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Chapter 07 - Current Asset Management
Chapter 07
Current Asset Management
Multiple Choice Questions
1. In managing cash and marketable securities, what should be the manager's primary
concern?
A. Maximization of profit
B. Maximization of liquid assets
C. Acceptable return on investment
D. Liquidity and safety
Accessibility: Keyboard Navigation

Blooms: Remember
Difficulty: Easy
Learning Objective: 07-02 Examine cash management as the control of receipts and disbursements to minimize nonearning cash balances
while providing liquidity; and compare techniques to make cash management more efficient.
Topic: 07-02 Cash Management
2. One of the first considerations in cash management is:

A. to have as much cash as possible on hand.
B. synchronization of cash inflows and cash outflows.
C. profitability.
D. to put any excess cash into accounts receivable.

Blooms: Understand
Difficulty: Easy
7-1
3. The difference between the amount of cash on the firm's books and the amount credited to
it by the bank is:
A. an overdraft.
B. interest revenue.
C. extended disbursement.
D. float.

Blooms: Remember
Difficulty: Easy
Topic: 07-05 Float
4. "Float" takes place because:

A. a firm is early in paying its bills.
B. the level of cash on the firm's books is equal to the level of cash in the bank.
C. a lag exists between writing a cheque and it being debited to the bank account.
D. a customer writes "hot" cheques.

Blooms: Remember
Difficulty: Easy
Topic: 07-05 Float
5. The system whereby funds are moved between computer terminals without use of cheques
is:
A. electronic funds transfer.
B. float.
C. a lock-box system.
D. magnetic character recognition.

Blooms: Remember
Difficulty: Easy
Topic: 07-07 Electronic Funds Transfer
7-2
6. How would electronic funds transfer affect the use of "float"?

A. Increase its use somewhat
B. Decrease its use somewhat
C. Virtually eliminate its use
D. Have no effect on its use

Blooms: Understand
Difficulty: Easy
7. Which of the following is not a method of speeding up collections?

A. Lock-box system
B. Use of local bank branches to deposit funds
C. Extended disbursement float
D. Electronic fund transfer

Blooms: Remember
Difficulty: Medium
Topic: 07-05 Float
8. Deposited cheques may be cleared through:

A. Stock exchange.
B. trusted employees.
C. a local dealer network.
D. chartered banks.

Blooms: Remember
Difficulty: Medium
Topic: 07-06 Improving Collections and Extending Disbursements
7-3
9. Average daily remittances are $5 million, and "extended disbursement float" adds 3 days to
the disbursement schedule, how much should the firm be willing to pay for a cash
management system if the firm earns 10% on excess funds.
A. $500,000
B. $1,500,000
C. $1,000,000
D. $0

Blooms: Apply
Difficulty: Medium
Topic: 07-08 Cash Management Analysis
10. Probably the safest and most marketable instrument for short-term investment is:
A. Commercial paper.
B. Large denomination certificates.
C. Bankers' acceptances.
D. Treasury bills.

Blooms: Remember
Difficulty: Easy
Learning Objective: 07-03 Define the various marketable securities available for investment by the firm; and calculate the yield on these
instruments.
Topic: 07-11 The Rates and Securities
11. A firm that wishes to minimize risk when investing idle cash would be least likely to buy:
A. commercial paper.
B. long-term corporate bonds.
C. negotiable certificates of deposit.
D. Treasury bills of the Canadian government.

Blooms: Remember
Difficulty: Easy
instruments.
7-4
12. Which of the following securities regularly trades on a discount basis?

A. Government bonds
B. Treasury bills
C. Swap deposits
D. Certificates of deposit

Blooms: Remember
Difficulty: Easy
instruments.
13. Which of the following securities represents an unsecured promissory note issued by a
corporation?
A. Certificates of deposit
B. Savings accounts
C. Commercial paper
D. Money market fund

Blooms: Remember
Difficulty: Easy
instruments.
14. The problem in stretching out the maturity of marketable securities is that:
A. you are legally locked in until the maturity date.
B. longer term securities are often not available.
C. there is greater possibility of loss.
D. interest rates are generally lower.

Blooms: Remember
Difficulty: Medium
instruments.
Topic: 07-10 Marketable Securities
7-5
15. The costs of carrying inventory do not include:

A. the interest on funds tied up in inventory.
B. the cost of warehouse space.
C. ordering costs.
D. insurance and handling costs.

Blooms: Remember
Difficulty: Easy
Learning Objective: 07-05 Assess inventory as an investment and apply techniques to reduce the costs of this investment.
Topic: 07-20 The Inventory Decision Model
16. For a given firm, holding other factors constant, ordering costs per unit generally:
A. decline as average inventory increases.
B. increase in proportion to increases in inventory.
C. are considered fixed costs.
D. are negotiated.

Blooms: Remember
Difficulty: Easy
17. Characteristics of a money market mutual fund include:

A. the purchase of shares by investors, the proceeds of which are reinvested into liquid short-
term securities.
B. a required minimum balance of $2,500.
C. these funds cannot be easily marketable.
D. secured by a promissory note.

Blooms: Remember
Difficulty: Medium
instruments.
7-6
18. The economic order quantity:

A. determines the reorder point.
B. is the lowest cost amount to order considering all costs.
C. determines the safety stock.
D. requires the number of days to maturity.

Blooms: Remember
Difficulty: Easy
19. A multinational company may prefer to hold sizeable cash balances in one currency rather
than another because:
A. of low interest rates existing in one country.
B. one country's currency may be weaker relative to the dollar.
C. of interest rate differentials on short term investments.
D. both currencies are at parity.

Blooms: Remember
Difficulty: Medium
Topic: 07-09 International Cash Management
20. A bankers' acceptance:

A. is a draft drawn on a corporation.
B. may be accepted by the corporation for future payment.
C. is a long term investment accepted by the bank.
D. is traded in a relatively liquid market until maturity.

Blooms: Remember
Difficulty: Easy
instruments.
7-7
21. Which of the following is not a valid quantitative measure of accounts receivable
collection policies?
A. Average collection period
B. Aging of accounts receivables
C. Ratio of debt to equity
D. Ratio of bad debts to credit sales

Blooms: Remember
Difficulty: Medium
Learning Objective: 07-04 Characterize accounts receivable as an investment resulting from the firm's credit policies; outline the
considerations in granting credit; and evaluate a credit decision that changes credit terms to stimulate sales.
Topic: 07-14 Credit Policy Administration
22. Characteristics of money market securities include:

A. a greater risk than money market funds.
B. the rates offered for currency deposits in the London international banking market.
C. the society for worldwide interbank financial telecommunication.
D. bought and sold on the basis of their promissory yield (price).

Blooms: Remember
Difficulty: Easy
instruments.
23. The economic order quantity:

A. assumes that inventory usage is seasonal.
B. assumes that delivery times of each order are consistent.
C. considers stock-outs.
D. assumes that inventory needs are constant.

Blooms: Remember
Difficulty: Easy
7-8
24. Which of the following are characteristics of money market investments?

A. Money market funds are quite risky.
B. Money market funds are insured up to $60,000 by CDIC.
C. The minimum balance for money market accounts is $5,000.
D. Short term and most commonly issued for periods of up to one year.

