Question 1

Money that will be used for one year or less is called

Accepted Answer

A)  open credit. 
B)  equity capital. 
C)  short-term financing. 
D)  nonsecured financing. 
E)  long-term financing.

Question 2

Commercial paper short-term financing is usually available only to large firms.

Accepted Answer

A) True 
 B)False

Question 3

Morgan's Transition
Morgan is currently a manager of a small financial planning firm. He is seeking a new career with a large corporation in the banking industry. He recently applied for the financial manager opening at G & T Bank. He is concerned that the transition from his small firm to a large corporation will be difficult. To better prepare himself for this change, he has decided to enroll in a few business classes to strengthen his understanding of corporate finance. The business classes have proven to be a valuable tool for learning the critical skills needed to fully understand a financial plan, equity financing, and debt financing. Morgan now believes he has strengthened his competitive advantage in his quest for the job.
-Refer to Morgan's Transition. Having taken the classes, Morgan should describe cash flow as which of the following?

Accepted Answer

A)  The movement of money from one account to another 
B)  Money that will be used for one year or less 
C)  The movement of money into and out of an organization 
D)  Money that will be used for longer than one year 
E)  Proceeds from any sales transactions only

Question 4

Sanchez Company sells its garden hoses to Gary's Lawn and Garden Center but does not require Gary's to pay for them right away. If this is a standard trade-credit agreement, Gary's will have to pay for the garden hoses in

Accepted Answer

A)  30 to 60 days. 
B)  1 to 20 days. 
C)  45 to 90 days. 
D)  60 to 180 days. 
E)  as many days as it takes to sell the merchandise.

Question 5

As a stockholder in 3M, Doug knows that corporations are required by law to have a stockholder meeting

Accepted Answer

A)  never. 
B)  once a quarter. 
C)  once a year. 
D)  every other year. 
E)  when a special need arises.

Question 6

MCB Company experienced a significant increase in sales as a result of its new promotional campaign. Yesterday, however, it realized that because most of those sales were on credit, it did not have enough money in the bank to pay this month's bills. MCB can take care of this situation temporarily by

Accepted Answer

A)  obtaining long-term financing. 
B)  disallowing credit sales. 
C)  selling commercial drafts. 
D)  obtaining short-term financing. 
E)  issuing stock.

Question 7

The amounts owed to a firm by its customers are called

Accepted Answer

A)  factors. 
B)  revolving credit agreements. 
C)  dividends. 
D)  accounts receivable. 
E)  commercial drafts.

Question 8

Long-term loans and the sale of corporate bonds are common sources of equity financing.

Accepted Answer

A) True 
 B)False

Question 9

Kliting Co. is concerned with whether or not it will be able to pay its bills with money coming in from sales. It would be helpful for Kliting to prepare a ____ to better understand its needs.

Accepted Answer

A)  capital budget 
B)  zero-based budget 
C)  cash budget 
D)  loan application 
E)  revolving credit agreement

Question 10

McGines, Inc.
Sam McGines, CEO of McGines, Inc., decided that upon his retirement, he would elect his son Derrick to become the new CEO. Sam thought it would be a good idea to have Derrick shadow him at work to understand the roles and responsibilities of a CEO. Derrick shadowed his father for months in order to learn every aspect of the business. Sam knew that the best way for Derrick to learn was to actually perform some of the tasks he did on a daily basis, rather than simply describe them. The company generally focused on short-term financing, and Sam felt that it was important for Derrick to understand the different types of financing. Derrick learned about the type of bonds that the company usually offered to raise capital. These bonds allow the purchasers of the bond to keep them until maturity. Derrick also learned the process of obtaining bonds and the various types of long-term financing methods. Job shadowing was indeed a worthwhile experience for Derrick.
-Refer to McGines, Inc. If a client asks, Derrick should be able to identify that ____ is the type of stock the owner may exchange for a specified number of shares of common stock.

