finace 201
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FIN201 Final Exam Sample MULTIPLE CHOICE. 1. Why will banks permit the use of an overdraft as suitable for funding the purchase of inventory that will quickly be converted into cash? A. To assist a company in meeting unexpected short-term cash flow problems B. To assist a company in exploiting short-term opportunities C. To assist a company through seasonal downturns in liquidity D. All of the given options Learning Objective: 10.03 Understand the main forms of short-term bank lending and recognise when each may be suitable to a borrowers needs Section: 10.03 Short-term borrowing from banks and other financial institutions 2. Which of the following statements with regard to factoring is true? A. When the customer makes payment, the money initially goes to the factor, which then passes it to the company, plus a factor charge. B. The discount charged by the factor is generally calculated at a rate approximately equal to the secured overdraft rate. C. From the factor’s viewpoint, the company accelerates its cash inflow from accounts receivable. D. Some banks and bank subsidiaries may provide factoring. Learning Objective: 10.04 Understand debtor finance, inventory loans and bridging finance and be able to distinguish between them Section: 10.03 Short-term borrowing from banks and other financial institutions 3. The interbank overnight rate is: A. well below the indicator rate for business lending; otherwise, a company could draw on its overdraft to borrow profitably in the cash market. B. well above the indicator rate for business lending; otherwise, a company could draw on its overdraft to borrow profitably in the cash market. C. well below the indicator rate for business lending; otherwise, a company could draw on its overdraft to lend profitably in the cash market. D. well above the indicator rate for business lending; otherwise, a company could draw on its overdraft to lend profitably in the cash market. …

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