Question 1

A firm will choose to seek debt financing only for the purpose of paying for short-term operating needs.

Accepted Answer

A) True 
 B)False

Question 2

The overall objective of financial planning is to

Accepted Answer

A)  forecast the impact of technological trends. 
B)  prepare financial statements for managers. 
C)  optimize the firm's profitability. 
D)  establish budgets for financial control. 
A)  forecast the impact of technological trends. 
B)  prepare financial statements for managers. 
C)  optimize the firm's profitability. 
D)  establish budgets for financial control.

Question 3

Pages and Pages Booksellers is seeking financing to fund the opening of two new locations in nearby college towns. There is no need to consider debt financing for this project. It will require a sizeable investment in equity funds.

Accepted Answer

A) True 
 B)False

Question 4

When a firm is owed money, the financial manager tries to collect as early as possible.

Accepted Answer

A) True 
 B)False

Question 5

________ provide financing to new or emerging companies with high profit potential. In return, these organizations expect a share of ownership in the company.

Accepted Answer

A)  Commercial banks 
B)  Venture capital firms 
C)  Federal Reserve banks 
D)  Investment bankers 
A)  Commercial banks 
B)  Venture capital firms 
C)  Federal Reserve banks 
D)  Investment bankers

Question 6

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 7

Epic Electronics holds commercial paper issued by SafeONE Insurance that matures in 180 days. However, shortly after Epic purchased the commercial paper, SafeONE went out of business. The finance manager for Epic is not worried because his loan to the corporation is secured by collateral that he can now claim.

Accepted Answer

A) True 
 B)False

Question 8

Long-term financing would normally be used to purchase

Accepted Answer

A)  supplies. 
B)  inventory. 
C)  buildings. 
D)  highly liquid assets. 
A)  supplies. 
B)  inventory. 
C)  buildings. 
D)  highly liquid assets.

Question 9

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

Accepted Answer

A)  accounting and finance 
B)  marketing and finance 
C)  production and accounting 
D)  finance and research and development 
A)  accounting and finance 
B)  marketing and finance 
C)  production and accounting 
D)  finance and research and development

Question 10

________ offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public with the promise of repayment within 270 days.

Accepted Answer

A)  Trade credit 
B)  A line of credit 
C)  Factoring 
D)  Commercial paper 
A)  Trade credit 
B)  A line of credit 
C)  Factoring 
D)  Commercial paper

Question 11

Identify and describe three types of short-term financing.

Accepted Answer

Students may mention that short-term fin

Question 12

Snowy Mountain Ski Lodge's cash budget for the month of March 2019 shows a negative amount. Due to the fact that the months of January and February were quite lucrative and showed positive amounts, the finance manager will not borrow any money in the short term to cover for March's deficit.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following provides the buyer with collateral?

Accepted Answer

A)  common stock 
B)  secured bond 
C)  unsecured bond 
D)  debenture bonds 
A)  common stock 
B)  secured bond 
C)  unsecured bond 
D)  debenture bonds

Question 14

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 15

Businesses acquire long-term financing from two major sources,

Accepted Answer

A)  debt financing and government funds. 
B)  equity financing and trade credit. 
C)  retained earnings and commercial paper. 
D)  debt financing and equity financing. 
A)  debt financing and government funds. 
B)  equity financing and trade credit. 
C)  retained earnings and commercial paper. 
D)  debt financing and equity financing.

Question 16

Explain the role the operating budget, the capital budget, and the cash budget play in financial planning.

Accepted Answer

The operating budget (master budget) tie

Question 17

Which of the following commonly results in the financial failure of a firm?

Accepted Answer

A)  diversification 
B)  undercapitalization 
C)  control of expenses 
D)  management of cash flows 
A)  diversification 
B)  undercapitalization 
C)  control of expenses 
D)  management of cash flows

Question 18

Undercapitalization refers to the problem of insufficient start-up funds.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following would normally involve long-term financing?

Accepted Answer

A)  workers' salaries 
B)  unanticipated emergencies 
C)  purchase of modern equipment 
D)  expansion current inventory 
A)  workers' salaries 
B)  unanticipated emergencies 
C)  purchase of modern equipment 
D)  expansion current inventory

Question 20

A term-loan agreement requires the borrower to repay the loan in one lump sum at the end of the loan period.

Accepted Answer

A) True 
 B)False

Exam 18: Financial Management

A firm will choose to seek debt financing only for the purpose of paying for short-term operating needs.

The overall objective of financial planning is to

Pages and Pages Booksellers is seeking financing to fund the opening of two new locations in nearby college towns. There is no need to consider debt financing for this project. It will require a sizeable investment in equity funds.

When a firm is owed money, the financial manager tries to collect as early as possible.

________ provide financing to new or emerging companies with high profit potential. In return, these organizations expect a share of ownership in the company.

A major concern for firms selling on credit is

Long-term financing would normally be used to purchase

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

________ offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public with the promise of repayment within 270 days.

Identify and describe three types of short-term financing.

Snowy Mountain Ski Lodge's cash budget for the month of March 2019 shows a negative amount. Due to the fact that the months of January and February were quite lucrative and showed positive amounts, the finance manager will not borrow any money in the short term to cover for March's deficit.

Which of the following provides the buyer with collateral?

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

Businesses acquire long-term financing from two major sources,

Explain the role the operating budget, the capital budget, and the cash budget play in financial planning.

Which of the following commonly results in the financial failure of a firm?

Undercapitalization refers to the problem of insufficient start-up funds.

Which of the following would normally involve long-term financing?

A term-loan agreement requires the borrower to repay the loan in one lump sum at the end of the loan period.

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

Appendix: Working Within the Legal Environment

Appendix: Using Technology to Manage Information

Appendix: Managing Risk

Appendix: Managing Personal Finances

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