Question 1

An insurance company makes a profit by taking in more in premiums than it pays out to cover customer losses.

Accepted Answer

A) True 
 B)False

Question 2

What is the difference between a line of credit and a revolving credit agreement?

Accepted Answer

A)  A line of credit is normally used by charitable and public-sector organizations,while a revolving credit agreement is usually used by private-sector business firms. 
B)  More money can be borrowed with a line of credit than with a revolving credit agreement. 
C)  There is no guarantee that the money will be available when it is requested in a line of credit,but there is an agreement that it will be available when requested in a revolving credit agreement. 
D)  A line of credit is only obtainable from a credit union,while a revolving credit agreement is only obtainable from a bank. 
E)  All of these. 
A)  A line of credit is normally used by charitable and public-sector organizations,while a revolving credit agreement is usually used by private-sector business firms. 
B)  More money can be borrowed with a line of credit than with a revolving credit agreement. 
C)  There is no guarantee that the money will be available when it is requested in a line of credit,but there is an agreement that it will be available when requested in a revolving credit agreement. 
D)  A line of credit is only obtainable from a credit union,while a revolving credit agreement is only obtainable from a bank. 
E)  All of these.

Question 3

The business firm may elect to provide for long-term funding needs by retaining earnings instead of paying dividends to the shareholders.

Accepted Answer

A) True 
 B)False

Question 4

The two basic types of business risk are speculative risk and pure risk.

Accepted Answer

A) True 
 B)False

Question 5

The responsibilities of financial managers fall into three general categories: cash flow management,financial control,and financial planning.

Accepted Answer

A) True 
 B)False

Question 6

Working capital is calculated as follows:

Accepted Answer

A)  work-in-process inventory plus accounts receivable minus accounts payable. 
B)  long-term assets plus short-term assets. 
C)  inventory plus accounts receivable minus accounts payable. 
D)  goodwill plus current assets. 
E)  finished goods inventory plus cash. 
A)  work-in-process inventory plus accounts receivable minus accounts payable. 
B)  long-term assets plus short-term assets. 
C)  inventory plus accounts receivable minus accounts payable. 
D)  goodwill plus current assets. 
E)  finished goods inventory plus cash.

Question 7

Which of the following is not an accurate statement about long-term expenditures?

Accepted Answer

A)  Long-term expenditures represent an ongoing tie-up of the firm's funds. 
B)  Normally,long-term fixed assets are not sold or converted into cash. 
C)  Long-term expenditures usually require less planning than operating expenditures. 
D)  Acquisition of fixed assets requires a very large investment of company funds. 
E)  Long-term expenditures are usually more carefully planned than short-term outlays. 
A)  Long-term expenditures represent an ongoing tie-up of the firm's funds. 
B)  Normally,long-term fixed assets are not sold or converted into cash. 
C)  Long-term expenditures usually require less planning than operating expenditures. 
D)  Acquisition of fixed assets requires a very large investment of company funds. 
E)  Long-term expenditures are usually more carefully planned than short-term outlays.

Question 8

Commitment fees are usually required for revolving credit agreements,but not for lines of credit.

Accepted Answer

A) True 
 B)False

Question 9

Accounts payable is the largest single category of short-term debt for most companies.

Accepted Answer

A) True 
 B)False

Question 10

When constructing a financial plan,which one of the following questions does a financial manager not ask?

Accepted Answer

A)  What funds are needed to meet immediate plans? 
B)  When will the company need more funds? 
C)  Where can the company get the funds to meet its short-term needs? 
D)  Where can the company get the funds to meet its long-term needs? 
E)  How well will the stock market do next year? 
A)  What funds are needed to meet immediate plans? 
B)  When will the company need more funds? 
C)  Where can the company get the funds to meet its short-term needs? 
D)  Where can the company get the funds to meet its long-term needs? 
E)  How well will the stock market do next year?

Question 11

One of the four characteristics of an insurable risk is ________.This means that the loss must result from an accident,not an intentional act by the policy-holder.

Accepted Answer

A)  unconnectedness 
B)  verifiability 
C)  profitability 
D)  predictability 
E)  casualty 
A)  unconnectedness 
B)  verifiability 
C)  profitability 
D)  predictability 
E)  casualty

Question 12

Which of the following would require General Motors to publicly disclose the purpose for which funds are being sought?

Accepted Answer

A)  Long-term loan 
B)  Sale of preferred stock 
C)  Short-term loan 
D)  Sale of common stock 
E)  Sale of bonds 
A)  Long-term loan 
B)  Sale of preferred stock 
C)  Short-term loan 
D)  Sale of common stock 
E)  Sale of bonds

Question 13

What are two forms of insurance that apply to the death or departure of key employees or owners.

Accepted Answer

Key-person insurance

Question 14

The commitment fee in revolving credit agreements provides assurance to the lender that the borrower is committed to actually borrowing the money.

Accepted Answer

A) True 
 B)False

Question 15

Why is it in the firm's interest to withhold payment as long as it can?

