Multiple choice

1) A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 2/20, net 90. What change might be expected on the balance sheets of its customers? 

A.-Increased receivables and increased bank loans

B.-Increased payables and increased bank loans

C.-Increased payables and decreased bank loans

D.-Decreased receivables and increased bank loans

2) Which method of controlling pledged inventory provides the greatest degree of security to the lender? 

A.-Overall inventory liens

B.-Warehousing

C.-Trust receipts

D.-Blanket inventory liens

3) Firms exposed to the risk of interest rate changes may reduce that risk by 

A.-hedging in the financial futures market.

B.-pledging or factoring accounts receivable.

C.-hedging in the commodities market.

D.-obtaining a Eurodollar loan.

4) As the interest rate increases, the present value of an amount to be received at the end of a fixed period 

A.-decreases

B.-Not enough information to tell

C.-remains the same

D.-increases