Blooms: Remember
Difficulty: Easy
instruments.
25. Money market funds:

A. are modelled after money market accounts.
B. are insured up to $60,000.
C. have a minimum balance of $2,500.
D. earn competitive market rates of return.

Blooms: Remember
Difficulty: Easy
instruments.
26. Eurodollar (Canadian) certificates of deposits:

A. are not marketable investments.
B. are Canadian dollars held on deposit by foreign banks.
C. pay interest rates usually lower than the rates on treasury bills.
D. are European currencies deposited into international Canadian branch banks.

Blooms: Remember
Difficulty: Easy
7-9
27. When using the economic order quantity model:

A. ordering costs increase as the level of inventory increases.
B. carrying costs decrease as the level of inventory increases.
C. costs are minimized when total carrying costs and total ordering costs are equal.
D. discounted prices are calculated.

Blooms: Remember
Difficulty: Medium
28. Hedging:
A. is a way to reduce your accounts receivable collection period.
B. increases risk.
C. is a non-binding agreement to buy or sell a financial futures contract.
D. can be carried out with a futures contract.

Blooms: Remember
Difficulty: Medium
Topic: 07-19 Inventory Policy in Inflation (and Deflation)
29. Price Corp. is considering selling to a group of new customers and creating new annual
sales of $70,000. 5% will be uncollectible. The collection cost on these accounts is 3.5%, the
cost of producing and selling is 80% of sales and the firm is in the 31% tax bracket. What is
the profit on new sales?
A. $5,554.50
B. $9,660.00
C. $7,245.00
D. $5,959.50

Blooms: Apply
Difficulty: Medium
Topic: 07-15 An Actual Credit Decision
7-10
30. Waldron Inc. is considering selling to a group of new customers that will bring in sales of
$15,000 with a return on sales of 5%. The only new investment will be in accounts receivable.
Waldron has a turnover ratio of 5 to 1 between sales and accounts receivable. What is the
return on investment?
A. 3%
B. 25%
C. 5%
D. 40%

Blooms: Apply
Difficulty: Medium
31. Modos Company has deposited $2,000 in cheques received from customers. It has written
$1,400 in cheques to its suppliers. The initial balance was $400. If $1,600 of its customers
cheques have been cleared but only $600 of its own has been deposited, calculate its float.
A. $200
B. $400
C. $300
D. $700

Blooms: Apply
Difficulty: Medium
Topic: 07-05 Float
7-11
32. Massa Machine Tool expects total sales of $10,000. The price per unit is $5. The firm
estimates an ordering cost of $7.50 per order, with an inventory carrying cost of $0.70 per
unit. What is the optimum order size?
A. 146 units
B. 207 units
C. 373 units
D. 2,000 units

Blooms: Apply
Difficulty: Medium
33. In comparison to securities issued by the federal government, securities issued by

provincial governments:
A. are significantly riskier.
B. are much less liquid.
C. yield slightly more than federal securities.
D. usually require the payment of higher commissions when purchased than federal securities.

Blooms: Remember
Difficulty: Medium
instruments.
34. Eurodollar (Canadian) certificates of deposit:

A. may be borrowed by anyone who wishes to hold dollars.
B. are Canadian dollars which have been converted into several European currencies.
C. can only be redeemed at Canadian banks or their branches in European countries.
D. can only be redeemed at Canadian banks or their branches in any foreign country.

Blooms: Remember
Difficulty: Easy
7-12
35. Money market funds are:

A. accounts that allow small investors to participate in buying large-denomination securities.
B. extremely risky but high-yielding accounts used by large corporations to finance
operations.
C. accounts that allow small investors to buy shares in companies that then buy shares of
common stock.
D. pools of bonds held by large utility companies.

Blooms: Remember
Difficulty: Medium
instruments.
36. Assuming that we can earn a 13.5% return on accounts receivable, which of the following
actions to finance an increase in our accounts receivable balance would be optimal?
A. A reduction in marketable securities which are earning a return of 14.2%
B. A decrease in inventories which are earning a 17.6% return
C. An increase in bank loans that would cost us 11.5%
D. An increase in accounts payable that would cost our firm 15%

Blooms: Apply
Difficulty: Medium
Topic: 07-13 Accounts Receivable as an Investment
37. Which of the following is not a valid reason for holding cash?
A. To meet transaction requirements.
B. To earn the highest return possible.
C. To satisfy emergency needs for funds.
D. To provide a compensating balance for a bank.

Blooms: Remember
Difficulty: Medium
Topic: 07-03 Reasons for Holding Cash Balances
7-13
38. Cash flow does not rely on which of the following?

A. The payment patterns of customers.
B. The monetary policy of the Bank of Canada.
C. The speed at which suppliers and creditors process cheques.
D. The efficiency of the banking system.

Blooms: Remember
Difficulty: Medium
39. A service provided around the clock by SWIFT is:

A. International interest rate evaluation.
B. foreign currency analysis.
C. swift shipping of goods.
D. international payments between banks.

Blooms: Remember
Difficulty: Medium
40. Which of the following is not a factor influencing the selection of a marketable security?
A. Yield
B. Maturity
C. Float
D. Safety

Blooms: Remember
Difficulty: Medium
instruments.
7-14
41. The three primary policy variables to consider when extending credit include all of the
following except:
A. credit standards.
B. the level of interest rates.
C. the terms of trade.
D. collection policy.

Blooms: Remember
Difficulty: Medium
42. Inventory is usually divided into three basic categories except:

A. projected sales.
B. work in progress.
C. finished goods.
D. raw materials.

Blooms: Remember
Difficulty: Easy
Topic: 07-21 Safety Stock and Stockouts
43. The amount of safety stock that a firm carries depends upon:
A. the unpredictability of inventory used.
B. the supply chain costs.
C. the riskiness of the storage facility.
D. the time period necessary to fill inventory orders.

Blooms: Remember
Difficulty: Medium
7-15
44. A Just-In-Time (JIT) inventory management program has all but which of the following
requirements?
A. Quality production
B. Large safety stocks
C. Close ties between suppliers, manufacturers, and customers
D. Minimizing inventory levels

Blooms: Remember
Difficulty: Easy
Topic: 07-22 Just-in-Time Inventory Management
45. Cost savings from JIT inventory management include:

A. lower transaction fees.
B. lower raw material cost.
C. lower productivity.
D. lower inventory financing costs.

Blooms: Remember
Difficulty: Easy
46. International cash management is more complex than domestic based cash management
because of:
A. difficult capital asset management.
B. similarity in banking systems.
C. exchange rate parity.
D. currency risk fluctuations.

Blooms: Remember
Difficulty: Easy
7-16
47. The most subjective and also significant segment of the 4 C's of credit for giving final
approval is:
A. capacity
B. collateral
C. character
D. conditions

Blooms: Remember
Difficulty: Medium
48. Variables important to credit scoring models include:

A. age of credit scoring company.
B. negative private records.
C. facility owned by competitors.
D. age of company in years.

