Question 1

Trade credit means the seller will sell and deliver products and/or services to the buyer,with the understanding that the buyer will pay for these products and/or services at a later date.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following companies is undercapitalized?

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 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 laborE) A) and B)
F) None of the above

Question 3

To secure financing for a planned expansion,Ohio Electronics borrowed $400,000 from King Finance.The ________ loan agreement requires that Ohio Electronics provide the title to their factory as collateral.

Accepted Answer

A)  recapitalization
B)  secured
C)  pledged
D)  minorityE) A) and B)
F) A) and C)

Question 4

The importance of financial managers to firms with large cash inflows is greater than for firms with smaller cash flows.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 difficultiesE) All of the above
F) B) and D)

Question 7

The terms of the agreement in a bond issue are referred to as the:

Accepted Answer

A)  articles of the issue.
B)  terms of indebtedness.
C)  bond specifications.
D)  indenture terms.E) A) and D)
F) A) and C)

Question 8

Financial managers understand the time value of money.They try to maximize cash expenditures,as opposed to minimizing cash expenditures.

Accepted Answer

A) True 
 B)False

Question 9

Short-term financing refers to borrowed funds that must be repaid in a year or less.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following organizations would be most likely to acquire short-term funding by issuing commercial paper?

Accepted Answer

A)  A well known,financially stable corporation
B)  A small business that is unable to qualify for loans from commercial banks
C)  A firm with a significant percentage of current assets held as accounts receivable
D)  A company that prefers equity financing to obtain short-term fundsE) B) and C)
F) A) and C)

Question 11

To be effective,budgets are prepared independently of organizational forecasts.

Accepted Answer

A) True 
 B)False

Question 12

A less established company,or a company with a high debt to equity ratio would be considered a riskier investment to the lender.Which of the following principles attests to this axiom?

Accepted Answer

A)  Direct relationship principle
B)  Compensating balance concept
C)  Risk/return trade-off
D)  Cost-benefit analysisE) B) and D)
F) A) and B)

Question 13

Businesses acquire long-term financing from two major sources:

Accepted Answer

A)  debt financing and government funds.
B)  equity financing and trade credit.
C)  retained earnings and commercial paper.
D)  debt financing and equity financing.E) A) and B)
F) B) and C)

Question 14

_________ offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public with the promise of repayment within 270 days.

Accepted Answer

A)  Trade credit
B)  A line of credit
C)  Factoring
D)  Commercial paperE) A) and B)
F) None of the above

Question 15

To be effective,an internal auditor must be critical of any improprieties or deficiencies found in the financial activities of the firm.

Accepted Answer

A) True 
 B)False

Question 16

What are two major forms of debt financing? Describe and differentiate between the two types.

Accepted Answer

The two forms of debt financing are 1)se...

Question 17

A share of stock represents a company-issued IOU including a promise to repay on a certain date.

Accepted Answer

A) True 
 B)False

Question 18

__________ 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)  PledgingE) B) and C)
F) B) and D)

Question 19

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) A) and C)
F) A) and B)

Question 20

If a company secures a three year bank loan,it is considered __________.

Accepted Answer

A)  short-term financing
B)  asset funding
C)  liability funding
D)  long-term financingE) None of the above
F) All of the above

Exam 18: Financial Management

Trade credit means the seller will sell and deliver products and/or services to the buyer,with the understanding that the buyer will pay for these products and/or services at a later date.

Correct AnswerverifiedShow Answer

To secure financing for a planned expansion,Ohio Electronics borrowed $400,000 from King Finance.The ________ loan agreement requires that Ohio Electronics provide the title to their factory as collateral.

Correct AnswerverifiedShow Answer

To be effective,budgets are prepared independently of organizational forecasts.

Correct AnswerverifiedShow Answer

Which of the following organizations would be most likely to acquire short-term funding by issuing commercial paper?

Correct AnswerverifiedShow Answer

What are two major forms of debt financing? Describe and differentiate between the two types.

Correct AnswerverifiedThe two forms of debt financing are 1)se...View AnswerShow Answer

Venture capital firms look to invest their funds in firms that __________.

Correct AnswerverifiedShow Answer

Which of the following companies is undercapitalized?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

_________ offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public with the promise of repayment within 270 days.

Correct AnswerverifiedShow Answer

The importance of financial managers to firms with large cash inflows is greater than for firms with smaller cash flows.

Correct AnswerverifiedShow Answer

Businesses acquire long-term financing from two major sources:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A share of stock represents a company-issued IOU including a promise to repay on a certain date.

Correct AnswerverifiedShow Answer

Financial managers understand the time value of money.They try to maximize cash expenditures,as opposed to minimizing cash expenditures.

Correct AnswerverifiedShow Answer

To be effective,an internal auditor must be critical of any improprieties or deficiencies found in the financial activities of the firm.

Correct AnswerverifiedShow Answer

A less established company,or a company with a high debt to equity ratio would be considered a riskier investment to the lender.Which of the following principles attests to this axiom?

Correct AnswerverifiedShow Answer

The first step in the financial planning process is:

Correct AnswerverifiedShow Answer

The terms of the agreement in a bond issue are referred to as the:

Correct AnswerverifiedShow Answer

If a company secures a three year bank loan,it is considered __________.

Correct AnswerverifiedShow Answer

Short-term financing refers to borrowed funds that must be repaid in a year or less.

Correct AnswerverifiedShow Answer

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The two forms of debt financing are 1)se...
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