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Exam 18: Financial Management

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Question 1

True/False

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Most companies have the ready cash available to make large purchases.

A) True
B) False

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Question 2

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Which of the following activities is most likely to be performed by a financial manager?

A) design of a marketable product that satisfies an unmet need
B) identification of specific target markets for a firm's goods
C) preparation of the balance sheet and income statement for the firm
D) analysis of the tax implications of various managerial decisions

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

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Question 3

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While firms finance their long-term needs with debt financing, their short-term needs are served by equity financing.

As the chief financial officer (CFO) for a medium-sized service company, Cora is concerned about the possibility of temporary cash shortages. Given the irregular cash flows from seasonal sales, she wants to ensure that her company's bank will provide adequate funds to cover any potential cash flow problem. The best strategy to ease Cora's concern would be to arrange a revolving credit agreement with the bank.

A firm negotiates a(n) ________ with its bank. This arrangement gives the firm access to a specified amount of unsecured short-term funds, provided the bank has the funds available.

An unsecured corporate bond is known as a debenture bond.

Small businesses rely heavily on long-term financing.

Financial managers use data prepared by accountants to develop strategies for improving the financial performance of the firm.

Which of the following statements about taxes is accurate?

A ________ forecast predicts the revenues, costs, and expenses a firm will incur for a period longer than one year.

The first step in financial planning is to develop a budget to better control costs.

According to the box, Adapting to Change, most online loans are safe with a low interest rate.

Equity financing represents funds acquired from within the firm or through the sale of stock, representing ownership in the company.

Zachary is going to major in business. However, he has never had much interest in subjects with numbers. He would like to avoid taking any finance courses if possible. What should Zachary do?

A budget's primary purpose is to provide managers with a financial summary of past operations.

Rock Solid Concrete Company does not offer customers a cash discount for early payment of their accounts receivable. As a result, most customers wait to pay their bill on the last day before late penalties are charged. These customers apparently understand the

Trade credit is the practice of buying goods now and paying for them later.

Mort is seriously considering a major expansion in the size of his funeral home. The money spent on this type of project would be classified as a(n)

When Asher received a loan from Bigbux Bank, he was required to pledge his house and car as collateral. The money from the loan was used to start his new business, which unfortunately failed within 6 months. The bank can now claim Asher's house and car to satisfy its claim.

Which of the following statements is most accurate?