Blooms: Remember
Difficulty: Medium
49. SWIFT's 'smart card technology':

A. increases the likelihood of electronic fraud.
B. adds additional security by sending secret information through mail.
C. disguises the identity of the receiver.
D. automates the process by which banks exchange authentication keys.

Blooms: Remember
Difficulty: Medium
7-17
50. LIBOR is:

A. a resource used in production.
B. an interest rate paid on Eurodollar deposits between banks in the London market.
C. an interest rate paid by European firms when they borrow Eurodollar deposits from
Canadian banks.
D. the interest rate paid by the British government on its long-term bonds.

Blooms: Remember
Difficulty: Easy
instruments.
51. An example of differences in International cash management systems includes:

A. developed countries using cash payments and developing countries using electronic
payments.
B. Canadian companies uses cash payments more than United States Companies.
C. the preference of Russian companies to use cash and United States Companies to use
electronic payments.
D. transaction costs are ignored when determining what cash management system to use.

Blooms: Remember
Difficulty: Medium
52. International cash management systems often consider:

A. the use of the gold standard.
B. the similarity of interest rates across countries.
C. the similarity of transaction costs.
D. the risk involved in currency fluctuations.

Blooms: Remember
Difficulty: Medium
7-18
53. D&B is known for providing:

A. interest rate information to cash managers.
B. credit scoring reports that rank a company's payment habits relative to its peer group.
C. cash management systems to corporate treasurers.
D. consumer credit reports to credit card companies.

Blooms: Remember
Difficulty: Easy
54. When developing a credit scoring report, many variables would be considered. Which of
the following best represent the major factors D&B would examine?
A. the age of the management team, the dollar amount of sales, net profits, and long-term debt
B. the age of the company, the number of employees, the level of current assets
C. the financial statements, satisfactory or slow payment experiences, negative public records
(suits, liens, judgments, bankruptcies)
D. the company's cash balances, return on equity, and its average tax rates

Blooms: Remember
Difficulty: Medium
55. Companies that are mostly influenced by seasonal sales have to make a choice between:
A. level production and inventory reduction.
B. seasonal production and a stable workforce.
C. a stable workforce and inventory build up.
D. a stable workforce and a fluctuating workforce.

Blooms: Remember
Difficulty: Hard
Topic: 07-18 Level versus Seasonal Production
7-19
56. Effective cash management requires awareness of:

A. production design.
B. forecasting theory.
C. security personnel.
D. financial forecasting.

Blooms: Remember
Difficulty: Medium
57. The Bank Rate is set based on:

A. the target rate for overnight money.
B. the yield on 98-day Treasury bills.
C. the prime rate.
D. U.S. fed funds rate.

Blooms: Remember
Difficulty: Easy
instruments.
58. All of the following are benefits of just-in-time inventory ordering systems except:
A. reduces warehouse space.
B. saves utility and manpower costs.
C. reduces inventory financing costs.
D. prevents stock-outs.

Blooms: Remember
Difficulty: Medium
7-20
59. Average daily remittances are $5 million, and "extended disbursement float" adds 5 days
to the disbursement schedule, how much should the firm be willing to pay for a cash
management system if the firm earns 12% on excess funds.
A. $3,000,000
B. $600,000
C. $1,000,000
D. $0

Blooms: Apply
Difficulty: Medium
Topic: 07-08 Cash Management Analysis
60. Laura's Furniture is considering selling to a group of new customers and creating new
annual sales of $80,000. 7% will be uncollectible. The collection cost on these accounts is 2%
of all sales, the cost of producing and selling is 75% of sales and the firm is in the 31% tax
bracket. What is the profit on new sales?
A. $9,936
B. $8,832
C. $12,696
D. $20,000

Blooms: Apply
Difficulty: Medium
Topic: 07-12 Management of Accounts Receivable
7-21
61. Van Bosch Inc. is considering selling to a group of new customers that will bring in sales
of $20,000 with a return on sales of 7%. The only new investment will be in accounts
receivable. Waldron has a turnover ratio of 4 to 1 between sales and accounts receivable.
What is the return on investment?
A. 28%
B. 7%
C. 1.75%
D. cannot calculate with the information provided

Blooms: Apply
Difficulty: Medium
62. Driveline Sprockets expects total sales of $20,000. The price per unit is $5. The firm
estimates an ordering cost of $9.00 per order, with an inventory carrying cost of $1.20 per
unit. What is the optimum order size?
A. 173 units
B. 1,852 units
C. 245 units
D. 2,000 units

Blooms: Apply
Difficulty: Medium
7-22
63. Assuming that we can earn a 13.5% return on accounts receivable, which of the following
actions to finance an increase in our accounts receivable balance would be optimal?
A. a reduction in marketable securities that are earning a return of 12.2%
B. a decrease in inventories that are earning a 17.6% return
C. an increase in bank loans that would cost us 14.5%
D. an increase in accounts payable that would cost our firm 15%

Blooms: Apply
Difficulty: Medium
The mechanical engineer at Robinson Manufacturing has developed a new gearbox. The
local distributor expects to increase his sales by 30% over the past year due to this new
development. Last year's sales were $70,000 at a selling price of $100 per unit. The manager
would like to cut costs as much as possible and comes to you for advice.
Relevant cost information includes:
Warehouse space $3.00/unit

Material handling expense $2.00/unit
Insurance premium $1.00/unit
Total ordering cost $150.00/per order
7-23
64. What is the economic order quantity?

A. 187 units
B. 213 units
C. 174 units
D. 522 units

Blooms: Apply
Difficulty: Hard
65. What is the amount of average inventory?

A. 107 units
B. 94 units
C. 261 units
D. cannot calculate with information provided.

Blooms: Apply
Difficulty: Hard
66. How many orders will be made per year?

A. 8.4 orders per year
B. 12 orders per year
C. 91 orders per year
D. 4.27 orders per year

Blooms: Apply
Difficulty: Hard
7-24
67. What is the total cost of this inventory decision?

A. $640.85
B. $739.52
C. $1,279.85
D. $2,556.59

Blooms: Apply
Difficulty: Hard
68. You purchased a T-bill at $99.80. If held the T-bill to maturity and returned a.8038%
yield how long did you hold the T-bill?
A. 180 days
B. 91 days
C. 364 days
D. 250 days

Blooms: Apply
Difficulty: Medium
instruments.
69. Banker's Acceptances (BA) are issued in the _____________. A BA is guaranteed by a

bank for a _________________.
A. Long term capital markets; discount fee
B. Forex Market; stamping fee
C. LIBOR Market; brokerage fee
D. Money Market; stamping fee

Blooms: Remember
Difficulty: Easy
instruments.
7-25
70. The Grocery Chain (GC) reported an average inventory of $349,589 in its last annual
report. If GC's annual Cost of Goods Sold was $5,800,000, approximately how many days did
GC hold its inventory?
A. 30 days
B. 15 days
C. 97 days
D. 22 days

Blooms: Apply
Difficulty: Medium
Topic: 07-17 Inventory Management
71. You anticipate selling 10,000 units of Wonder Soap in the next month. It cost $3.50 per
order and total carrying costs are $1.50 per unit. What is the minimum order quantity for this
new product?
A. 216 units
B. 342 units
C. 1,000 units
D. 100 units

Blooms: Apply
Difficulty: Easy
72. Western Jet requires a minimum of 1,000,000 litres of jet fuel each month to keep its fleet
of Airbus 380A passenger jets running. If Western Jet Operations Manager enters into a future
contract to buy 750,000 litres of jet fuel in 90 days he is engaging in ____________.
A. Speculation
B. Swap options
C. Selling Short
D. Hedging

Blooms: Remember
Difficulty: Easy
7-26
73. If you bought a T-bill at $99.44 and held it for 180 days what would your return be?
A. 1.14%
B. 011419%
C. 0056%
D. 11.49%

Blooms: Apply
Difficulty: Easy
instruments.
Ardvark Corp. (AC) reported annual sales of $15,500,000. In the past AC's customers have
paid within an average of 35 days. AC's management is considering allowing customers to
pay in 40 days.
74. AC's average daily sales are ____________.

