Question 1

Which of the following would be most helpful for a company looking to know the income potential during the next five years?

Accepted Answer

A)  cash flow forecast 
B)  long-term forecast 
C)  short-term forecast 
D)  capital budget forecast 
A)  cash flow forecast 
B)  long-term forecast 
C)  short-term forecast 
D)  capital budget forecast

Question 2

A major concern for firms selling on credit is

Accepted Answer

A)  the realization that many credit customers always pay their bills. 
B)  the large amount of assets tied up in accounts receivable. 
C)  the resulting increase in the debt ratio for the firm. 
D)  the inability to utilize factoring as a source of financing. 
A)  the realization that many credit customers always pay their bills. 
B)  the large amount of assets tied up in accounts receivable. 
C)  the resulting increase in the debt ratio for the firm. 
D)  the inability to utilize factoring as a source of financing.

Question 3

Businesses match their long-term capital needs to

Accepted Answer

A)  the firm's debt to equity ratio. 
B)  the ratio of long-term vs. short-term capital available. 
C)  trade credit discounts. 
D)  their long-term goals and objectives. 
A)  the firm's debt to equity ratio. 
B)  the ratio of long-term vs. short-term capital available. 
C)  trade credit discounts. 
D)  their long-term goals and objectives.

Question 4

The long-term financial forecast plays a crucial part in the company's long-term strategic plan.

Accepted Answer

A) True 
 B)False

Question 5

________ represent a favorable source of meeting long-term financing needs because there are no interest payments, dividends, or underwriting fees required when using this source.

Accepted Answer

A)  Secured bonds 
B)  Debentures 
C)  Warrants 
D)  Retained earnings 
A)  Secured bonds 
B)  Debentures 
C)  Warrants 
D)  Retained earnings

Question 6

A comptroller is the chief accounting officer of an organization.

Accepted Answer

A) True 
 B)False

Question 7

Funds obtained from venture capitalists are considered equity financing.

Accepted Answer

A) True 
 B)False

Question 8

A company's capital budget helps management plan for cash shortages or surpluses.

Accepted Answer

A) True 
 B)False

Question 9

Mini-Case
Tishian's Funeral Home has been in business for over 80 years. Throughout its history, the firm has been a family-run operation. Today, the business is managed by Mort Tishian, a grandson of the founder. Unfortunately, Mort Tishian's tenure has been plagued with problems neither his father nor grandfather before him experienced. The reason is simple: the funeral business is undergoing rapid change. Small, family-owned funeral homes are losing ground to a new type of competitor, a large national network service that resembles a franchise system. More and more families "in their time of need" are choosing the new, highly promoted competitors instead of the traditional small family-operated funeral homes.
This trend has required a response from organizations like Tishian's Funeral Home. Bigger and better facilities are needed to remain competitive. All of this puts more pressure on the family owners to be more active in the financial side of the business. Mort summed it up best when he said, "Grandpa told people, 'You pay me when you can, I ain't goin' nowheres.'" His creditors did the same with him. Today, it's a different game. Cash flow is key, and obtaining funds is no simple task. Additionally, creditors want their money now, not later. Banks are also more demanding. "Heck, Grandpa knew all the bankers he dealt with personally. I see new faces every time I go to the bank. If things don't get better, I suspect after eighty years of service, Tishian's Funeral Home will have its own funeral."
-After seeing Mort's advertisement: "You Aren't Gettin' Any Younger! Start Planning for Heaven Today!" a(n) ________ firm decided the aging population was a good investment. Although they typically look at start-ups with great promise, they approached Mort with $6 million dollars for his new idea of a major three-city expansion that included six new funeral homes, a crematory, and mausoleum. After researching the offer, Mort agreed to give up 50% ownership of the business in order to secure these funds. His last thoughts as he began to sign the papers were: "Now, I'll be able to compete with the big guys!"

Accepted Answer

A)  retained earnings 
B)  indentured 
C)  venture capital 
D)  leveraged buyout 
A)  retained earnings 
B)  indentured 
C)  venture capital 
D)  leveraged buyout

Question 10

Which of the following companies is undercapitalized?

Accepted Answer

A)  A large corporation that has been hit with a major lawsuit because one of its products has a design flaw that has led to serious injuries. 
B)  A new company struggling because it has insufficient start-up funds. 
C)  A medium-sized company that has decided to buy out a smaller competitor. 
D)  An electric utility that has recently experienced a significant increase in the cost of coal and labor. 
A)  A large corporation that has been hit with a major lawsuit because one of its products has a design flaw that has led to serious injuries. 
B)  A new company struggling because it has insufficient start-up funds. 
C)  A medium-sized company that has decided to buy out a smaller competitor. 
D)  An electric utility that has recently experienced a significant increase in the cost of coal and labor.

Question 11

Long-term loans are often more expensive than short-term loans.

