Deck 10: Cash Concentration

Question 1

If a firm makes only one transfer for several days of deposits:

A)It follows the 'one transfer rule'
B)It follows the 'managing about a target rule'
C)It follows the 'anticipation rule'
D)This never happens

Answer 1

B

Question 2

The main benefits associated with a well-designed concentration system include:

A)greater control over balances
B)economies of scale
C)the absence of dual balances
D)'a' and 'b'
E)'b' and 'c'

Answer 2

D

Question 3

In order to justify the cost of using a wire transfer instead of an EDT (electronic depository transfer),your company must transfer a minimum of $200,000.The EDT has a one business day availability.If the EDT availability were two business days,what is the minimum transfer amount that would justify a wire transfer?

A)$100,000
B)$200,000
C)$400,000
D)the amount cannot be calculated without more information

Answer 3

A

Question 4

Wire transfers represent a "real-time transfer of account balances." This implies that:

A)there is no availability float
B)there is no charge to the user because no time is involved in the transfer processing
C)there is very large dual balances in the "transferred from" and "transferred to" accounts
D)the user does not have to keep compensating balances or reserve requirements for deposit accounts from which the transfer takes place

Question 5

The 'daily transfer rule' is applied to which of the following situations:

A)Weekend bank processing
B)No weekend bank processing
C)Immediate deposit availability
D)'a' 'b' and 'c'
E)none of the above

Question 6

Assume a wire transfer provides immediate availability,a depository transfer check provides two-day availability,and deposit balances earn an ECR (earned credit rate)of 8%.Under these assumptions,the minimum amount a company can transfer in order to justify the cost of a wire transfer is $200,000.If the bank reduces the ECR to 5%,the amount required to justify a wire transfer will:

A)not change
B)increase
C)decrease
D)you cannot determine the direction of change from the given information

Question 7

Canadian banks are not encumbered by which of the following restrictions common to US banks:

A)No interest restrictions on deposits
B)Overdraft privileges
C)'a' and 'b'
D)None of the above

Question 8

Which of the following is an example of an electronic debit?

A)a depository transfer check
B)an electronic depository transfer check
C)a wire transfer
D)draft

Question 9

Currently,the two basic methods by which cash managers transfer funds from accounts at one bank to accounts at another bank are:

A)EDTs,and wire transfers
B)overnight mail,and wire transfers
C)Western Union transfers,and wire transfers
D)courier,and EDTs

Question 10

Decisions regarding when and how much to transfer in a concentration system are primarily complicated by:

A)new federal regulations
B)higher banking fees for electronic transfers
C)constantly changing reserve requirements
D)fluctuations in daily deposit amounts