Question 1

Short-term financing is used to start a new business.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following might be considered the most drastic step in securing funding, often a last resort for a corporation?

Accepted Answer

A)  Using sales revenue 
B)  Equity capital funding 
C)  Short-term borrowing from a bank 
D)  Debt capital funding 
E)  Sale of assets 
A)  Using sales revenue 
B)  Equity capital funding 
C)  Short-term borrowing from a bank 
D)  Debt capital funding 
E)  Sale of assets

Question 3

What is cash flow? Why is cash flow important to a business?

Accepted Answer

Cash flow refers to the movement of mone

Question 4

State the purpose of a promissory note. Describe why a supplier would use a promissory note for short-term financing instead of trade credit.

Accepted Answer

The purpose of a promissory note is to s

Question 5

The primary sources of funds available to a business include all of the following except

Accepted Answer

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

Question 6

Max Beauty Supply has ordered $5,000 worth of merchandise from Kelly's Beauty Supply, Inc. The invoice to Max has discount terms of 2/10, net/30. Max writes a check within ten days for

Accepted Answer

A)  $100. 
B)  $1,000. 
C)  $4,000. 
D)  $4,900. 
E)  $5,000. 
A)  $100. 
B)  $1,000. 
C)  $4,000. 
D)  $4,900. 
E)  $5,000.

Question 7

Kevin received unsecured financing from a bank for his plumbing business. This means that Kevin did not have to provide the bank with any

Accepted Answer

A)  application forms. 
B)  collateral. 
C)  reasons for the loan. 
D)  promise to pay interest. 
E)  scheduled monthly payments. 
A)  application forms. 
B)  collateral. 
C)  reasons for the loan. 
D)  promise to pay interest. 
E)  scheduled monthly payments.

Question 8

Chelsea notices that her preferred stock from Landings, Inc., has a par value of $40. She knows that this $40

Accepted Answer

A)  represents the price she paid for the stock. 
B)  represents the amount she could sell the stock for. 
C)  is the amount Landings will pay her each year. 
D)  is an assigned and often arbitrary number. 
E)  is the redemption value of the stock. 
A)  represents the price she paid for the stock. 
B)  represents the amount she could sell the stock for. 
C)  is the amount Landings will pay her each year. 
D)  is an assigned and often arbitrary number. 
E)  is the redemption value of the stock.

Question 9

Casey Broadway's responsibility at his company is overseeing all the activities concerned with obtaining money and using it effectively. Casey is a(n)

Accepted Answer

A)  accountant. 
B)  financial manager. 
C)  financial planner. 
D)  investment advisor. 
E)  loan officer. 
A)  accountant. 
B)  financial manager. 
C)  financial planner. 
D)  investment advisor. 
E)  loan officer.

Question 10

Kirsten purchased a new dining room table and china cabinet from Discount Furniture, which offered a one-year special with no interest or financing charges. When Kirsten makes her purchase, Discount Furniture checks her credit and seeks approval for her. Upon approval, Kirsten is informed her that she will make payments to Regional Finance Company. This arrangement is an example of

Accepted Answer

A)  unsecured bank loan. 
B)  commercial paper. 
C)  factoring. 
D)  pledging accounts receivable. 
E)  selective financing. 
A)  unsecured bank loan. 
B)  commercial paper. 
C)  factoring. 
D)  pledging accounts receivable. 
E)  selective financing.

Question 11

The terms "2/10, net/30" are used with most promissory notes.

Accepted Answer

A) True 
 B)False

Question 12

A factor will buy accounts receivable for

Accepted Answer

A)  more than their face value. 
B)  less than their face value. 
C)  their present value. 
D)  their par value. 
E)  the interest that can be collected from them. 
A)  more than their face value. 
B)  less than their face value. 
C)  their present value. 
D)  their par value. 
E)  the interest that can be collected from them.

Question 13

Marietta Hotels used a twenty-five-year, $50 million bond issue to finance its expansion. In its plan to ensure that funds would be available to redeem the bonds at maturity, it arranged that none of the bonds would mature during the first fifteen years. Therefore, 10 percent of the bonds mature each year until all the bonds are retired at the end of the twenty-fifth year. This is an example of the ____ method of repayment.

