Exam 18: Financial Management

Which of the following organizations would be most likely to acquire short-term funding by issuing commercial paper?

Inadequate control of expenses represents a common financial problem that contributes to business failure.

Diana is a financial manager for Eagle Eye Care, a chain of retail stores offering optical care and glasses. The majority of Diana's day likely involves efforts to locate and secure long-term financing to fund Eagle Eye Care's capital expenditures.

Explain the role the operating budget, the capital budget, and the cash budget play in financial planning.

Investors and entrepreneurs should have an understanding of financial issues.

A promissory note is a written contract between a supplier and a business customer, with a promise that customer will pay supplier a specified amount by a certain date.

When Portable Pet Care, a mobile veterinary company, first started operations, it extended three months of credit to customers. It soon began to experience a cash flow problem. A finance professional was hired to

When a firm is owed money, the financial manager tries to collect as early as possible.

Leverage refers to the use of borrowed funds to increase a firm's rate of return.

Some suppliers hesitate to offer trade credit to firms with a poor credit history. In these cases, the supplier may insist that the customer sign a(n)

Equity financing must be repaid.

Identify and describe the major steps involved in financial planning.

Expansion into new markets (either domestic or global) is sometimes financed with long-term funds.

The operating (master) budget identifies the funds (and the allocation of those funds) required to operate a business at a projected level of revenue.

One important consideration for a firm accepting funds from a venture capitalist is the ownership interest demanded by the venture capital firm.

The most widely used source of short-term funding is

The importance of financial managers to firms with large cash inflows is greater than for firms with smaller cash flows.

Factoring refers to the process of selling accounts receivable for cash.

To maximize the benefits of using financial leverage, a firm should

Corporations that issue stock to raise long-term funds accept the legal obligation to repay the amount borrowed.