A. $55,000
B. $67,890
C. $42,466
D. $87,650

Blooms: Apply
Difficulty: Easy
7-27
75. AC's average AR is ______________.

A. $3,238,999
B. $1,486,301
C. $1,698,640
D. $15,500,000

Blooms: Apply
Difficulty: Easy
76. If AC increases it collection period to 40 days its average AR will increase to _______.
A. $1,698,640
B. $567,000
C. $2,106,788
D. $3,238,999

Blooms: Apply
Difficulty: Easy
77. If a firm has total accounts receivable of $6,000,000 and its average daily credit sales are
$45,000 what is its collection period?
A. 120 days
B. 133 days
C. 45 days
D. 156 days

Blooms: Apply
Difficulty: Easy
True / False Questions
7-28
78. In the management of cash and marketable securities, the primary concern is profitability.
FALSE

Blooms: Remember
Difficulty: Easy
79. For modern corporations, the more cash they have, the better off they are.
FALSE

Blooms: Remember
Difficulty: Easy
80. Cash management becomes more important as the level of short-term interest rates rise.
TRUE

Blooms: Remember
Difficulty: Easy
81. A goal of cash management is to insure that the inflows and outflows of cash are
synchronized.
TRUE

Blooms: Remember
Difficulty: Easy
Topic: 07-05 Float
7-29
82. Float is the difference between the cash balance on the corporate books and the amount
credited to the corporation by the bank.
TRUE

Blooms: Remember
Difficulty: Easy
Topic: 07-05 Float
83. "Float" is the name given for a short-term loan between suppliers and buyers.
FALSE

Blooms: Remember
Difficulty: Easy
Topic: 07-05 Float
84. It is possible for companies to operate with negative cash balances on their books.
TRUE

Blooms: Remember
Difficulty: Medium
Topic: 07-05 Float
85. A lockbox system is a method of extending disbursements.

FALSE

Blooms: Remember
Difficulty: Easy
7-30
86. Computerized cash management and electronic funds transfer allow firms to carry smaller
cash balances.
TRUE

Blooms: Remember
Difficulty: Medium
87. A lockbox is used to safeguard the corporation's marketable securities.

FALSE

Blooms: Remember
Difficulty: Easy
88. A lockbox is used by the selling corporation to speed up the cheque collection and
cheque-clearing process.
TRUE

Blooms: Remember
Difficulty: Easy
89. "Extended disbursement float" has to do with the length of time a corporation takes to
collect bills.
FALSE

Blooms: Remember
Difficulty: Medium
7-31
90. Electronic Data Interchange may be used to eliminate cheques.

TRUE

Blooms: Remember
Difficulty: Easy
91. Cost-benefit is not a consideration in development of cash management system; only

safety and liquidity.
FALSE

Blooms: Remember
Difficulty: Medium
Learning Objective: 07-01 Extend Chapter 6 concepts of liquidity and risk to current asset management; recognizing that a firm's investment
in current assets should achieve an adequate return for its liquidity and risk.
Topic: 07-01 Cost-Benefit Analysis
92. Electronic funds transfer will likely increase the use of float.
FALSE

Blooms: Remember
Difficulty: Easy
93. Stretching out the maturity of marketable securities can rarely result in a loss.
FALSE

Blooms: Remember
Difficulty: Medium
instruments.
7-32
94. The investment of excess short-term funds is usually diversified between short-and long-
term marketable securities.
FALSE

Blooms: Remember
Difficulty: Medium
instruments.
95. Deposit receipts purchased in small denominations of $1,000 at the bank are readily
marketable.
FALSE

Blooms: Remember
Difficulty: Medium
instruments.
96. The "SWIFT" transfer system was developed to aid bank fund transfers within Canada.
FALSE

Blooms: Remember
Difficulty: Medium
97. If a firm averages $2,000 in daily credit sales and offers 60-day terms, the average
accounts receivable balance will be $120,000.
TRUE

Blooms: Apply
Difficulty: Medium
7-33
98. Return on investment is the major decision criteria in credit decisions.

TRUE

Blooms: Remember
Difficulty: Medium
99. The Reference Book, published by D&B, is a book listing all the companies supplying
certain types of products.
FALSE

Blooms: Remember
Difficulty: Easy
100. SWIFT has combated the growing issue of electronic fraud with smart card technology
that no longer requires users to manually log in to the network and thus eliminates any paper
trail.
TRUE

Blooms: Remember
Difficulty: Easy
101. The economic order quantity helps a firm determine the most efficient size order to
place.
TRUE

Blooms: Remember
Difficulty: Medium
7-34
102. If we assume that inventory is used up at a constant rate and safety stock is zero, the
average inventory will be 1/2 the order size.
TRUE

Blooms: Understand
Difficulty: Medium
103. The two basic costs associated with inventory are production cost and carrying cost.
FALSE

Blooms: Remember
Difficulty: Medium
104. Seasonal production allows for maximum efficiency in machinery and manpower use.
FALSE

Blooms: Remember
Difficulty: Easy
Topic: 07-18 Level versus Seasonal Production
105. Multinational firms find it difficult to shift funds from one country to another.
FALSE

Blooms: Remember
Difficulty: Medium
7-35
106. Cash management at the international level employs the same techniques as domestic
cash management.
TRUE

Blooms: Remember
Difficulty: Medium
107. Bankers' acceptances are short-term securities that arise from foreign trade.
TRUE

Blooms: Remember
Difficulty: Medium
instruments.
108. Bankers' acceptances rank behind treasury bills as a vehicle for short-term investments.
TRUE

Blooms: Remember
Difficulty: Medium
instruments.
109. Eurodollars are Canadian dollars held on deposit by foreign banks.

