Question 1

Equity capital generally provides the greatest part of a firm's financing.

Accepted Answer

A) True 
 B)False

Question 2

Most firms like lines of credit because the compensating balance requirement frees up their capital to pay short-term debts.

Accepted Answer

A) True 
 B)False

Question 3

The most expensive form of short-term financing is factoring of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 4

The greatest part of a firm's financing is provided by

Accepted Answer

A)  debt equity. 
B)  sale of assets. 
C)  government grants. 
D)  sales revenue. 
E)  equity capital. 
A)  debt equity. 
B)  sale of assets. 
C)  government grants. 
D)  sales revenue. 
E)  equity capital.

Question 5

The highest cost of short-term finance generally is

Accepted Answer

A)  trade credit. 
B)  unsecured bank loans. 
C)  commercial paper. 
D)  factoring. 
E)  promissory notes. 
A)  trade credit. 
B)  unsecured bank loans. 
C)  commercial paper. 
D)  factoring. 
E)  promissory notes.

Question 6

The steps in effective financial planning are

Accepted Answer

A)  establishing organizational goals, identifying expenses, and budgeting. 
B)  establishing organizational goals, budgeting for financial needs, and identifying sources of financing. 
C)  developing a plan of action, monitoring the plan, and evaluating. 
D)  identifying sources of financing, budgeting, and evaluating. 
E)  None of these answers are correct. 
A)  establishing organizational goals, identifying expenses, and budgeting. 
B)  establishing organizational goals, budgeting for financial needs, and identifying sources of financing. 
C)  developing a plan of action, monitoring the plan, and evaluating. 
D)  identifying sources of financing, budgeting, and evaluating. 
E)  None of these answers are correct.

Question 7

The legal document detailing all the conditions relating to a bond issue is called a bond indenture.

Accepted Answer

A) True 
 B)False

Question 8

Zero-base budgeting is a budgeting approach in which every expense must be justified in every budget.

Accepted Answer

A) True 
 B)False

Question 9

Commercial paper usually is issued

Accepted Answer

A)  for 3 to 7 years. 
B)  for short-term financing by large corporations. 
C)  for short-term financing by small businesses. 
D)  by large corporations unable to get credit elsewhere. 
E)  by savings and loan associations. 
A)  for 3 to 7 years. 
B)  for short-term financing by large corporations. 
C)  for short-term financing by small businesses. 
D)  by large corporations unable to get credit elsewhere. 
E)  by savings and loan associations.

Question 10

With regard to ongoing expenses, the most expensive type of long-term financing is the sale of common stock.

Accepted Answer

A) True 
 B)False

Question 11

A factor is a financial firm that specializes in buying other firms' accounts receivables.

Accepted Answer

A) True 
 B)False

Question 12

Financial managers should

Accepted Answer

A)  ignore minor budgeting problems and concentrate on major problems when budgeting. 
B)  establish a means of monitoring financial performance on an interim basis. 
C)  prepare budgets and hope for the best. 
D)  hire a person to go over interim budgets. 
E)  fire or demote individual managers when budgeting goals are not achieved. 
A)  ignore minor budgeting problems and concentrate on major problems when budgeting. 
B)  establish a means of monitoring financial performance on an interim basis. 
C)  prepare budgets and hope for the best. 
D)  hire a person to go over interim budgets. 
E)  fire or demote individual managers when budgeting goals are not achieved.

Question 13

____ is (are) short-term promissory notes with no collateral that are issued by large corporations.

Accepted Answer

A)  Serial bonds 
B)  Sinking funds 
C)  Convertible bonds 
D)  Credit agreements 
E)  Commercial paper 
A)  Serial bonds 
B)  Sinking funds 
C)  Convertible bonds 
D)  Credit agreements 
E)  Commercial paper

Question 14

Which of the following companies would most likely be able to issue commercial paper?

Accepted Answer

A)  Mike's Pizza Place 
B)  A local housing construction company 
C)  General Electric 
D)  A medium-sized advertising agency 
E)  United Way 
A)  Mike's Pizza Place 
B)  A local housing construction company 
C)  General Electric 
D)  A medium-sized advertising agency 
E)  United Way

Question 15

A tool that managers use to estimate major expenditures for assets, expansion of facilities, and mergers and acquisitions is called a(n)

Accepted Answer

A)  capital budget. 
B)  cash budget. 
C)  revenue forecast. 
D)  zero budget. 
E)  equity budget. 
A)  capital budget. 
B)  cash budget. 
C)  revenue forecast. 
D)  zero budget. 
E)  equity budget.

