56. Why is an analysis of the pattern and variability of the investing company\'

Question

56. Why is an analysis of the pattern and variability of the investing company's cash flows so important as part of the short-term investment process?
it guides dollar amounts and maturities of investments
it insures that state and federal regulations are met
it protects the investment manager against shareholder lawsuits
it ensures that the company's brokers and banks do not trick the company into making overly risky investments


57. Why should the investment officer be concerned about the loan covenants on the company's loans?
they may force the company to invest in high-risk, high-return securities in order to have enough interest revenue to pay the loan's interest expense
they may include fine print forcing the company to engage in illegal activities
they may prohibit certain types and/or amounts of investments
all of the above


58. When determining how much of the firm's total assets to invest in cash and securities, a low-liquidity strategy entails investing ___________ of the assets in cash and securities, earning ____________ expected profits in total.
relatively less, relatively more
relatively more, relatively more
relatively less, relatively less
relatively more, relatively less


59. A "clean up" is:
a periodic payment of all interest a borrower owes to date on a line of credit
a period of time over which the lender defers interest to a later date on a borrower's line of credit
a period of time over which a company reduces its outstanding balances to zero on order to demonstrate has not become permanent capital
the removal of the compensating balance requirement on a line of credit


60. The minimum level of ongoing inventory and receivables is what is referred to as ______________ current assets.
transitory
modifiable
discretionary
permanent

Explanation / Answer

56 it ensures that the company's brokers and banks do not trick the company into making overly risky investments 57 all of the above 58 a period of time over which the lender defers interest to a later date on a borrower's line of credit 59 a period of time over which a company reduces its outstanding balances to zero on order to demonstrate has not become permanent capital 60 discretionary

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