TRUE

Blooms: Remember
Difficulty: Easy
7-36
110. The rate on Eurodollar certificates of deposit is usually lower than domestic certificates
of deposit.
FALSE

Blooms: Remember
Difficulty: Medium
111. The market for Eurodollar deposits and loans is primarily centred in London.
TRUE

Blooms: Remember
Difficulty: Medium
instruments.
112. Small-denomination certificates of deposit are usually more liquid than large-
denomination CDs.
FALSE

Blooms: Remember
Difficulty: Medium
instruments.
113. A reduction in production and selling costs as a percentage of sales would usually lead to
a more liberal credit policy.
TRUE

Blooms: Remember
Difficulty: Medium
Topic: 07-16 Another Example of a Credit Decision
7-37
114. Inventories are usually the most liquid, but lowest-yielding, current asset of a firm.
FALSE

Blooms: Understand
Difficulty: Medium
115. A reduction in carrying costs would increase the economic order quantity.
TRUE

Blooms: Remember
Difficulty: Medium
116. Lower ordering costs would tend to increase a firm's economic order quantity.
FALSE

Blooms: Remember
Difficulty: Medium
117. Treasury bills are unique in that they trade on a premium basis.
FALSE

Blooms: Remember
Difficulty: Easy
instruments.
7-38
118. Because they generally run a surplus budget, Crown corporations are able to issue
securities with slightly lower yields than direct Treasury issues.
FALSE

Blooms: Understand
Difficulty: Medium
instruments.
119. Accounts receivable of industrial corporations has decreased since the introduction of
Electronic Funds Transfer.
FALSE

Blooms: Remember
Difficulty: Medium
120. A stock out occurs when a firm runs out of inventory and is unable to sell or deliver the
product requested.
TRUE

Blooms: Remember
Difficulty: Medium
121. Maintaining a safety stock will guard against an EOQ from occurring.
FALSE

Blooms: Remember
Difficulty: Medium
7-39
122. Minimizing cash balances can improve overall corporate profitability.

TRUE

Blooms: Remember
Difficulty: Medium
123. For most firms, the primary motive for holding cash is the transaction motive.
TRUE

Blooms: Remember
Difficulty: Easy
124. Cash balances are usually determined by the amount of cash flowing through the firm on
a yearly basis.
FALSE

Blooms: Remember
Difficulty: Easy
125. Sales, receivables, and inventory form the basis of cash flow.
TRUE

Blooms: Remember
Difficulty: Easy
7-40
126. Unfortunately, float is too complicated to be effectively managed through any

combination of disbursement and collection strategies.
FALSE

Blooms: Remember
Difficulty: Medium
Topic: 07-05 Float
127. The cash generating process for a firm is continuous, even though cash flow can be
sporadic.
TRUE

Blooms: Remember
Difficulty: Medium
128. The 4 C's of credit include character, capital, capacity, and conditions.
TRUE

Blooms: Remember
Difficulty: Easy
7-41
129. One way businesses try to overcome the risk associated with new customers is to access
a credit scoring report that will predict the probability of a customer causing credit problems
in the future.
TRUE

Blooms: Remember
Difficulty: Easy
130. Because of changing economic conditions, it is difficult for companies such as D&B to
devise models predicting payment problems and probability of bankruptcy 12 months in the
future.
FALSE

Blooms: Remember
Difficulty: Medium
131. Finding out who is ultimately responsible for a bad debt can be helped by D&B's D-U-
N-S (Data Universal Numbers System) that tracks relationships and ownership of businesses
within D&B's information base.
TRUE

Blooms: Remember
Difficulty: Easy
7-42
132. SWIFT stands for the Society for Worldwide International Funds Transfer.
FALSE

Blooms: Remember
Difficulty: Easy
133. Every message routed through SWIFT is encrypted and every money transaction is
authorized by another code for security purposes.
TRUE

Blooms: Remember
Difficulty: Medium
134. Just-in-time (JIT) inventory systems can leave manufacturers empty handed if suppliers
can't keep up with product growth rates.
TRUE

Blooms: Understand
Difficulty: Easy
135. A compensating balance is a cash balance, typically held by the bank, to indirectly pay
for certain bank services.
TRUE

Blooms: Remember
Difficulty: Medium
7-43
136. Commercial paper is an unsecured promissory note issued by large corporations to

investors.
TRUE

Blooms: Remember
Difficulty: Medium
instruments.
Short Answer Questions
137. Explain what a float is and what causes it to occur.
There are two cash balances of importance:
• Corporation's recorded amount

• Amount available for use by the corporation at the bank
The difference between the two is float. Float exists as a result of the time lag between when a
payment or receipt is recorded in the corporation's ledgers and the eventual acknowledgement
that it has altered the corporate bank account.
Float arises from payments or receipts that are
• In the mail
• Clearing the banking system
• Being processed
• Slow to be acknowledged by the firm's (bank's) information system

Blooms: Remember
Difficulty: Medium
Topic: 07-05 Float
7-44
138. How can a firm achieve faster collection times? Why is this desirable?
A firm must be diligent in collecting monies owed to it, in depositing those monies into a
bank account, and in holding on to monies as long as possible, so that the funds can be
utilized efficiently by the corporate treasurer. Having monies in a bank account even one day
longer can make a significant difference to the firm. Faster collections can be achieved by:
• Encouraging customers to pay on a timely basis

• Cutting down on the time monies take to arrive in the firm's possession
• Accounting for and processing monies quickly upon receipt
• Depositing monies quickly into the firm's bank accounts
Once concentrated and administered centrally in the firm's bank accounts, the funds can be
more efficiently deployed, because:
• Treasury has better control of the funds.

• Transaction and administration costs are lower.
• Concentrated sums can earn better returns invested in marketable securities (e.g., $100,000
receives a higher rate than 20  $5,000).

Blooms: Understand
Difficulty: Medium
139. What factors should a financial manager consider when choosing appropriate short-term
securities?
The financial manager in choosing short-term securities considers such factors as yield,
maturity, minimum investment required, safety of the security, and marketability of the
security.

Blooms: Remember
Difficulty: Easy
instruments.
7-45
140. Describe the 7 characteristics of most market securities.
Most money market securities are:
• Unsecured (no physical asset backing up pledge of payment) promissory notes.

• Highly liquid with high trading volumes.
• In either bearer (ownership resides with individual in possession) or street (investment
dealer's name) form. This facilitates ease of trading.
• Short-term (maturity or payback occurs in less than one year) and most commonly issued for
periods of 1, 2, 3, 6 months, or 1 year.
• Traded continuously, producing maturities of any period desired (a 3-month security sold
one month later becomes a 2-month security).
• Sold on a discount basis. The instrument is sold at less than the maturity value. The return
(considered interest, not a capital gain, by the tax department) is the gain from the discounted
price to the maturity value.
• Bought and sold on the basis of their promised yield (price) with the best rates for
transactions of $1,000,000 or more. Lower yields accompany lower-sized investments.

Blooms: Remember
Difficulty: Hard
instruments.
7-46
141. List and explain the "4C's of credit" as discussed by the author.
To establish the degree of credit risk of a potential customer, a firm should develop a credit
profile. This profile establishes the customer's strengths and weaknesses. Most importantly, it
questions if customers are able to pay and if they can buy enough. Companies that analyze
credit risk tend to develop a system in some way related to the 4 Cs of credit.
Character: An analyst attempts to determine the customer's willingness to pay. If things get
rough, does the customer go into hiding or attempt to work things out? Clues as to the
strength of corporate character come from information on fraudulent activities, legal disputes,
union problems, dealings with other suppliers, and even the willingness to supply credit
information.
Capacity: The ability to pay. Capacity is built on marketing abilities, experience in the
business, the management team, and overall, the ability to generate profits. To judge a
customer's ability to generate profits is a difficult process. Financial ratio analysis can be of
considerable assistance, as is an investigation of the customer's abilities based on past
experience.
Capital: Assets and net worth. Strong net worth is evidence of past success and a commitment
by shareholders to the firm. Growing assets demonstrate an ongoing successful business. In
difficult economic times when its ability to generate profits is diminished, a strong net worth
helps a company survive.
Conditions: The state of the economy and the industry in general. One's experience and
knowledge best help an analyst in getting a fix on conditions. One tries to foresee how
existing conditions affect the potential credit customer. How the customer adapts to changing
conditions in the marketplace is also a consideration.