Accepted Answer

A) True 
 B)False

Question 12

The CFO of a satellite radio company was trying to work his magic today as he solicited another telecommunications/entertainment company to invest in his company in order to prevent bankruptcy. Having refinanced the company less than a year ago, the satellite radio finance manager had a $75 million note coming due today. The current financing arrangement represents

Accepted Answer

A)  a long-term sale of stock to private investors. 
B)  short-term debt financing. 
C)  the issuance of long-term bonds. 
D)  a leveraged buy-out. 
A)  a long-term sale of stock to private investors. 
B)  short-term debt financing. 
C)  the issuance of long-term bonds. 
D)  a leveraged buy-out.

Question 13

Typically, only highly regarded customers with financial stability receive

Accepted Answer

A)  secured loans. 
B)  bank premiums. 
C)  unsecured loans. 
D)  commercial paper. 
A)  secured loans. 
B)  bank premiums. 
C)  unsecured loans. 
D)  commercial paper.

Question 14

Rock Solid Concrete Company does not offer customers a cash discount for early payment of their accounts receivable. As a result, most customers wait to pay their bill on the last day before late penalties are charged. These customers apparently understand the

Accepted Answer

A)  time value of money. 
B)  benefits of tax-deductible expenses. 
C)  financial community's perception of equity financing. 
D)  government's regulations of the chemical industry. 
A)  time value of money. 
B)  benefits of tax-deductible expenses. 
C)  financial community's perception of equity financing. 
D)  government's regulations of the chemical industry.

Question 15

Many small businesses rely on factoring as a source of short-term financing because

Accepted Answer

A)  factoring provides a much cheaper source of funds than bank loans. 
B)  interest paid to a factor qualifies for a tax credit. 
C)  small firms often find it difficult to qualify for bank loans. 
D)  loans provided by factors do not require collateral. 
A)  factoring provides a much cheaper source of funds than bank loans. 
B)  interest paid to a factor qualifies for a tax credit. 
C)  small firms often find it difficult to qualify for bank loans. 
D)  loans provided by factors do not require collateral.

Question 16

Inability to attract and retain qualified employees is one of the most common ways for a firm to fail financially.

Accepted Answer

A) True 
 B)False

Question 17

A ________ forecast predicts the revenues, costs, and expenses a firm will incur for a period longer than one year.

Accepted Answer

A)  cash flow 
B)  short-term 
C)  capital expenditures 
D)  long-term 
A)  cash flow 
B)  short-term 
C)  capital expenditures 
D)  long-term

Question 18

After earning $50 million in net income, Marshall Manufacturing distributed $15 million in dividends to their stockholders. Marshall's board of directors decided to invest the remaining $35 million back into the business. This $35 million reinvestment of profits represents

Accepted Answer

A)  a trust fund. 
B)  retained earnings. 
C)  preferred capital. 
D)  mutual funds. 
A)  a trust fund. 
B)  retained earnings. 
C)  preferred capital. 
D)  mutual funds.

Question 19

A loan backed by collateral represents a(n)

Accepted Answer

A)  bond trust. 
B)  debenture bond. 
C)  pledging factor. 
D)  secured loan. 
A)  bond trust. 
B)  debenture bond. 
C)  pledging factor. 
D)  secured loan.

Question 20

A firm's short-term financial forecast provides a projected sales estimate.

Accepted Answer

A) True 
 B)False

Exam 18: Financial Management

Which of the following would be most helpful for a company looking to know the income potential during the next five years?

A major concern for firms selling on credit is

Businesses match their long-term capital needs to

The long-term financial forecast plays a crucial part in the company's long-term strategic plan.

________ represent a favorable source of meeting long-term financing needs because there are no interest payments, dividends, or underwriting fees required when using this source.

A comptroller is the chief accounting officer of an organization.

Funds obtained from venture capitalists are considered equity financing.

A company's capital budget helps management plan for cash shortages or surpluses.

Which of the following companies is undercapitalized?

Long-term loans are often more expensive than short-term loans.

Typically, only highly regarded customers with financial stability receive

Rock Solid Concrete Company does not offer customers a cash discount for early payment of their accounts receivable. As a result, most customers wait to pay their bill on the last day before late penalties are charged. These customers apparently understand the

Many small businesses rely on factoring as a source of short-term financing because

Inability to attract and retain qualified employees is one of the most common ways for a firm to fail financially.

A ________ forecast predicts the revenues, costs, and expenses a firm will incur for a period longer than one year.

After earning $50 million in net income, Marshall Manufacturing distributed $15 million in dividends to their stockholders. Marshall's board of directors decided to invest the remaining $35 million back into the business. This $35 million reinvestment of profits represents

A loan backed by collateral represents a(n)

A firm's short-term financial forecast provides a projected sales estimate.

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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