Question 1

Which of these is backed only by the reputation of the issuer?

Accepted Answer

A)  venture capital 
B)  secured bonds 
C)  debenture bonds 
D)  long-term financing 
A)  venture capital 
B)  secured bonds 
C)  debenture bonds 
D)  long-term financing

Question 2

Bigbux Savings and Loan agreed to extend Appleman's Orchards $250,000 of unsecured short-term funds, contingent upon the bank having the funds available. This arrangement represents a

Accepted Answer

A)  line of credit. 
B)  pledge agreement. 
C)  factoring agreement. 
D)  trade voucher. 
A)  line of credit. 
B)  pledge agreement. 
C)  factoring agreement. 
D)  trade voucher.

Question 3

Seedling Plant Science invented a drought resistant grass seed that only needs watering three times each year. In order to expand distribution worldwide, the company whose product produces lush green foliage needs serious funding. The handful of seed scientists that own the company are seeking ________, but understand that they will relinquish a sizeable share of ownership in order to obtain the funds.

Accepted Answer

A)  debenture capital 
B)  international line of credit 
C)  leverage 
D)  venture capital 
A)  debenture capital 
B)  international line of credit 
C)  leverage 
D)  venture capital

Question 4

Based on the time value of money, $100 received a year from today is worth more than $100 received today.

Accepted Answer

A) True 
 B)False

Question 5

Equity financing may involve the sale of stock (representing ownership) to new investors.

Accepted Answer

A) True 
 B)False

Question 6

One important consideration for a firm accepting funds from a venture capitalist is the ownership interest demanded by the venture capital firm.

Accepted Answer

A) True 
 B)False

Question 7

________ refers to the strategy of using borrowed funds to increase the rate of return for stockholders.

Accepted Answer

A)  Leverage 
B)  Retained earnings 
C)  Factoring 
D)  Pledging 
A)  Leverage 
B)  Retained earnings 
C)  Factoring 
D)  Pledging

Question 8

Commercial paper is unsecured short-term debt.

Accepted Answer

A) True 
 B)False

Question 9

A firm's most recent financial statements often serve as the basis for predicting future sales, costs, and expenses.

Accepted Answer

A) True 
 B)False

Question 10

The terms "2/10, net 30" indicate that the seller is offering a 20% discount for early payment.

Accepted Answer

A) True 
 B)False

Question 11

A loan backed by collateral represents a(n)

Accepted Answer

A)  bond trust. 
B)  debenture bond. 
C)  pledging factor. 
D)  secured loan. 
A)  bond trust. 
B)  debenture bond. 
C)  pledging factor. 
D)  secured loan.

Question 12

The indenture terms refer to the agreements of a bond issue, such as how much interest it promises to pay and when it promises to repay the issue.

Accepted Answer

A) True 
 B)False

Question 13

To reduce the time and expense of collecting their accounts receivable, some firms

Accepted Answer

A)  extend credit to new customers. 
B)  offer extended payment plans to existing customers. 
C)  adopt a just-in-time inventory policy. 
D)  accept bank credit cards. 
A)  extend credit to new customers. 
B)  offer extended payment plans to existing customers. 
C)  adopt a just-in-time inventory policy. 
D)  accept bank credit cards.

Question 14

The long-term financial forecast gives top management some sense of the profit potential of various strategic decisions.

Accepted Answer

A) True 
 B)False

Question 15

A promissory note is a written contract between a supplier and a business customer, with a promise that customer will pay supplier a specified amount by a certain date.

Accepted Answer

A) True 
 B)False

Question 16

Financial managers generally oppose credit sales because of the impact on cash flows.

Accepted Answer

A) True 
 B)False

Question 17

Venture capital firms look to invest their funds in firms that

Accepted Answer

A)  operate in established, mature industries. 
B)  present financial statements indicating stronger than average cash flows. 
C)  are new with great profit potential. 
D)  require extra funding to avoid financial difficulties. 
A)  operate in established, mature industries. 
B)  present financial statements indicating stronger than average cash flows. 
C)  are new with great profit potential. 
D)  require extra funding to avoid financial difficulties.

Question 18

A comptroller is responsible for the acquiring and managing of funds for an organization.

Accepted Answer

A) True 
 B)False

Question 19

Finance is the function in a business that acquires funds for the firm and manages those funds within the firm.

Accepted Answer

A) True 
 B)False

Question 20

To improve cash flow and profitability, effective managers attempt to minimize the firm's investment in inventory.

Accepted Answer

A) True 
 B)False

Exam 18: Financial Management

Which of these is backed only by the reputation of the issuer?

Bigbux Savings and Loan agreed to extend Appleman's Orchards $250,000 of unsecured short-term funds, contingent upon the bank having the funds available. This arrangement represents a

Based on the time value of money, $100 received a year from today is worth more than $100 received today.

Equity financing may involve the sale of stock (representing ownership) to new investors.

One important consideration for a firm accepting funds from a venture capitalist is the ownership interest demanded by the venture capital firm.

________ refers to the strategy of using borrowed funds to increase the rate of return for stockholders.

Commercial paper is unsecured short-term debt.

A firm's most recent financial statements often serve as the basis for predicting future sales, costs, and expenses.

The terms "2/10, net 30" indicate that the seller is offering a 20% discount for early payment.

A loan backed by collateral represents a(n)

The indenture terms refer to the agreements of a bond issue, such as how much interest it promises to pay and when it promises to repay the issue.

To reduce the time and expense of collecting their accounts receivable, some firms

The long-term financial forecast gives top management some sense of the profit potential of various strategic decisions.

A promissory note is a written contract between a supplier and a business customer, with a promise that customer will pay supplier a specified amount by a certain date.

Financial managers generally oppose credit sales because of the impact on cash flows.

Venture capital firms look to invest their funds in firms that

A comptroller is responsible for the acquiring and managing of funds for an organization.

Finance is the function in a business that acquires funds for the firm and manages those funds within the firm.

To improve cash flow and profitability, effective managers attempt to minimize the firm's investment in inventory.

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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