Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Pages and Pages Booksellers is seeking financing to fund the opening of two new locations in nearby college towns. There is no need to consider debt financing for this project. It will require a sizeable investment in equity funds.

Accepted Answer

A) True 
 B)False

Question 3

Charlie Chicken Restaurants announced it plans to issue $300 million in debenture bonds to fund the expansion of its fast food chain of restaurants. In financial terms, this means

Accepted Answer

A)   the corporation will borrow $300 million worth of long-term financing. The bond issue will not carry any collateral.
B)   the corporation will issue $300 million worth of equity financing. The bond issue will be backed by the property and buildings purchased with the funds.
C)   the corporation will borrow $300 million worth of long-term financing. The issue will be backed by the property and buildings purchased with the funds.
D)   the corporation will issue $300 million worth of interest-free bonds. Financiers will be paid from the revenues created by the individual franchises.E) All of the above
F) C) and D)

Question 4

Acquiring funds through debt financing actually decreases the overall risk of the firm.

Accepted Answer

A) True 
 B)False  False

Question 5

Snowy Mountain Ski Lodge's cash budget for the month of March 2019 shows a negative amount. Due to the fact that the months of January and February were quite lucrative and showed positive amounts, the finance manager will not borrow any money in the short term to cover for March's deficit.

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 difficulties.E) A) and B)
F) A) and C)

Question 7

Business organizations always use long-term financing for (both) short-term and long-term needs, but they never use short-term financing for (both) short-term and long-term needs.

Accepted Answer

A) True 
 B)False

Question 8

An internal auditor is responsible for paying the company's bills and collecting overdue payments from customers.

Accepted Answer

A) True 
 B)False

Question 9

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

Question 10

The main objective of financial control is to establish priorities for the purchase of plant and equipment.

Accepted Answer

A) True 
 B)False

Question 11

Treetop Nursery offers customer credit terms of 2/15 net 30. This gives customers a

Accepted Answer

A)   15 percent discount if they pay in two days.
B)   2 percent discount if they pay in thirty days.
C)   2 percent discount if they pay in fifteen days.
D)   15 percent discount if they pay in thirty days.E) A) and C)
F) B) and C)

Question 12

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.

Accepted Answer

A)   asset drawing account
B)   capital drawing agreement
C)   reserve account
D)   line of creditE) All of the above
F) A) and D)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

A budget reflects management's expectations for revenues and allocates the use of specific resources throughout the firm.

Accepted Answer

A) True 
 B)False  True

Question 16

Venture capital is money that is invested in new or emerging companies that are perceived as having great profit potential.

Accepted Answer

A) True 
 B)False

Question 17

Finance managers need funds for capital purchases, but seldom for the day-to-day operations.

Accepted Answer

A) True 
 B)False  False

Question 18

A firm's short-term forecast helps top management in preparing a company budget.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following presents an effective technique to improve cash management?

Accepted Answer

A)   Speed up cash payments and slow down cash collections.
B)   Speed up cash collections and slow down cash payments.
C)   Speed up both collections and payments of cash.
D)   Slow down both the payment and collections of cash.E) A) and D)
F) None of the above

Question 20

Factoring represents the least expensive way for a firm to raise short-term funds.

Accepted Answer

A) True 
 B)False

Exam 18: Financial Management

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

Correct AnswerverifiedShow Answer

Pages and Pages Booksellers is seeking financing to fund the opening of two new locations in nearby college towns. There is no need to consider debt financing for this project. It will require a sizeable investment in equity funds.

Correct AnswerverifiedShow Answer

Charlie Chicken Restaurants announced it plans to issue $300 million in debenture bonds to fund the expansion of its fast food chain of restaurants. In financial terms, this means

Correct AnswerverifiedShow Answer

Acquiring funds through debt financing actually decreases the overall risk of the firm.

Correct AnswerverifiedFalse

Snowy Mountain Ski Lodge's cash budget for the month of March 2019 shows a negative amount. Due to the fact that the months of January and February were quite lucrative and showed positive amounts, the finance manager will not borrow any money in the short term to cover for March's deficit.

Correct AnswerverifiedShow Answer

Venture capital firms look to invest their funds in firms that

Correct AnswerverifiedShow Answer

Business organizations always use long-term financing for (both) short-term and long-term needs, but they never use short-term financing for (both) short-term and long-term needs.

Correct AnswerverifiedShow Answer

An internal auditor is responsible for paying the company's bills and collecting overdue payments from customers.

Correct AnswerverifiedShow Answer

The overall objective of financial planning is to

Correct AnswerverifiedShow Answer

The main objective of financial control is to establish priorities for the purchase of plant and equipment.

Correct AnswerverifiedShow Answer

Treetop Nursery offers customer credit terms of 2/15 net 30. This gives customers a

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A budget reflects management's expectations for revenues and allocates the use of specific resources throughout the firm.

Correct AnswerverifiedTrue

Venture capital is money that is invested in new or emerging companies that are perceived as having great profit potential.

Correct AnswerverifiedShow Answer

Finance managers need funds for capital purchases, but seldom for the day-to-day operations.

Correct AnswerverifiedFalse

A firm's short-term forecast helps top management in preparing a company budget.

Correct AnswerverifiedShow Answer

Which of the following presents an effective technique to improve cash management?

Correct AnswerverifiedShow Answer

Factoring represents the least expensive way for a firm to raise short-term funds.

Correct AnswerverifiedShow Answer

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