Question

47. Which of the following presents an effective technique to improve cash management? : A) Speed up cash payments and slow down cash collections. B) Speed up cash collections and slow down cash payments. C) Speed up both collections and payments of cash. D) Slow down both the payment and collections of cash. 48. As a result of cash flow shortages, Washington Department Stores has fallen behind in payments to suppliers. Some suppliers are withholding shipments to Washington until they receive payments on overdue accounts. To meet their immediate needs, Washington Department Stores should utilize: A) vulture capital B) long-term financing. C) contingency capital. D) short-term financing. 49. Jackson Plumbing, a medium sized company, wants to guarantee that it can obtain short- term funds to meet unexpected future cash needs. Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should: A) issue commercial paper as needed. B) request that the firm's board of directors approve an issue of additional shares of common stock. C) arrango with the firm's commercial bank a revolving credit agreement. D) eliminate credit sales to improve their cash inflows and reduce the firm's investment in accounts receivable. 50. As John considers approaching a venture capital firm to provide funding for his new software firm, he should realize that a venture capital firm wi A) offer no more than 20 percent of the funding he needs. B) charge a higher interest rate than a commercial bank. C) expect the company to provide a steady dividend income. D) probably want an ownership interest in the business.

Answer 1

47) Answer is C

Reason being, if we would be speed up the collection and payment in timely manner the choice for running the business will be longer and sustain better way with out involving debt and credit. Obviously, the answer can be suitable option is option " C " for investor.

48) Answer is C

The better way to sustain to business in the difficult time to meet the immediate requirement use the contingency fund/capital and with using this fund we can fulfill the immediate obligation and later on once the situation is better stage then again we can build up the contingency fund. Here, it is similar situation where until the sales and profit pick up we can use the contingency capital without diluting the ownership of the company.

49) Answer is A

Mostly to meet the immediate obligation without hampering the sales and customer engagement the better option is to issues the commercial paper. In other parameter or options, like involving the bank credit and stopping the credit sales it will directly impact the wide basis of profit and sales because the customer might not agree to purchase through cash. Similarly, in the bank credit the interest charges will be pretty higher comparison with issuance of commercial paper. Talking about the approval from board of director to issues the common stock it will dilute the ownership of company.

50) Answer is D

In the alternative asset industry like financing through venture capital and private equity they directly involve with company management and hold some ownership interest to run the organization standardized manner. Obviously, in this question other option are not engaging to involve the ownership interest.