Question 1

The use of borrowed funds to increase the return on owners' equity is called

Accepted Answer

A)   financial planning.
B)   investment management.
C)   management leverage.
D)   financial leverage.
E)   return on leverage.F) C) and E)
G) A) and E)

Question 2

When compared to common stockholders,preferred stockholders have a priority claim on corporate assets.

Accepted Answer

A) True 
 B)False

Question 3

Inventories and accounts receivable are the assets most commonly used as collateral for short-term financing.

Accepted Answer

A) True 
 B)False

Question 4

As a stockholder in the Great Plants Company,you have the right to vote on all of the following issues except

Accepted Answer

A)   amendments to the corporate charter.
B)   the price the firm charges for its products.
C)   the sale of certain assets.
D)   new issues of preferred stock or bonds.
E)   changes in the amount of common stock issued.F) B) and E)
G) B) and D)

Question 5

Your small business has been very successful and has amassed a large amount of accounts receivable from reputable firms,but you find yourself short of ready cash to replace inventory.How could a factor help you?

Accepted Answer

A factor,a firm that specializes in buyi...

Question 6

For the majority of businesses,newly-proposed financial reforms by the U.S.House of Representatives and the Senate will likely increase the time and cost of obtaining financing.

Accepted Answer

A) True 
 B)False

Question 7

Short-term business loans must be repaid within 5 years.

Accepted Answer

A) True 
 B)False

Question 8

Money received from the sale of shares of ownership in a business is called

Accepted Answer

A)   sales revenue.
B)   debt capital.
C)   equity capital.
D)   factor proceeds.
E)   cash flow.F) D) and E)
G) C) and D)

Question 9

The most popular form of short-term financing is

Accepted Answer

A)   bank loans.
B)   trade credit.
C)   sale of bonds.
D)   sale of stock.
E)   loans from insurance companies.F) A) and E)
G) B) and D)

Question 10

Commercial paper is short-term promissory notes issued by large corporations.

Accepted Answer

A) True 
 B)False

Question 11

Larry Patterson,president of Patterson Manufacturing,suspects that the managers of two departments have been padding their budgets for the last three years.To eliminate this problem,Larry would

Accepted Answer

A)   fire the managers.
B)   hire an efficiency expert.
C)   hire a new accountant.
D)   use zero-base budgeting.
E)   use traditional budgeting.F) A) and B)
G) A) and C)

Question 12

A firm with questionable credit should expect to pay the prime interest rate minus 2 percent.

Accepted Answer

A) True 
 B)False

Question 13

What do experts consider the key to securing a long-term business loan? Explain.

Accepted Answer

Preparation is the key when applying for...

Question 14

A tool that managers use to estimate major expenditures for assets,expansion of facilities,and mergers and acquisitions is called a(n)

Accepted Answer

A)   capital budget.
B)   cash budget.
C)   revenue forecast.
D)   zero budget.
E)   equity budget.F) All of the above
G) A) and B)

Question 15

The type of corporate ownership that has first claim on profits and assets is called a

Accepted Answer

A)   bondholder.
B)   preferred stockholder.
C)   creditor.
D)   common stockholder.
E)   board of directors.F) A) and E)
G) B) and D)

Question 16

The assets most commonly used as collateral for short-term financing include

Accepted Answer

A)   cash and accounts receivable.
B)   accounts payable and notes payable.
C)   inventory and equipment.
D)   marketable securities and owners' equity.
E)   accounts receivable and inventory.F) A) and B)
G) C) and D)

Question 17

The first step in building a budget is to identify sources of debt financing.

Accepted Answer

A) True 
 B)False

Question 18

Kliting Co.is concerned with whether or not it will be able to pay its bills with money coming in from sales.It would be helpful for Kliting to prepare a ____ to better understand its needs.

Accepted Answer

A)   capital budget
B)   zero-based budget
C)   cash budget
D)   loan application
E)   revolving credit agreementF) None of the above
G) A) and B)

Question 19

A factor is a financial firm that specializes in buying other firms' accounts receivables.

Accepted Answer

A) True 
 B)False

Question 20

State the purpose of a promissory note.Describe why a supplier would use a promissory note for short-term financing instead of trade credit.

Accepted Answer

A promissory note is a written pledge by...

Exam 16: Mastering Financial Management

A tool that managers use to estimate major expenditures for assets,expansion of facilities,and mergers and acquisitions is called a(n)

Correct AnswerverifiedShow Answer

What do experts consider the key to securing a long-term business loan? Explain.

Correct AnswerverifiedPreparation is the key when applying for...View AnswerShow Answer

The type of corporate ownership that has first claim on profits and assets is called a

Correct AnswerverifiedShow Answer

Your small business has been very successful and has amassed a large amount of accounts receivable from reputable firms,but you find yourself short of ready cash to replace inventory.How could a factor help you?

Correct AnswerverifiedA factor,a firm that specializes in buyi...View AnswerShow Answer

The most popular form of short-term financing is

Correct AnswerverifiedShow Answer

State the purpose of a promissory note.Describe why a supplier would use a promissory note for short-term financing instead of trade credit.

Correct AnswerverifiedA promissory note is a written pledge by...View AnswerShow Answer

The assets most commonly used as collateral for short-term financing include

Correct AnswerverifiedShow Answer

As a stockholder in the Great Plants Company,you have the right to vote on all of the following issues except

Correct AnswerverifiedShow Answer

A firm with questionable credit should expect to pay the prime interest rate minus 2 percent.

Correct AnswerverifiedShow Answer

When compared to common stockholders,preferred stockholders have a priority claim on corporate assets.

Correct AnswerverifiedShow Answer

Larry Patterson,president of Patterson Manufacturing,suspects that the managers of two departments have been padding their budgets for the last three years.To eliminate this problem,Larry would

Correct AnswerverifiedShow Answer

A factor is a financial firm that specializes in buying other firms' accounts receivables.

Correct AnswerverifiedShow Answer

For the majority of businesses,newly-proposed financial reforms by the U.S.House of Representatives and the Senate will likely increase the time and cost of obtaining financing.

Correct AnswerverifiedShow Answer

Inventories and accounts receivable are the assets most commonly used as collateral for short-term financing.

Correct AnswerverifiedShow Answer

The first step in building a budget is to identify sources of debt financing.

Correct AnswerverifiedShow Answer

Short-term business loans must be repaid within 5 years.

Correct AnswerverifiedShow Answer

Commercial paper is short-term promissory notes issued by large corporations.

Correct AnswerverifiedShow Answer

Kliting Co.is concerned with whether or not it will be able to pay its bills with money coming in from sales.It would be helpful for Kliting to prepare a ____ to better understand its needs.

Correct AnswerverifiedShow Answer

The use of borrowed funds to increase the return on owners' equity is called

Correct AnswerverifiedShow Answer

Money received from the sale of shares of ownership in a business is called

Correct AnswerverifiedShow Answer

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Preparation is the key when applying for...
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A factor,a firm that specializes in buyi...
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A promissory note is a written pledge by...
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