Question 1

A term-loan agreement is a promissory note that requires a borrower to repay a loan in monthly, quarterly, semiannual, or annual installments.

Accepted Answer

A) True 
 B)False

Question 2

During the recent economic crisis, the number of business bankruptcies actually declined..

Accepted Answer

A) True 
 B)False

Question 3

In what situations would you seek short-term financing? In what situations would you seek long-term financing?

Accepted Answer

Short-term financing is typically sought

Question 4

Tidewater Distributors is successfully using short-term financing to buy inventory for resale. As sales climb, the managers realize that they must decide what to do with the money. Since you are the financial manager, they ask for your advice. You advise them to first

Accepted Answer

A)  repay the short-term obligations out of the sales revenue. 
B)  use the money to buy a yacht for the managers. 
C)  increase all employees' wages. 
D)  enroll all the salespeople in a sales training course. 
E)  borrow more money. 
A)  repay the short-term obligations out of the sales revenue. 
B)  use the money to buy a yacht for the managers. 
C)  increase all employees' wages. 
D)  enroll all the salespeople in a sales training course. 
E)  borrow more money.

Question 5

When a small-business owner applies for a loan, the bank officer will

Accepted Answer

A)  turn the loan down unless the firm doesn't need the money. 
B)  check to see if the firm has issued corporate stocks or bonds. 
C)  reject the loan if the firm has any outstanding debts. 
D)  ask the business owner to fill out a loan application. 
E)  approve the loan if the firm has never borrowed money from a competing bank. 
A)  turn the loan down unless the firm doesn't need the money. 
B)  check to see if the firm has issued corporate stocks or bonds. 
C)  reject the loan if the firm has any outstanding debts. 
D)  ask the business owner to fill out a loan application. 
E)  approve the loan if the firm has never borrowed money from a competing bank.

Question 6

Most mature corporations distribute ____ of their after-tax profits as dividends to stockholders.

Accepted Answer

A)  none 
B)  10 to 25 percent 
C)  40 to 60 percent 
D)  70 to 80 percent 
E)  all 
A)  none 
B)  10 to 25 percent 
C)  40 to 60 percent 
D)  70 to 80 percent 
E)  all

Question 7

In order to repay some corporate bonds, a firm may be required to deposit a specified sum of money each year until the bond's maturity in a sinking fund.

Accepted Answer

A) True 
 B)False

Question 8

All of the activities concerned with obtaining money and using it effectively are called

Accepted Answer

A)  financial management. 
B)  long-term financing. 
C)  budgeting. 
D)  financial planning. 
E)  unsecured financing. 
A)  financial management. 
B)  long-term financing. 
C)  budgeting. 
D)  financial planning. 
E)  unsecured financing.

Question 9

In order to catch problems before they get out of hand, a business firm should compare its financial performance against various budgets.

Accepted Answer

A) True 
 B)False

Question 10

Morgan's Transition
Morgan is currently a manager of a small financial planning firm. He is seeking a new career with a large corporation in the banking industry. He recently applied for the financial manager opening at G & T Bank. He is concerned that the transition from his small firm to a large corporation will be difficult. To better prepare himself for this change, he has decided to enroll in a few business classes to strengthen his understanding of corporate finance. The business classes have proven to be a valuable tool for learning the critical skills needed to fully understand a financial plan, equity financing, and debt financing. Morgan now believes he has strengthened his competitive advantage in his quest for the job.
-Refer to Morgan's Transition. During his job interview, Morgan was asked to talk about money received from the owners or from the sale of shares of ownership in a business. Which of the following would best describe these funds?

Accepted Answer

A)  Debt capital 
B)  Equity capital 
C)  Proceeds from a merger or acquisition 
D)  Proceeds from the sale of assets 
E)  Sales revenue 
A)  Debt capital 
B)  Equity capital 
C)  Proceeds from a merger or acquisition 
D)  Proceeds from the sale of assets 
E)  Sales revenue

Question 11

Venture capital firms invest in

Accepted Answer

A)  banks and financial firms. 
B)  large, successful firms. 
C)  small firms that have the potential to be very successful. 
D)  neighborhood convenience stores. 
E)  chain retail establishments. 
A)  banks and financial firms. 
B)  large, successful firms. 
C)  small firms that have the potential to be very successful. 
D)  neighborhood convenience stores. 
E)  chain retail establishments.

Question 12

Your small business has been very successful and has amassed a large amount of accounts receivable from reputable firms, but you find yourself short of ready cash to replace inventory. How could a factor help you?

Accepted Answer

A factor could help your small business

Question 13

What is the main difference between unsecured short-term financing and secured short-term financing? Which method is better from the viewpoint of the borrower?

Accepted Answer

The main difference between unsecured sh

Question 14

One of the concerns that large corporations have when they use equity financing is the need to repay the principal plus the interest at a future date.