Blooms: Remember
Difficulty: Hard
7-47
142. Describe the 3 basic requirements of Just-in-Time inventory management.
Just-in-time inventory management is part of a total production concept that often interfaces
with a total quality control program. A JIT program has several basic requirements:
1) quality production that continually satisfies customer requirements

2) close ties between suppliers, manufacturers, and customers
3) minimization of the level of inventory.

Blooms: Remember
Difficulty: Hard
7-48
143. Describe and explain several benefits and downsides of a Just-in-Time inventory
program.
Benefits of JIT:
1) Cost savings from lower levels of inventory and reduced financing cost are expected.
2) A JIT plant may use much less space than the standard plant and therefore saves
construction costs and reduces its overhead expenses for utilities and manpower.
3) Computerized ordering systems and EDI systems between suppliers, production, and
manufacturing reduce rekeying errors and duplication of forms for the accounting and finance
functions.
4) Supplier lists may be reduced, creating savings in quality control programs.
5) JIT can reduce quality control costs as much as 60%, but these costs can often be
overlooked by financial analysts because JIT prevents defects rather than detecting poor
quality (therefore no cost savings are recognized).
6) Elimination of waste—one of the side benefits of a total quality control system coupled
with JIT.
The Downside of JIT:
1) Some JIT management systems allow for inventory levels as low as 1 hour's worth of parts.
The discipline of these levels and the required process has imposed an extraordinary rigour on
firms. Such a system requires a substantial expenditure on computer systems to coordinate the
delivery activity.
2) May be forced to shut down manufacturing plants if parts cannot be delivered by suppliers
due to weather or other disruptions. The cost is lost business.

Blooms: Understand
Difficulty: Hard
7-49
144. Mountain Home Systems, Inc. is a well-known and reputable supplier of integrated
circuits to manufacturers of telecommunications devices. The firm is currently debating
whether to expand its sales to car-telephone manufacturers. While the firm expects an extra $2
million in sales if it enters this market, it also knows that 15% of its sales will ultimately be
uncollectible. In addition, collection costs will be 2% on all new sales and the firm's
production costs are 72% of sales. Selling expenses are 8% of sales and Mountain Home has
an opportunity cost of funds (before tax) of 20%. Mountain Home can turn its receivables 4
times per year. Should Mountain Home Systems Co. enter the car telephone manufacturer
market?
Incremental sales $2,000,000

Incremental contribution margin (100 – 72) % $560,000
Incremental selling expense (160,000)
Incremental bad debts (uncollectables) 15% (300,000)
Incremental collection costs 2% (40,000)
Incremental accounts receivable $2,000,000/4
$500,000
Incremental opportunity cost on investment in (100,000)
accounts receivable 20%
Total incremental change $(40,000)
No, Mountain Home Systems should not enter this market.

Blooms: Apply
Difficulty: Medium
7-50
145. Tanner Co. is a highly successful supplier of leather to manufacturers of leather goods.
Tanner is considering expanding into the luxury auto seat market. It is estimated that although
selling leather to auto manufacturers will bring additional annual sales of $700,000, a high
12% of those accounts will be uncollectible. The cost of conditioning and selling the leather is
70% of sales. Tanner has a receivables turnover of 5 times a year and its opportunity cost of
funds (before-tax) is 15%. Should Tanner expand into the auto market?
Incremental sales $2,000,000

Incremental contribution margin (100 – 70) % $560,000
Incremental selling expense (160,000)
Incremental bad debts (uncollectables) 15% (300,000)
Incremental collection costs 2% (40,000)
Incremental accounts receivable $2,000,000/4
$500,000
Incremental opportunity cost on investment in accounts (100,000)
receivable 20%
Total incremental change $(40,000)
Tanner Co. should expand into this market.

Blooms: Apply
Difficulty: Hard
7-51
146. Novelty Gifts, Inc. is experiencing some inventory control problems. The manager,
Wanda LaRue, currently orders 5,000 units four times each year to handle annual demand of
20,000 units. Each order costs $15 and each unit costs $1.50 to carry. Ms. LaRue maintains a
safety stock of 200 units.
A) What is Novelty Gifts' current total annual inventory cost?

B) Calculate the economic ordering quantity (EOQ).
C) What is average inventory under EOQ if Ms. LaRue maintains a safety stock of 200 units?
D) Calculate total annual inventory cost under EOQ.
A)
B)
C)
D)
Blooms: Apply
Difficulty: Hard
7-52
147. The Milling Corp. has developed a new type of widget. The local distributor expects to
increase his sales by 20% over the past year due to this new development. Last year's sales
were $50,000 at a selling price of $100 per unit. The manager would like to cut costs as much
as possible and comes to you for advice.
Relevant cost information includes:
Warehouse space $.50/unit

Material handling expense $1.50/unit
Insurance premium $1.00/unit
Total ordering cost $100.00/per order
7-53
A) What is the economic order quantity?

B) What is the amount of average inventory?
C) How many orders will be made per year?
D) What is the total cost of this inventory decision?
A)
B) 155/2 = 77.5 units
C)
D)
Blooms: Apply
Difficulty: Hard
7-54
Foundations of Financial Management Canadian 11th Edition Block Test Bank
148. Linkup Systems, which provides investors with computerized information about stock
prices, is considering the establishment of a lockbox system with its bank. The firm receives
daily remittances of $1.5 million, and could earn 9% on any funds freed up through faster
collections. If the lockbox system can save 2 days in the collection process, and the firm's
bankers will charge $200,000 per year to operate the lockbox system, is it worth it to establish
the system?
Average daily remittances $1,500,000

X days saved in collection x2
Freed-up cash balance 3,000,000
X earnings on cash balances x 9%
Additional earnings from establishing lockbox system 270,000
Less: operating costs 200,000
Net gain from lockbox system $70,000
It will be worthwhile to establish the lockbox system.

Blooms: Apply
Difficulty: Medium
Topic: 07-05 Float
7-55
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The Project Gutenberg eBook of The war of the
Carolinas
This ebook is for the use of anyone anywhere in the United
States and most other parts of the world at no cost and with
almost no restrictions whatsoever. You may copy it, give it away
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are not located in the United States, you will have to check the
laws of the country where you are located before using this
eBook.
Title: The war of the Carolinas
Author: Meredith Nicholson
Illustrator: Stephen Reid
Release date: June 10, 2022 [eBook #68275]
Language: English
Original publication: United Kingdom: Thomas Nelson & Sons,

1909
Credits: D A Alexander, David E. Brown, and the Online

Distributed Proofreading Team at https://www.pgdp.net
(This book was produced from images made available
by the HathiTrust Digital Library.)
*** START OF THE PROJECT GUTENBERG EBOOK THE WAR OF

THE CAROLINAS ***
UNIFORM WITH THIS VOLUME
THE PRIMROSE PATH. Mrs. Oliphant.