Question 16

Private placements are used to sell stock to individual investors.

Accepted Answer

A) True 
 B)False

Question 17

The assets most commonly used as collateral for short-term financing include

Accepted Answer

A)  cash and accounts receivable. 
B)  accounts payable and notes payable. 
C)  inventory and equipment. 
D)  marketable securities and owners' equity. 
E)  accounts receivable and inventory. 
A)  cash and accounts receivable. 
B)  accounts payable and notes payable. 
C)  inventory and equipment. 
D)  marketable securities and owners' equity. 
E)  accounts receivable and inventory.

Question 18

It is not unusual for companies to issue ____ type(s) of common stock and ____ type(s) of preferred stock.

Accepted Answer

A)  one; one 
B)  two; one 
C)  one; many 
D)  many; one 
E)  zero; several 
A)  one; one 
B)  two; one 
C)  one; many 
D)  many; one 
E)  zero; several

Question 19

When a seller allows a buyer thirty to sixty days to pay for a purchase, the sales arrangement is called

Accepted Answer

A)  a bank loan. 
B)  trade credit. 
C)  a promissory note. 
D)  equity financing. 
E)  None of these answers is correct. 
A)  a bank loan. 
B)  trade credit. 
C)  a promissory note. 
D)  equity financing. 
E)  None of these answers is correct.

Question 20

Assume you are a small retailer selling women's fashions. What actions can you take to build a credit relationship with a manufacturer or wholesaler to ensure that you can use trade credit to purchase needed inventory for your store?

Accepted Answer

As a small retailer selling women's fash

Exam 19: Mastering Financial Management

Equity capital generally provides the greatest part of a firm's financing.

Most firms like lines of credit because the compensating balance requirement frees up their capital to pay short-term debts.

The most expensive form of short-term financing is factoring of accounts receivable.

The greatest part of a firm's financing is provided by

The highest cost of short-term finance generally is

The steps in effective financial planning are

The legal document detailing all the conditions relating to a bond issue is called a bond indenture.

Zero-base budgeting is a budgeting approach in which every expense must be justified in every budget.

Commercial paper usually is issued

With regard to ongoing expenses, the most expensive type of long-term financing is the sale of common stock.

A factor is a financial firm that specializes in buying other firms' accounts receivables.

Financial managers should

____ is (are) short-term promissory notes with no collateral that are issued by large corporations.

Which of the following companies would most likely be able to issue commercial paper?

A tool that managers use to estimate major expenditures for assets, expansion of facilities, and mergers and acquisitions is called a(n)

Private placements are used to sell stock to individual investors.

The assets most commonly used as collateral for short-term financing include

It is not unusual for companies to issue ____ type(s) of common stock and ____ type(s) of preferred stock.

When a seller allows a buyer thirty to sixty days to pay for a purchase, the sales arrangement is called

Assume you are a small retailer selling women's fashions. What actions can you take to build a credit relationship with a manufacturer or wholesaler to ensure that you can use trade credit to purchase needed inventory for your store?

Exploring the World of Business and Economics

A: Being Ethical and Socially Responsible

B: Being Ethical and Socially Responsible

A: Exploring Global Business

B: Exploring Global Business

Choosing a Form of Business Ownership

Small Business, Entrepreneurship, and Franchises

Understanding the Management Process

Creating a Flexible Organization

Producing Quality Goods and Services

Attracting and Retaining the Best Employees

Motivating and Satisfying Employees and Teams

Enhancing Union-Management Relations

Building Customer Relationships Through Effective Marketing

A: Creating and Pricing Products That Satisfy Customers

B: Creating and Pricing Products That Satisfy Customers

Wholesaling, Retailing, and Physical Distribution

Developing Integrated Marketing Communications

Social Media, E-Business, and Accounting

Using Management and Accounting Information

Understanding Money, Banking, and Credit

A: Understanding Personal Finances and Investments

B: Understanding Personal Finances and Investments

Filters

It is not unusual for companies to issue type(s) of common stock and type(s) of preferred stock.