover.
   2. Relaxation of credit standard means extending credit facilities to higher-risk customers.
   3. Ageing schedule shows the size of outstanding receivables in different age classes.
   4. Forfaiting is a practice normally found in international trade.
   5. Factoring may be only on a recourse basis.
2. Choose the most suitable answer.
   1. Average size of receivables is equal to:
      1. sales × receivables turnover
      2. sales/receivables turnover
      3. sales + receivables turnover
   2. Optimum credit term exists when:
      1. average rate of return > required rate of return by the largest margin
      2. average rate of return = required rate of return
      3. average rate of return ...