Exam 18: Financial Management

The owners of Spokes Bicycle Shop worry that cash flow this winter may be insufficient to meet the current operating expenses. While they anticipate a surplus of cash inflow as warm weather approaches, they need funds now to meet the company's immediate obligations. The owners can best resolve cash flow concerns by obtaining ________ financing.

Which of the following statements is most accurate?

Commercial paper is unsecured short-term debt.

The most widely used source of short-term funding is trade credit.

A ________ forecast predicts the future cash inflows and outflows in future periods.

The rationale behind offering customers credit is

The interest paid for debt financing is a tax-deductible expense for the firm.

Which of the following correctly identifies areas of authority and responsibility for a chief financial officer (CFO)?

Many sellers offer a 2% discount to a buyer that makes payment 20 days before the due date, (2/10, net 30). Firms that fail to take advantage of this early payment discount are giving up approximately 36%.

Tax management by financial managers involves the development of strategies to evade tax liabilities.

A comptroller is responsible for the acquiring and managing of funds for an organization.

Pure Power issued $300 million of bonds to finance a major upgrade of its largest power plant in Georgia. The issuance of these bonds indicates that Pure Power utilizes equity capital to meet its long-term financing needs.

The financial manager of Picture Perfect Graphics negotiated a ________ with her bank that allows Picture Perfect to borrow up to $75,000 without collateral. This arrangement eliminates the need to renegotiate the terms of the loan and complete new paperwork each time Picture Perfect borrows money. The preapproved short-term loan agreement is contingent upon the bank having the funds available.

The duties and responsibilities of a financial manager are virtually identical to the duties and responsibilities of an accountant.

Corporations that issue debenture bonds are required to provide collateral.

Selling accounts receivable to obtain short-term funds is called

Through equity financing, stockholders become ________ of the firm.

Efficient cash management requires firms to pay their bills as quickly as possible, and delay the collection of accounts receivable.

________ examine the data prepared by ________ and then make recommendations to top management regarding strategies for improving the firm.

Lydia is a financial manager with Securitas Financial. She regularly compares actual revenues and expenses against their projected values. After identifying areas with significant deviations from planned values, she investigates to find the cause of these variances. Lydia's activities represent the steps involved in the preparation of Securitas's capital budget.