Accepted Answer

A)  convertible common stock 
B)  convertible preferred stock 
C)  preferred stock 
D)  common stock 
E)  IPO

Question 11

The type of corporate ownership that has first claim on profits and assets is called a

Accepted Answer

A)  bondholder. 
B)  preferred stockholder. 
C)  creditor. 
D)  common stockholder. 
E)  board of directors.

Question 12

Erras Corporation issued 6 percent preferred stock with a par value of $30. The annual dividend amount per share is

Accepted Answer

A)  $1.80. 
B)  $5.00. 
C)  $18.00. 
D)  $0.02. 
E)  $2.00.

Question 13

Corporate profits reinvested in the business are called retained earnings.

Accepted Answer

A) True 
 B)False

Question 14

Sierra purchases a corporate bond from Mattel. On the bond it states that Sierra will receive her money back on February 15, 2022. This is the bond's ____ date.

Accepted Answer

A)  declaration 
B)  maturity 
C)  conversion 
D)  redemption 
E)  expiration

Question 15

Sara Lee Corporation is a large conglomerate of businesses participating in a variety of industries. A few years ago, Sara Lee was considering the purchase of Bryan Foods. If Bryan Foods represented a tremendous opportunity to make the company more successful, Sara Lee may, as a last resort, have considered

Accepted Answer

A)  seeking short-term financing. 
B)  using trade credit to pay for Bryan Foods. 
C)  using future sales revenues for the purchase of Bryan Foods.. 
D)  sharing the idea with competitors as a possible joint venture.. 
E)  selling assets from another division to pay for Bryan Foods.

Question 16

Dillon Wholesale Foods allows retailers to purchase merchandise using trade credit. For Dillon, this type of transaction

Accepted Answer

A)  is written off as a bad-debt expense. 
B)  is an unusual type of transaction between a wholesaler and retailers. 
C)  should be paid within thirty to sixty days. 
D)  is referred to as a notes payable account by Dillon's accountants. 
E)  creates a liability for Dillon Wholesale.

Question 17

The NASDAQ only carries small company's stocks; by regulation, large firms' stock must trade on the NYSE, not on the NASDAQ.

Accepted Answer

A) True 
 B)False

Question 18

Some equity capital generally is used to start a

Accepted Answer

A)  sole proprietorship only. 
B)  partnership only. 
C)  corporation only. 
D)  business regardless of its legal form. 
E)  cooperative only.

Question 19

Interest on corporate bonds is paid quarterly.

Accepted Answer

A) True 
 B)False

Question 20

It is not necessary to give most lenders a current business plan or audited financial statements when requesting a long-term business loan.

Accepted Answer

A) True 
 B)False

Exam 19: Mastering Financial Management

Money that will be used for one year or less is called

Commercial paper short-term financing is usually available only to large firms.

Sanchez Company sells its garden hoses to Gary's Lawn and Garden Center but does not require Gary's to pay for them right away. If this is a standard trade-credit agreement, Gary's will have to pay for the garden hoses in

As a stockholder in 3M, Doug knows that corporations are required by law to have a stockholder meeting

The amounts owed to a firm by its customers are called

Long-term loans and the sale of corporate bonds are common sources of equity financing.

Kliting Co. is concerned with whether or not it will be able to pay its bills with money coming in from sales. It would be helpful for Kliting to prepare a ____ to better understand its needs.

The type of corporate ownership that has first claim on profits and assets is called a

Erras Corporation issued 6 percent preferred stock with a par value of $30. The annual dividend amount per share is

Corporate profits reinvested in the business are called retained earnings.

Sierra purchases a corporate bond from Mattel. On the bond it states that Sierra will receive her money back on February 15, 2022. This is the bond's ____ date.

Dillon Wholesale Foods allows retailers to purchase merchandise using trade credit. For Dillon, this type of transaction

The NASDAQ only carries small company's stocks; by regulation, large firms' stock must trade on the NYSE, not on the NASDAQ.

Some equity capital generally is used to start a

Interest on corporate bonds is paid quarterly.

It is not necessary to give most lenders a current business plan or audited financial statements when requesting a long-term business loan.