Question 1

With plans to build a $50 million theme park,Lakeview Enterprises intends to finance this project through the sale of additional shares of ownership in their firm.Selling new shares of stock represents ___________ financing.

Accepted Answer

A)  retained
B)  debt
C)  initial offering
D)  equityE) None of the above
F) All of the above

Question 2

A promissory note is a written contract with a promise that one party will pay a specified amount to another party.

Accepted Answer

A) True 
 B)False

Question 3

White Palace operates a chain of restaurants specializing in hamburgers.The firm plans to expand to new communities.The acquisition of land and construction of new restaurants represent capital expenditures.

Accepted Answer

A) True 
 B)False

Question 4

There is actually a stronger relationship between finance and marketing than there is between finance and accounting.

Accepted Answer

A) True 
 B)False

Question 5

Nicole is a financial manager.Her responsibilities include all of the following except preparing:

Accepted Answer

A)  a cash flow analysis.
B)  financial statements.
C)  for the acquisition of funds.
D)  for the expenditure of funds.E) B) and C)
F) All of the above

Question 6

Why are preferred shares often referred to as a hybrid investment?

Accepted Answer

Because they have ch...

Question 7

Long-term financing is used to buy long-lived assets,such as buildings and equipment.

Accepted Answer

A) True 
 B)False

Question 8

Acquiring and storing inventory represents a sizable expenditure for many businesses.

Accepted Answer

A) True 
 B)False

Question 9

A(n) __________ is responsible for verifying that the accounting procedures within a firm are consistent with established accounting principles.

Accepted Answer

A)  managerial accountant
B)  tax accountant
C)  bookkeeper
D)  internal auditorE) B) and D)
F) All of the above

Question 10

Capstone Financial Services is considering the purchase and installation of an expensive computer network.This is the type of expenditure that would be included in a(n) :

Accepted Answer

A)  capital budget.
B)  cash budget.
C)  operating budget.
D)  asset budget.E) B) and C)
F) All of the above

Question 11

Equity financing refers to the money a firm receives from the sale of bonds.

Accepted Answer

A) True 
 B)False

Question 12

Budgets are prepared after the financial forecasts are developed.

Accepted Answer

A) True 
 B)False

Question 13

An effective budget requires:

Accepted Answer

A)  a successful advertising campaign.
B)  accurate forecasts.
C)  management approval.
D)  stakeholder consensus.E) A) and D)
F) All of the above

Question 14

Budgets assist managers in performing the functions of planning and control.

Accepted Answer

A) True 
 B)False

Question 15

The first step in the financial planning process is:

Accepted Answer

A)  forecasting financial needs.
B)  preparing financial statements.
C)  developing budgets.
D)  establishing financial control.E) None of the above
F) C) and D)

Question 16

A cash flow forecast provides managers with an estimate of the profit potential of different strategic plans.

Accepted Answer

A) True 
 B)False

Question 17

Charging interest on past due customer accounts reflects that:

Accepted Answer

A)  credit sales cost more to manage than they are worth.
B)  credit customers receive preferential treatment.
C)  money has a time value.
D)  government regulations protect customers who are late in making payments.E) A) and B)
F) All of the above

Question 18

Equity financing comes from the ________ of the firm.

Accepted Answer

A)  creditors
B)  employees
C)  suppliers
D)  ownersE) None of the above
F) B) and C)

Question 19

Which of the following companies faces the problem of undercapitalization?

Accepted Answer

A)  A large corporation that has been hit with a major lawsuit because one of its products has a design flaw that has led to serious injuries.
B)  A small new company struggling because it has insufficient start-up funds.
C)  A medium-sized company that has decided to buy out a smaller competitor.
D)  An electric utility that has recently experienced a significant increase in the cost of coal and labour.E) A) and B)
F) B) and D)

Question 20

Obtaining long-term financing:

Accepted Answer

A)  occupies the majority of a finance manager's day.
B)  is normally provided by trade credit.
C)  is generally not available to small businesses.
D)  is available through pledging accounts receivable.E) B) and D)
F) All of the above

Exam 17: Financial Management

The first step in the financial planning process is:

Correct AnswerverifiedShow Answer

Budgets assist managers in performing the functions of planning and control.

Correct AnswerverifiedShow Answer

There is actually a stronger relationship between finance and marketing than there is between finance and accounting.

Correct AnswerverifiedShow Answer

Why are preferred shares often referred to as a hybrid investment?

Correct AnswerverifiedBecause they have ch...View AnswerShow Answer

Nicole is a financial manager.Her responsibilities include all of the following except preparing:

Correct AnswerverifiedShow Answer

Equity financing comes from the ________ of the firm.

Correct AnswerverifiedShow Answer

A cash flow forecast provides managers with an estimate of the profit potential of different strategic plans.

Correct AnswerverifiedShow Answer

Charging interest on past due customer accounts reflects that:

Correct AnswerverifiedShow Answer

A promissory note is a written contract with a promise that one party will pay a specified amount to another party.

Correct AnswerverifiedShow Answer

White Palace operates a chain of restaurants specializing in hamburgers.The firm plans to expand to new communities.The acquisition of land and construction of new restaurants represent capital expenditures.

Correct AnswerverifiedShow Answer

A(n) __________ is responsible for verifying that the accounting procedures within a firm are consistent with established accounting principles.

Correct AnswerverifiedShow Answer

Capstone Financial Services is considering the purchase and installation of an expensive computer network.This is the type of expenditure that would be included in a(n) :

Correct AnswerverifiedShow Answer

Long-term financing is used to buy long-lived assets,such as buildings and equipment.

Correct AnswerverifiedShow Answer

Equity financing refers to the money a firm receives from the sale of bonds.

Correct AnswerverifiedShow Answer

An effective budget requires:

Correct AnswerverifiedShow Answer

Acquiring and storing inventory represents a sizable expenditure for many businesses.

Correct AnswerverifiedShow Answer

With plans to build a $50 million theme park,Lakeview Enterprises intends to finance this project through the sale of additional shares of ownership in their firm.Selling new shares of stock represents ___________ financing.

Correct AnswerverifiedShow Answer

Obtaining long-term financing:

Correct AnswerverifiedShow Answer

Which of the following companies faces the problem of undercapitalization?

Correct AnswerverifiedShow Answer

Budgets are prepared after the financial forecasts are developed.

Correct AnswerverifiedShow Answer

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Because they have ch...
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