Accepted Answer

A)  Withholding payment increases the value of the accounts payable that may be subsequently factored. 
B)  The longer the firm withholds payment,the longer it will have cash available for investments or other uses. 
C)  The longer it withholds interest,the higher the amount that can be factored from accounts receivable. 
D)  The longer it withholds payments the more it can raise the selling price of its own goods. 
E)  The longer it withholds funds,the lower the interest rate will be. 
A)  Withholding payment increases the value of the accounts payable that may be subsequently factored. 
B)  The longer the firm withholds payment,the longer it will have cash available for investments or other uses. 
C)  The longer it withholds interest,the higher the amount that can be factored from accounts receivable. 
D)  The longer it withholds payments the more it can raise the selling price of its own goods. 
E)  The longer it withholds funds,the lower the interest rate will be.

Question 16

Budgets are the backbone of financial control.

Accepted Answer

A) True 
 B)False

Question 17

Approximately how much money is lost to insurance fraud each year in Canada?

Accepted Answer

A)  More than $100 million 
B)  More than $300 million 
C)  More than $1 billion 
D)  More than $4 billion 
E)  More than $11 billion 
A)  More than $100 million 
B)  More than $300 million 
C)  More than $1 billion 
D)  More than $4 billion 
E)  More than $11 billion

Question 18

Which of the following terms would a firm use to speed up cash flow?

Accepted Answer

A)  1/10; net 60 
B)  1/10; net 30 
C)  3/10; net 30 
D)  2/10; net 60 
E)  2/10; net 30 
A)  1/10; net 60 
B)  1/10; net 30 
C)  3/10; net 30 
D)  2/10; net 60 
E)  2/10; net 30

Question 19

What are the differences among liability insurance,property insurance,and life insurance?

Accepted Answer

- liability insurance: covers losses res

Question 20

What is open-book credit?.

Accepted Answer

A gentlemen's agreement whereb

An insurance company makes a profit by taking in more in premiums than it pays out to cover customer losses.

What is the difference between a line of credit and a revolving credit agreement?

The business firm may elect to provide for long-term funding needs by retaining earnings instead of paying dividends to the shareholders.

The two basic types of business risk are speculative risk and pure risk.

The responsibilities of financial managers fall into three general categories: cash flow management,financial control,and financial planning.

Working capital is calculated as follows:

Which of the following is not an accurate statement about long-term expenditures?

Commitment fees are usually required for revolving credit agreements,but not for lines of credit.

Accounts payable is the largest single category of short-term debt for most companies.

When constructing a financial plan,which one of the following questions does a financial manager not ask?

One of the four characteristics of an insurable risk is ________.This means that the loss must result from an accident,not an intentional act by the policy-holder.

Which of the following would require General Motors to publicly disclose the purpose for which funds are being sought?

What are two forms of insurance that apply to the death or departure of key employees or owners.

The commitment fee in revolving credit agreements provides assurance to the lender that the borrower is committed to actually borrowing the money.

Why is it in the firm's interest to withhold payment as long as it can?

Budgets are the backbone of financial control.

Approximately how much money is lost to insurance fraud each year in Canada?

Which of the following terms would a firm use to speed up cash flow?

What are the differences among liability insurance,property insurance,and life insurance?

What is open-book credit?.

Understanding the Canadian Business System

Understanding the Environments of Business

Conducting Business Ethically and Responsibly

Understanding Entrepreneurship, small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Managing Human Resources

Understanding Labourmanagement Relations

Motivating and Leading Employees

Producing Goods and Services

Increasing Productivity and Quality

Managing Information Systems and Communication Technology

Understanding Accounting Issues

Understanding Marketing Processes and Consumer Behaviour

Developing and Promoting Goods and Services

Pricing and Distributing Goods and Services

Understanding Money and Banking

Understanding Securities and Investments

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Exam 20: Financial Decisions and Risk Management

An insurance company makes a profit by taking in more in premiums than it pays out to cover customer losses.

What is the difference between a line of credit and a revolving credit agreement?

The business firm may elect to provide for long-term funding needs by retaining earnings instead of paying dividends to the shareholders.

The two basic types of business risk are speculative risk and pure risk.

The responsibilities of financial managers fall into three general categories: cash flow management,financial control,and financial planning.

Working capital is calculated as follows:

Which of the following is not an accurate statement about long-term expenditures?

Commitment fees are usually required for revolving credit agreements,but not for lines of credit.

Accounts payable is the largest single category of short-term debt for most companies.

When constructing a financial plan,which one of the following questions does a financial manager not ask?

One of the four characteristics of an insurable risk is ________.This means that the loss must result from an accident,not an intentional act by the policy-holder.

Which of the following would require General Motors to publicly disclose the purpose for which funds are being sought?

What are two forms of insurance that apply to the death or departure of key employees or owners.

The commitment fee in revolving credit agreements provides assurance to the lender that the borrower is committed to actually borrowing the money.

Why is it in the firm's interest to withhold payment as long as it can?

Budgets are the backbone of financial control.

Approximately how much money is lost to insurance fraud each year in Canada?

Which of the following terms would a firm use to speed up cash flow?

What are the differences among liability insurance,property insurance,and life insurance?

What is open-book credit?.

Understanding the Canadian Business System

Understanding the Environments of Business

Conducting Business Ethically and Responsibly

Understanding Entrepreneurship, small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Managing Human Resources

Understanding Labourmanagement Relations

Motivating and Leading Employees

Producing Goods and Services

Increasing Productivity and Quality

Managing Information Systems and Communication Technology

Understanding Accounting Issues

Understanding Marketing Processes and Consumer Behaviour

Developing and Promoting Goods and Services

Pricing and Distributing Goods and Services

Understanding Money and Banking

Understanding Securities and Investments

Filters