Accepted Answer

A) True 
 B)False

Question 15

McGines, Inc.
Sam McGines, CEO of McGines, Inc., decided that upon his retirement, he would elect his son Derrick to become the new CEO. Sam thought it would be a good idea to have Derrick shadow him at work to understand the roles and responsibilities of a CEO. Derrick shadowed his father for months in order to learn every aspect of the business. Sam knew that the best way for Derrick to learn was to actually perform some of the tasks he did on a daily basis, rather than simply describe them. The company generally focused on short-term financing, and Sam felt that it was important for Derrick to understand the different types of financing. Derrick learned about the type of bonds that the company usually offered to raise capital. These bonds allow the purchasers of the bond to keep them until maturity. Derrick also learned the process of obtaining bonds and the various types of long-term financing methods. Job shadowing was indeed a worthwhile experience for Derrick.
-Refer to McGines, Inc. If Derrick were to offer advice to a client about obtaining a loan, which of the following would be the first step?

Accepted Answer

A)  Get to know potential lenders before requesting debt financing. 
B)  Have the financial manager meet with the loan officer. 
C)  Fill out a loan application. 
D)  Show current business plan. 
E)  Have your CPA prepare financial statements. 
A)  Get to know potential lenders before requesting debt financing. 
B)  Have the financial manager meet with the loan officer. 
C)  Fill out a loan application. 
D)  Show current business plan. 
E)  Have your CPA prepare financial statements.

Question 16

Tom Jackson, president of Jackson Manufacturing, suspects that the managers of two departments have been padding their budgets for the last three years. To eliminate this problem, Tom would

Accepted Answer

A)  fire the managers. 
B)  hire an efficiency expert. 
C)  hire a new accountant. 
D)  use zero-base budgeting. 
E)  use traditional budgeting. 
A)  fire the managers. 
B)  hire an efficiency expert. 
C)  hire a new accountant. 
D)  use zero-base budgeting. 
E)  use traditional budgeting.

Question 17

The most popular form of short-term financing is

Accepted Answer

A)  bank loans. 
B)  trade credit. 
C)  sale of bonds. 
D)  sale of stock. 
E)  loans from insurance companies. 
A)  bank loans. 
B)  trade credit. 
C)  sale of bonds. 
D)  sale of stock. 
E)  loans from insurance companies.

Question 18

With regard to the ongoing expense of long-term corporate financing, which of the following would be the most expensive?

Accepted Answer

A)  Long-term loans 
B)  Corporate bonds 
C)  Debenture bonds 
D)  Common stock 
E)  Trade credit 
A)  Long-term loans 
B)  Corporate bonds 
C)  Debenture bonds 
D)  Common stock 
E)  Trade credit

Question 19

Poor financial management is one of the major reasons why firms file for bankruptcy.

Accepted Answer

A) True 
 B)False

Question 20

Jackson Ski Equipment receives an invoice for $10,000 worth of merchandise from one of its suppliers. The invoice has discount terms of 2/10, net/60. Twenty days later, Jackson Ski Equipment writes a check for ____ to pay the invoice.

Accepted Answer

A)  $10,200 
B)  $10,000 
C)  $9,800 
D)  $9,000 
E)  $200 
A)  $10,200 
B)  $10,000 
C)  $9,800 
D)  $9,000 
E)  $200

Exam 19: Mastering Financial Management

A term-loan agreement is a promissory note that requires a borrower to repay a loan in monthly, quarterly, semiannual, or annual installments.

During the recent economic crisis, the number of business bankruptcies actually declined..

In what situations would you seek short-term financing? In what situations would you seek long-term financing?

Tidewater Distributors is successfully using short-term financing to buy inventory for resale. As sales climb, the managers realize that they must decide what to do with the money. Since you are the financial manager, they ask for your advice. You advise them to first

When a small-business owner applies for a loan, the bank officer will

Most mature corporations distribute ____ of their after-tax profits as dividends to stockholders.

In order to repay some corporate bonds, a firm may be required to deposit a specified sum of money each year until the bond's maturity in a sinking fund.

All of the activities concerned with obtaining money and using it effectively are called

In order to catch problems before they get out of hand, a business firm should compare its financial performance against various budgets.

Venture capital firms invest in

Your small business has been very successful and has amassed a large amount of accounts receivable from reputable firms, but you find yourself short of ready cash to replace inventory. How could a factor help you?

What is the main difference between unsecured short-term financing and secured short-term financing? Which method is better from the viewpoint of the borrower?

One of the concerns that large corporations have when they use equity financing is the need to repay the principal plus the interest at a future date.

Tom Jackson, president of Jackson Manufacturing, suspects that the managers of two departments have been padding their budgets for the last three years. To eliminate this problem, Tom would

The most popular form of short-term financing is

With regard to the ongoing expense of long-term corporate financing, which of the following would be the most expensive?

Poor financial management is one of the major reasons why firms file for bankruptcy.

Jackson Ski Equipment receives an invoice for $10,000 worth of merchandise from one of its suppliers. The invoice has discount terms of 2/10, net/60. Twenty days later, Jackson Ski Equipment writes a check for ____ to pay the invoice.

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

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