Accepted Answer

A)  sinking fund 
B)  selling new bonds 
C)  registered bond 
D)  selling old bonds 
E)  serial bond 
A)  sinking fund 
B)  selling new bonds 
C)  registered bond 
D)  selling old bonds 
E)  serial bond

Question 14

For a corporation such as AT&T, what are the two primary advantages of equity financing?

Accepted Answer

A)  It never has to be paid back and flotation costs are low. 
B)  There is no obligation to pay dividends or to repay the money obtained from the sale of stock. 
C)  Interest payments are less than debt financing and principal does not have to be repaid. 
D)  Ownership is spread among many individuals and no interest payments are required. 
E)  Investors pay top dollar for stock issues and the corporation has higher ongoing expenses. 
A)  It never has to be paid back and flotation costs are low. 
B)  There is no obligation to pay dividends or to repay the money obtained from the sale of stock. 
C)  Interest payments are less than debt financing and principal does not have to be repaid. 
D)  Ownership is spread among many individuals and no interest payments are required. 
E)  Investors pay top dollar for stock issues and the corporation has higher ongoing expenses.

Question 15

The NASDAQ, part of the ___ market, provides price information on more than 3,600 stocks.

Accepted Answer

A)  NYSE 
B)  secondary 
C)  primary 
D)  over-the-counter 
E)  securities exchange 
A)  NYSE 
B)  secondary 
C)  primary 
D)  over-the-counter 
E)  securities exchange

Question 16

A cash budget estimates a firm's expenditures for major assets like replacement of obsolete equipment and mergers and acquisitions.

Accepted Answer

A) True 
 B)False

Question 17

An initial public offering occurs anytime that a corporation sells stock to the general public.

Accepted Answer

A) True 
 B)False

Question 18

Compare the traditional approach to budgeting with the zero-base budgeting approach.

Accepted Answer

The traditional approach to budgeting in

Question 19

Short-term financing not backed by collateral is called

Accepted Answer

A)  debt capital. 
B)  unsecured financing. 
C)  mortgage bonds. 
D)  trade credit. 
E)  unprotected financing. 
A)  debt capital. 
B)  unsecured financing. 
C)  mortgage bonds. 
D)  trade credit. 
E)  unprotected financing.

Question 20

Bonds that are backed only by the reputation of the issuing corporation are known as

Accepted Answer

A)  mortgage bonds. 
B)  registered bonds. 
C)  debenture bonds. 
D)  bond indentures. 
E)  serial bonds. 
A)  mortgage bonds. 
B)  registered bonds. 
C)  debenture bonds. 
D)  bond indentures. 
E)  serial bonds.

Exam 19: Mastering Financial Management

Short-term financing is used to start a new business.

Which of the following might be considered the most drastic step in securing funding, often a last resort for a corporation?

What is cash flow? Why is cash flow important to a business?

State the purpose of a promissory note. Describe why a supplier would use a promissory note for short-term financing instead of trade credit.

The primary sources of funds available to a business include all of the following except

Max Beauty Supply has ordered $5,000 worth of merchandise from Kelly's Beauty Supply, Inc. The invoice to Max has discount terms of 2/10, net/30. Max writes a check within ten days for

Kevin received unsecured financing from a bank for his plumbing business. This means that Kevin did not have to provide the bank with any

Chelsea notices that her preferred stock from Landings, Inc., has a par value of $40. She knows that this $40

Casey Broadway's responsibility at his company is overseeing all the activities concerned with obtaining money and using it effectively. Casey is a(n)

The terms "2/10, net/30" are used with most promissory notes.

A factor will buy accounts receivable for

For a corporation such as AT&T, what are the two primary advantages of equity financing?

The NASDAQ, part of the ___ market, provides price information on more than 3,600 stocks.

A cash budget estimates a firm's expenditures for major assets like replacement of obsolete equipment and mergers and acquisitions.

An initial public offering occurs anytime that a corporation sells stock to the general public.

Compare the traditional approach to budgeting with the zero-base budgeting approach.

Short-term financing not backed by collateral is called

Bonds that are backed only by the reputation of the issuing corporation are known as

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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