Reading 46: Working Capital Management LOS d习题精选 2010, management, necessary, managing

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LOS d: Identify and evaluate the necessary tools to use in managing a company's net daily cash position.

 

An appropriate cash management strategy for a company that has a seasonally high need for cash prior to the holiday shopping season would least likely include:

A) investing in U.S. Treasury notes at other times of the year because they are highly liquid.

B) allowing short-term securities to mature without reinvestment.

C) borrowing funds though a bank line of credit.

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Treasury notes have maturities between 2 and 10 years and, thus, have maturities longer than those of securities suitable for cash management. Allowing short-term securities to mature without reinvesting the cash generated would be one way to meet seasonal cash needs. Short-term bank borrowing or issuing commercial paper that can be paid off when holiday sales generate cash would be appropriate strategies for dealing with a predictable short-term need for cash.

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The least appropriate security for investing short-term excess cash balances would be:

A) bank certificates of deposit.

B) preferred stock.

C) time deposits.

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While adjustable-rate preferred is an appropriate security for short-term investment of excess cash balances, other preferred shares are not. Bank certificates of deposit and time deposits can be for appropriately short periods.