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Exam 18: Financial Management

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Question 31

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Preferred Pet Care, Inc., plans to purchase a second mobile unit next year that will cost an estimated $55,000. The finance manager will include this projected purchase in the company's capital budget.

A) True
B) False

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Question 32

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___________ offer short-term secured loans to high-risk borrowers. These loans usually require collateral

A) Commercial finance companies
B) Reserve banks
C) Credit brokers
D) Investment bankers

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

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Question 33

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Financial managers examine the data prepared by accountants and make recommendations to top management regarding strategies for improving the financial performance of the company.

Debt financing refers to funds acquired from the profitable operations of a firm or through the sale of ownership in the firm.

Which of the following would be most helpful for a company looking to know the income potential during the next five years?

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

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

An example of a firm using leverage to its advantage is a firm that borrows funds at 9% and invests those funds to earn 14%.

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

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

Corporations that issue stock to raise long-term funds accept the legal obligation to repay the amount borrowed.

Bill is a financial manager for Great View Eye Care, a local chain of Milwaukee retail stores offering glasses and optical health care. The majority of Bill's day likely involves efforts to locate and secure long-term financing to fund Great View Eye Care's capital expenditures.

When using ________ financing, the company incurs a legal obligation to repay the amount borrowed

One step in the financial planning process is to establish financial control procedures that allow managers to monitor the organization's performance.

A line of credit represents a guarantee from a bank to lend a firm a given amount of money.

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

A capital budget highlights a firm's spending plans for major assets, such as property, buildings, and equipment.

Acquiring funds through equity financing requires the firm to pay annual dividends.

The finance manager at AllSports Communication has asked his assistant, Ben, to prepare the ________ budget. Ben will gather as much information as possible by utilizing the firm's other budgets and any documents that summarize proposed financial activities

The rate of return a company must earn to meet the demands of its lenders and expectations of its equity holders is called: