Question 1

A share of stock represents a company-issued IOU including a promise to repay on a certain date.

Accepted Answer

A) True 
 B)False

Question 2

Generally accepted accounting principles require that any assessment of a firm's financial statements be performed by independent outside auditors.

Accepted Answer

A) True 
 B)False

Question 3

Financial managers at Epic Electronics have always had a conservative attitude toward long-term financing. In particular, they are interested in keeping risk to a minimum. This philosophy suggests that managers at Epic consider the extensive use of leverage an attractive financial strategy.

Accepted Answer

A) True 
 B)False

Question 4

Successful businesses establish restrictive credit policies encouraging customers to pay cash.

Accepted Answer

A) True 
 B)False

Question 5

Financial managers understand the time value of money. They try to maximize cash expenditures, as opposed to minimizing cash expenditures.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements represents good advice prior to making capital expenditures?

Accepted Answer

A)  Capital expenditures represent borrowed funds that must be repaid in one year or less. It is important to seek the advice of your accountant prior to committing. 
B)  Capital expenditures represent investment in inventories and expendable assets that the firm will use in one year or less. It is important to maintain the appropriate level of monthly cash flow to pay for these expenditures. 
C)  Most firms do not value capital expenditures on their balance sheets, so it is important to stay abreast of the market value of these assets at all times, in case you want to sell them. 
D)  Capital expenditures are major investments, meaning they require large sums of funds. Companies should weigh all possible options before committing available resources to projects that take significant amounts of funds and extended time. 
A)  Capital expenditures represent borrowed funds that must be repaid in one year or less. It is important to seek the advice of your accountant prior to committing. 
B)  Capital expenditures represent investment in inventories and expendable assets that the firm will use in one year or less. It is important to maintain the appropriate level of monthly cash flow to pay for these expenditures. 
C)  Most firms do not value capital expenditures on their balance sheets, so it is important to stay abreast of the market value of these assets at all times, in case you want to sell them. 
D)  Capital expenditures are major investments, meaning they require large sums of funds. Companies should weigh all possible options before committing available resources to projects that take significant amounts of funds and extended time.

Question 7

A debenture bond is backed only by the reputation of the issuer.

Accepted Answer

A) True 
 B)False

Question 8

Acquiring funds through debt financing enhances the firm's ability to increase profits.

Accepted Answer

A) True 
 B)False

Question 9

Roman, the finance manager at Outdoor Adventure Sporting Goods, has asked his assistant, Vincent, to prepare the ________ budget. Vincent will gather as much information as possible by utilizing the firm's other budgets and any documents that summarize proposed financial activities.

Accepted Answer

A)  master 
B)  cash 
C)  capital 
D)  line item 
A)  master 
B)  cash 
C)  capital 
D)  line item

Question 10

In order to assist in revenue realization, a(n) ________ allocates resources throughout the firm.

Accepted Answer

A)  forecast 
B)  balance sheet 
C)  budget 
D)  income statement 
A)  forecast 
B)  balance sheet 
C)  budget 
D)  income statement

Question 11

________ provide financing to new or emerging companies with high profit potential. In return, these organizations expect a share of ownership in the company.

Accepted Answer

A)  Commercial banks 
B)  Venture capital firms 
C)  Federal Reserve banks 
D)  Investment bankers 
A)  Commercial banks 
B)  Venture capital firms 
C)  Federal Reserve banks 
D)  Investment bankers

Question 12

Bigbux Savings and Loan agreed to extend Appleman's Orchards $250,000 of unsecured short-term funds, contingent upon the bank having the funds available. This arrangement represents a

Accepted Answer

A)  line of credit. 
B)  pledge agreement. 
C)  factoring agreement. 
D)  trade voucher. 
A)  line of credit. 
B)  pledge agreement. 
C)  factoring agreement. 
D)  trade voucher.

Question 13

Epic Electronics holds commercial paper issued by SafeONE Insurance that matures in 180 days. However, shortly after Epic purchased the commercial paper, SafeONE went out of business. The finance manager for Epic is not worried because his loan to the corporation is secured by collateral that he can now claim.

