Question 1

Inability to attract and retain qualified employees is one of the most common ways for a firm to fail financially.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Commercial finance companies normally charge lower rates on short-term loans than those charged by commercial banks.

Accepted Answer

A) True 
 B)False

Question 4

Much of a financial manager's day-to-day activities involve managing the short-term financial needs of the firm.

Accepted Answer

A) True 
 B)False

Question 5

The most widely used source of short-term funding is:

Accepted Answer

A)  trade credit.
B)  a line of credit.
C)  factoring.
D)  commercial finance companies.E) A) and B)
F) B) and D)

Question 6

An effective budget requires:

Accepted Answer

A)  a successful advertising campaign.
B)  accurate forecasts.
C)  management approval.
D)  stakeholder consensus.E) A) and C)
F) None of the above

Question 7

__________ represent a favorable source of meeting long-term financing needs because there are no interest payments,dividends,or underwriting fees required when using this source.

Accepted Answer

A)  Secured bonds
B)  Debentures
C)  Warrants
D)  Retained earningsE) A) and B)
F) B) and C)

Question 8

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) A) and C)
F) C) and D)

Question 9

Jackson Plumbing,a medium-sized company,wants to guarantee that it can obtain short-term funds to meet unexpected future cash needs.Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should:

Accepted Answer

A)  issue commercial paper as needed.
B)  request that the firm's board of directors approve an issue of additional shares of common stock.
C)  arrange for a revolving credit agreement with Jackson Plumbing's commercial bank.
D)  eliminate credit sales to improve their cash inflows and reduce the firm's investment in accounts receivable.E) B) and D)
F) All of the above

Question 10

An effective strategy to manage cash flows requires retail businesses to eliminate their inventory.

Accepted Answer

A) True 
 B)False

Question 11

The overall objective of financial planning is to:

Accepted Answer

A)  forecast the impact of technological trends.
B)  prepare financial statements for managers.
C)  optimize the firm's profitability.
D)  establish budgets for financial control.E) None of the above
F) B) and C)

Question 12

One of the primary factors that influences the interest rate a firm pays on long-term loans is the:

Accepted Answer

A)  Intensity of competition the firm faces with new products.
B)  Current level of government regulations.
C)  General level of market interest rates.
D)  Exchange rate of the euro to the U.S.dollar.E) A) and D)
F) B) and D)

Question 13

When using equity financing,firms incur a legal obligation to repay the amount of money invested.

Accepted Answer

A) True 
 B)False

Question 14

Delaware Aluminum uses its stock of unsold aluminum products as collateral for a short-term loan.This arrangement represents:

Accepted Answer

A)  a secured loan.
B)  a revolving credit agreement.
C)  factoring.
D)  an unsecured loan.E) None of the above
F) A) and C)

Question 15

Ariel,a recent graduate in finance from a well-known university,was hired by a large corporation to work in tax management.Ariel's goal is:

Accepted Answer

A)  To prepare the company's tax returns.
B)  To develop ways to increase taxes in order to enhance the bottom line.
C)  To minimize the firm's tax consequences.
D)  To be the firm's tax collector.E) B) and D)
F) None of the above

Question 16

To reduce the time and expense of collecting their accounts receivable,some firms:

Accepted Answer

A)  extend credit to new customers.
B)  offer extended payment plans to existing customers.
C)  adopt a just-in-time inventory policy.
D)  accept bank credit cards.E) B) and C)
F) None of the above

Question 17

The owners of Preferred Pet Care,Inc. ,a mobile pet care company,have approached you about obtaining long-term financing.They must choose between debt financing and equity financing.Which of the following statements reflects accurate information that you share with this company?

Accepted Answer

A)  The sale of stock (equity financing) will result in a greater pool of funds.Debt financing is less risky and increases leverage,but it seldom results in the owners securing the total amount of funds needed.
B)  The sale of bonds is more risky because they always require collateral and an interest rate that exceeds the cost of capital.
C)  The interest paid to banks and bondholders is tax deductible.
D)  Equity financing usually comes with a lower cost of capital.E) A) and B)
F) A) and C)

Question 18

Mark manages credit and collections at Polly Parrot Pet Supplies,Inc.He is responsible for accounts receivable and accounts payable.These activities suggest that his job is in financial management.

Accepted Answer

A) True 
 B)False

Question 19

After earning $30 million in net income,Rolatrim Industries distributed $5 million in dividends to their stockholders.The board of directors of the firm decided to invest the remaining $25 million back into the business.This $25 million reinvestment of profits represents:

Accepted Answer

A)  a trust fund.
B)  retained earnings.
C)  preferred capital.
D)  mutual funds.E) A) and B)
F) B) and C)

Question 20

By borrowing $10 million from First Dayton Bank,Hi-Lo Industries is utilizing _________.

Accepted Answer

A)  equity financing
B)  debt financing
C)  liability funding
D)  asset fundingE) A) and B)
F) All of the above

Exam 18: Financial Management

When using equity financing,firms incur a legal obligation to repay the amount of money invested.

Correct AnswerverifiedShow Answer

An effective strategy to manage cash flows requires retail businesses to eliminate their inventory.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Inability to attract and retain qualified employees is one of the most common ways for a firm to fail financially.

Correct AnswerverifiedShow Answer

One of the primary factors that influences the interest rate a firm pays on long-term loans is the:

Correct AnswerverifiedShow Answer

Much of a financial manager's day-to-day activities involve managing the short-term financial needs of the firm.

Correct AnswerverifiedShow Answer

An effective budget requires:

Correct AnswerverifiedShow Answer

The most widely used source of short-term funding is:

Correct AnswerverifiedShow Answer

Delaware Aluminum uses its stock of unsold aluminum products as collateral for a short-term loan.This arrangement represents:

Correct AnswerverifiedShow Answer

Jackson Plumbing,a medium-sized company,wants to guarantee that it can obtain short-term funds to meet unexpected future cash needs.Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should:

Correct AnswerverifiedShow Answer

By borrowing $10 million from First Dayton Bank,Hi-Lo Industries is utilizing _________.

Correct AnswerverifiedShow Answer

The owners of Preferred Pet Care,Inc. ,a mobile pet care company,have approached you about obtaining long-term financing.They must choose between debt financing and equity financing.Which of the following statements reflects accurate information that you share with this company?

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

Mark manages credit and collections at Polly Parrot Pet Supplies,Inc.He is responsible for accounts receivable and accounts payable.These activities suggest that his job is in financial management.

Correct AnswerverifiedShow Answer

__________ represent a favorable source of meeting long-term financing needs because there are no interest payments,dividends,or underwriting fees required when using this source.

Correct AnswerverifiedShow Answer

To reduce the time and expense of collecting their accounts receivable,some firms:

Correct AnswerverifiedShow Answer

After earning $30 million in net income,Rolatrim Industries distributed $5 million in dividends to their stockholders.The board of directors of the firm decided to invest the remaining $25 million back into the business.This $25 million reinvestment of profits represents:

Correct AnswerverifiedShow Answer

Ariel,a recent graduate in finance from a well-known university,was hired by a large corporation to work in tax management.Ariel's goal is:

Correct AnswerverifiedShow Answer

The overall objective of financial planning is to:

Correct AnswerverifiedShow Answer

Commercial finance companies normally charge lower rates on short-term loans than those charged by commercial banks.

Correct AnswerverifiedShow Answer

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