THOMPSON’S PROGRESS. C. J. Cutcliffe Hyne.
LOVE AND MR. LEWISHAM. H. G. Wells.
THE FOOD OF THE GODS. H. G. Wells.
KIPPS. H. G. Wells.
CYNTHIA’S WAY. Mrs. A. Sidgwick.
CLARISSA FURIOSA. W. E. Norris.
RAFFLES. E. W. Hornung.
FRENCH NAN. Agnes & Egerton Castle.
SPRINGTIME. H. C. Bailey.
MOONFLEET. J. Meade Falkner.
WHITE FANG. Jack London.
MAJOR VIGOUREUX. “Q.”
EIGHT DAYS. R. E. Forrest.
THE TRANSLATION OF A SAVAGE. Sir G. Parker.
A LAME DOG’S DIARY. S. Macnaughtan.
FORTUNE OF CHRISTINA M’NAB. S. Macnaughtan.
THE RECIPE FOR DIAMONDS. C. J. Cutcliffe Hyne.
OLD GORGON GRAHAM. George Horace Lorimer.
MRS. GALER’S BUSINESS. W. Pett Ridge.
THE DUENNA OF A GENIUS. M. E. Francis.
THE OCTOPUS. Frank Norris.
THE PIT. Frank Norris.
MATTHEW AUSTIN. W. E. Norris.
HIS GRACE. W. E. Norris.
MARCELLA. Mrs. Humphry Ward.
THE INTRUSIONS OF PEGGY. Anthony Hope.
THE PRINCESS PASSES. C. N. & A. M. Williamson.
And Many Other Equally Popular
Copyright Novels.
NELSON’S LIBRARY.
She loosed his horse’s rein, and led it rapidly towards
her own horse.
The War
of the
Carolinas
By
MEREDITH
NICHOLSON
THOMAS NELSON
AND SONS
Oh, for you that I never knew,
Only in dreams that bind you!—
By Spring’s own grace I shall know your face
When under the may I find you!
H. C. Bunner.
TO YOU AT THE GATE.
There was a daisy-meadow, that flowed brimming to the stone wall
at the roadside, and on the wooded crest beyond a lamp twinkled in
a house round which stole softly the unhurried, eddyless dusk. You
stood at the gate, your arms folded on the top bar, your face uplifted,
watching the stars and the young moon of June. I was not so old but
that I marked your gown of white, your dark head, your eyes like the
blue of mid-ocean sea-water in the shadow of marching billows. As
my step sounded you looked up startled, a little disdainful, maybe;
then you smiled gravely; but a certain dejection of attitude, a sweet
wistfulness of lips and eyes, arrested and touched me; and I stole on
guiltily, for who was I to intrude upon a picture so perfect, to which
moon and stars were glad contributors? As I reached the crown of
the road, where it dipped down to a brook that whispered your name,
I paused and looked back, and you waved your hand as though
dismissing me to the noisy world of men.
In other Junes I have kept tryst with moon and stars beside your
gate, where daisies flow still across the meadow, and insect voices
blur the twilight peace; but I have never seen again your house of
shadows among the trees, or found you dreaming there at the gate
with uplifted face and wistful eyes. But from the ridge, where the
road steals down into the hollow with its fireflies and murmuring
water, I for ever look back to the star- and moon-hung gate in the
wall, and see your slim, girlish figure, and can swear that you wave
your hand.
Katonah, June 30, 1908. M. N.
CONTENTS.
I. Two Gentlemen say Good-Bye 7
II. The Absence of Governor Osborne 29
III. The Jug and Mr. Ardmore 40
IV. Duty and the Jug 55
V. Mr. Ardmore Officially Recognized 71
VI. Mr. Griswold Forsakes the Academic Life 89
VII. An Affair at the State House 100
VIII. The Labours of Mr. Ardmore 115
IX. The Land of the Little Brown Jug 129
X. Professor Griswold Takes the Field 138
XI. Two Ladies on a Balcony 149
XII. The Embarrassments of the Duke of Ballywinkle 160
XIII. Miss Dangerfield Takes a Prisoner 175
XIV. A Meeting of Old Friends 191
XV. The Prisoner in the Corn-Crib 209
XVI. The Flight of Gillingwater 228
XVII. On the Road to Turner’s 237
XVIII. The Battle of the Raccoon 246
XIX. In the Red Bungalow 255
XX. Rosæ Mundi 269
XXI. Good-Bye to Jerry Dangerfield 281
THE
WAR OF THE CAROLINAS.
CHAPTER I.
TWO GENTLEMEN SAY GOOD-BYE.
“IF anything really interesting should happen to me I think I should

