Exam 18: Financial Management

Acquiring funds through debt financing enhances the firm's ability to increase profits.

Financial managers are responsible for buying merchandise on credit and collecting payment from accounts receivable.

Money has a time value because

If you are at the Phoenix Sky Harbor International Airport, you will no longer get a pat-down if you go through the metal detector. The airport now has full body screening ports that scan the entire body and readily detect weapons or explosive devices that someone may want to take on board a plane. These expensive devices represent

The rate of return a company must earn to meet the demands of its lenders and expectations of its equity holders is called

Which of these statements about corporate bonds is correct?

When Newport Industries renegotiated their loan agreement, they borrowed an additional $2 million. The new loan requires Liberty to repay the new amount in nine months. Liberty's activity represents ________ financing.

Commercial finance companies normally charge lower rates on short-term loans than those charged by commercial banks.

The operating (master) budget identifies the funds (and the allocation of those funds) required to operate a business at a projected level of revenue.

Theme Park Thrillers has plans to build a new $175 million theme park and intends to finance this project through the sale of additional shares of ownership in their firm. Selling new shares of stock represents ________ financing.

An effective budget requires

Forecasting means determining how closely the actual revenue and expense results matched up with the predicted revenues and expenses.

If a buyer is offered the terms of sale of "3/10, net 30" this means that the buyer can receive a 10 percent discount by making full payment within 30 days of the billing date.

Burger Barn is a chain of hamburger restaurants on the West Coast. The corporation plans to expand to the Midwest and then along the East Coast. The acquisition of land and construction of new restaurants represent major capital expenditures.

A capital budget highlights a firm's spending plans for major assets, such as property, buildings, and equipment.

Inadequate expense control typically occurs as a result of undercapitalization.

Venture capitalists expect lower than average returns on their investment since they are exposed to little risk.

________ offer short-term secured loans to high-risk borrowers. These loans usually require collateral.

Jason manages credit and collections at Barkatorium Pet Supplies. He is responsible for accounts receivable and accounts payable. These activities suggest that Jason's job is in financial management.

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.