Accepted Answer

A) True 
 B)False

Question 14

According to the box, Adapting to Change, most online loans are safe with a low interest rate.

Accepted Answer

A) True 
 B)False

Question 15

To reduce the time and expense of collecting their accounts receivable, some firms

Accepted Answer

A)  extend credit to new customers. 
B)  offer extended payment plans to existing customers. 
C)  adopt a just-in-time inventory policy. 
D)  accept bank credit cards. 
A)  extend credit to new customers. 
B)  offer extended payment plans to existing customers. 
C)  adopt a just-in-time inventory policy. 
D)  accept bank credit cards.

Question 16

________ refers to the strategy of using borrowed funds to increase the rate of return for stockholders.

Accepted Answer

A)  Leverage 
B)  Retained earnings 
C)  Factoring 
D)  Pledging 
A)  Leverage 
B)  Retained earnings 
C)  Factoring 
D)  Pledging

Question 17

Which of the following provides the buyer with collateral?

Accepted Answer

A)  common stock 
B)  secured bond 
C)  unsecured bond 
D)  debenture bonds 
A)  common stock 
B)  secured bond 
C)  unsecured bond 
D)  debenture bonds

Question 18

The chief financial officer of a company is responsible for managing cash, accounts receivable, and inventory.

Accepted Answer

A) True 
 B)False

Question 19

________ offer short-term secured loans to high-risk borrowers. These loans usually require collateral.

Accepted Answer

A)  Commercial finance companies 
B)  Reserve banks 
C)  Credit brokers 
D)  Investment bankers 
A)  Commercial finance companies 
B)  Reserve banks 
C)  Credit brokers 
D)  Investment bankers

Question 20

________ is the function in business that is responsible for acquiring funds for the firm, and managing funds within the firm.

Accepted Answer

A)  Accounting 
B)  Managerial accounting 
C)  Finance 
D)  Financial accounting 
A)  Accounting 
B)  Managerial accounting 
C)  Finance 
D)  Financial accounting

Exam 18: Financial Management

A share of stock represents a company-issued IOU including a promise to repay on a certain date.

Generally accepted accounting principles require that any assessment of a firm's financial statements be performed by independent outside auditors.

Financial managers at Epic Electronics have always had a conservative attitude toward long-term financing. In particular, they are interested in keeping risk to a minimum. This philosophy suggests that managers at Epic consider the extensive use of leverage an attractive financial strategy.

Successful businesses establish restrictive credit policies encouraging customers to pay cash.

Financial managers understand the time value of money. They try to maximize cash expenditures, as opposed to minimizing cash expenditures.

Which of the following statements represents good advice prior to making capital expenditures?

A debenture bond is backed only by the reputation of the issuer.

Acquiring funds through debt financing enhances the firm's ability to increase profits.

Roman, the finance manager at Outdoor Adventure Sporting Goods, has asked his assistant, Vincent, to prepare the ________ budget. Vincent will gather as much information as possible by utilizing the firm's other budgets and any documents that summarize proposed financial activities.

In order to assist in revenue realization, a(n) ________ allocates resources throughout the firm.

________ provide financing to new or emerging companies with high profit potential. In return, these organizations expect a share of ownership in the company.

Bigbux Savings and Loan agreed to extend Appleman's Orchards $250,000 of unsecured short-term funds, contingent upon the bank having the funds available. This arrangement represents a

According to the box, Adapting to Change, most online loans are safe with a low interest rate.

To reduce the time and expense of collecting their accounts receivable, some firms

________ refers to the strategy of using borrowed funds to increase the rate of return for stockholders.

Which of the following provides the buyer with collateral?

The chief financial officer of a company is responsible for managing cash, accounts receivable, and inventory.

________ offer short-term secured loans to high-risk borrowers. These loans usually require collateral.

________ is the function in business that is responsible for acquiring funds for the firm, and managing funds within the firm.

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Working Within the Legal Environment

Using Technology to Manage Information

Managing Risk

Managing Personal Finances

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