drop dead,” declared Ardmore, as he stood talking to Griswold in the
railway station at Atlanta. “I entered upon this life under false
pretenses, thinking that money would make the game easy, but here
I am, twenty-seven years old, stalled at the end of a blind alley, with
no light ahead; and to be quite frank, old man, I don’t believe you
have the advantage of me. What’s the matter with us, anyhow?”
“The mistake we make,” replied Griswold, “is in failing to seize
opportunities when they offer. You and I have talked ourselves
hoarse a thousand times planning schemes we never pull off. We
are cursed with indecision, that’s the trouble with us. We never see
the handwriting on the wall, or if we do, it’s just a streak of
hieroglyphics, and we don’t know what it means until we read about
it in the newspapers. But I thought you were satisfied with the thrills
you got running as a reform candidate for alderman in New York last
year. It was a large stage, and the lime-light struck you pretty often.
Didn’t you get enough? No doubt they’d be glad to run you again.”
Ardmore glanced hastily about and laid his hand heavily on his
friend’s shoulder.
“Don’t mention it—don’t think of it! No more politics in mine. The
world may go hang if it waits for me to set it right. What I want is
something different, a real adventure—something with spice in it. I
have bought everything money can buy, and now I’m looking for
something that can’t be tagged with a price.”
“There’s your yacht and the open sea,” suggested Griswold.
“Sick of it! Sick to death of it!”
“You’re difficult, old man, and mighty hard to please. Why don’t you
turn explorer and go in for the North Pole?”
“Perfectly bully! I’ve thought of it a lot, but I want to be sure I’ve
cleaned up everything else first. It’s always up there waiting—on ice,
so to speak—but when it’s done once there will be nothing left. I
want to save that for the last call.”
“You said about the same thing when we talked of Thibet that first
evening we met at the University Club, and now the Grand Lama
sings in all the phonographs, and for a penny you can see him in a
kinetoscope, eating his luncheon. I remember very well that night.
We were facing each other at a writing-table, and you looked up
timidly from your letter and asked me whether there were two g’s in
aggravate; and I answered that it depended on the meaning—one g
for a mild case, two for a severe one—and you laughed, and we
began talking. Then we found out how lonesome we both were, and
you asked me to dinner, and then took me to that big house of yours
up there in Fifth Avenue and showed me the pictures in your art
gallery, and we found out that we needed each other.”
“Yes, I had needed you all right!” And Ardmore sniffed dolefully, and
complained of the smoke that was drifting in upon them from the
train sheds. “I wish you wouldn’t always be leaving me. You ought to
give up your job and amuse me. You’re the only chap I know who
doesn’t talk horse or automobile or yacht, or who doesn’t want to
spend whole evenings discussing champagne vintages; but you’re
too good a man to be wasted on a college professorship. Better let
me endow an institution that will make you president—there might be
something in that.”
“It would make me too prominent, so that when we really make up
our minds to go in for adventures I should be embarrassed by my
high position. As a mere lecturer on ‘The Libelling of Sunken Ships’
in a law school, I’m the most obscure person in the world. And for
another thing, we couldn’t risk the scandal of tainted money. It would
be nasty to have your great-grandfather’s whisky deals with the
Mohawk Indians chanted in a college yell.”
The crowd surged past them to the Washington express, and a
waiting porter picked up Griswold’s bags.
“Wish you wouldn’t go. I have three hours to wait,” said Ardmore,
looking at his watch, “and the only Atlanta man I know is out of
town.”
“What did you say you were going to New Orleans for?” demanded
Griswold, taking out his ticket and moving towards the gate. “I
thought you exhausted the Creole restaurants long ago.”
“The fact is,” faltered Ardmore, colouring, “I’m looking for some one.”
“Out with it—out with it!” commanded his friend.
“I’m looking for a girl I saw from a car window day before yesterday. I
had started north, and my train stopped to let a south-bound train
pass somewhere in North Carolina. The girl was on the south-bound
sleeper, and her window was opposite mine. She put aside the
magazine she was reading and looked me over rather coolly.”
“And you glanced carelessly in the opposite direction and pulled
down your shade, of course, like the well-bred man you are——”
interrupted Griswold, holding fast to Ardmore’s arm as they walked
down the platform.
“I did no such thing. I looked at her and she looked at me. And then
my train started——”
“Well, trains have a way of starting. Does the romance end here?”
“Then, just at the last moment, she winked at me!”
“It was a cinder, Ardy. The use of soft coal on railways is one of the
saddest facts of American transportation. I need hardly remind you,
Mr. Ardmore, that nice girls don’t wink at strange young men. It isn’t
done!”
“I would have you know, Professor, that this girl is a lady.”
“Don’t be so irritable, and let me summarize briefly on your own
hypothesis. You stared at a strange girl, and she winked at you, safe
in the consciousness that she would never see you again. And now
you are going to New Orleans to look for her. She will probably meet
you at the station, with her bridesmaids and wedding cake all ready
for you. And you think this will lead to an adventure—you defer
finding the North Pole for this—for this? Poor Ardy! But did she toss
her card from the window? Why New Orleans? Why not Minneapolis,
or Bangor, Maine?”
“I’m not an ass, Grissy. I caught the name of the sleeper—you know
they’re all named, like yachts and tall buildings—the name of her car
was the Alexandra. I asked our conductor where it was bound for,
and he said it was the New Orleans car. So I took the first train back,
ran into you here, and that’s the whole story to date.”
“I admire your spirit. New Orleans is much pleasanter than the polar
ice, and a girl with a winking eye isn’t to be overlooked in this vale of
tears. What did this alleviating balm for tired eyes look like, if you
remember anything besides the wicked wink?”
“She was bareheaded, and her hair was wonderfully light and fluffy,
and it was parted in the middle and tied behind with a black ribbon in
a great bow. She rested her cheek on her hand—her elbow on the
window-sill, you know—and she smiled a little as the car moved off,
and winked—do you understand? Her eyes were blue, Grissy, big
and blue—and she was perfectly stunning.”
“There are winks and winks, Ardy,” observed Griswold, with a judicial
air. “There is the wink inadvertent, to which no meaning can be
attached. There is the wink deceptive, usually given behind the back
of a third person, and a vulgar thing which we will not associate with
your girl of the Alexandra. And then, to be brief, there is the wink of
mischief, which is observed occasionally in persons of exceptional
bringing up. There are moments in the lives of all of us when we lose
our grip on conventions—on morality, even. The psychology of this
matter is very subtle. Here you are, a gentleman of austerely correct
life; here is a delightful girl, on whom you flash in an out-of-the-way
corner of the world. And she, not wholly displeased by the frank
admiration in your eyes—for you may as well concede that you
stared at her——”
“Well, I suppose I did look at her,” admitted Ardmore reluctantly.
“Pardonably, no doubt, just as you would look at a portrait in a
picture gallery, of course. This boarding-school miss, who had never
before lapsed from absolute propriety, felt the conventional world
crumble beneath her as the train started. She could no more have
resisted the temptation to wink than she could have refused a
caramel or an invitation to appear as best girl at a church wedding.
Thus wireless communication is established between soul and soul
for an instant only, and then you are cut off for ever. Perhaps, in the
next world, Ardy——”
Griswold and Ardmore had often idealized themselves as hopeless
pursuers of the elusive, the unattainable, the impossible; or at least
Ardmore had, and Griswold had entered into the spirit of this sort of
thing for the joy it gave Ardmore. They had discussed frequently the
call of soul to soul—the quick glance passing between perfect
strangers in crowded thoroughfares—and had fruitlessly speculated
as to their proper course in the event the call seemed imperative. A
glance of the eye is one thing, but it is quite another to address a
stranger and offer eternal friendship. The two had agreed that, while,
soul-call or no soul-call, a gentleman must keep clear of steamer
flirtations, and avoid even the most casual remarks to strange young
women in any circumstances, a gentleman of breeding and
character may nevertheless follow the world’s long trails in search of
a never-to-be-forgotten face.
The fact is that Ardmore was exceedingly shy, and a considerable
experience of fashionable society had not diminished this
shortcoming. Griswold, on the other hand, had the Virginian’s natural
social instinct, but he suffered from a widely-diffused impression that
much learning had made him either indifferent or extremely critical
where women are concerned.
Ardmore shrugged his shoulders and fumbled in his coat pockets as
though searching for ideas. An austere composure marked his
countenance at all times, and emphasized the real distinction of his
clean-cut features. His way of tilting back his head and staring
dreamily into vacancy had established for him a reputation for
stupidity that was wholly undeserved.

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Multiple Choice Questions

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2. One of the first considerations in cash management is:

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4. "Float" takes place because:

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6. How would electronic funds transfer affect the use of "float"?

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7. Which of the following is not a method of speeding up collections?

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8. Deposited cheques may be cleared through:

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12. Which of the following securities regularly trades on a discount basis?

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15. The costs of carrying inventory do not include:

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17. Characteristics of a money market mutual fund include:

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18. The economic order quantity:

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20. A bankers' acceptance:

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22. Characteristics of money market securities include:

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23. The economic order quantity:

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24. Which of the following are characteristics of money market investments?

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25. Money market funds:

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26. Eurodollar (Canadian) certificates of deposits:

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27. When using the economic order quantity model:

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