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Exam 16: Mastering Financial Management

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Question 91

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Nancy's law practice has undergone several financial changes throughout the years.In its early years,it had cash flow problems due to having to wait for payment from estates that were in probate and she could not be paid until they were ready to close.In those years,she made an agreement with a bank that it would loan her money as needed without delay,except when there were issues with the bank having insufficient funds available to make the loan.These issues were usually resolved in a week or less.In later years,she had the loan guaranteed.The firm is currently in the position that it has placed excess funds with a bank which has issued an agreement with the bank stating it will pay the firm a guaranteed interest rate on the money left on deposit for five years.What is the name of the agreement she made with the bank? Revolving credit agreement

A) Line of credit agreement
B) Revolving credit agreement
C) Passbook savings account
D) Certificate of deposit

E) B) and D)
F) B) and C)

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Question 92

Multiple Choice

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Which of the following is not a characteristic of short-term financing?

A) It must be repaid within three years.
B) It is easier to obtain than long-term financing.
C) There is less risk of nonpayment to the lender.
D) The amounts are usually smaller than amounts obtained through long-term sources.
E) There is a close working relationship between borrower and lender.

F) A) and E)
G) B) and D)

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Question 93

Multiple Choice

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Financial managers should

If a firm's earnings should drop below the interest cost of borrowed money,the return on owners' equity will increase.

All of the following would be considered appropriate collateral for a long-term loan except

Erick's Transition Erick is currently a manager of a small financial planning firm.He is seeking a new career with a large corporation in the banking industry.He recently applied for the financial manager opening at G & T Bank.He is concerned that the transition from his small firm to a large corporation will be difficult.To better prepare himself for this change,he has decided to enroll in a few business classes to strengthen his understanding of corporate finance.The business classes have proven to be a valuable tool for learning the critical skills needed to fully understand a financial plan,equity financing,and debt financing.Erick now believes he has strengthened his competitive advantage in his quest for the job. -Refer to Erick's Transition.Erick's business classes taught him that the financial manager should do which of the following?

The board of directors of a corporation usually is elected by

Collateral is not required for most short-term financing.

A feature of corporate bonds is that they

The Nasdaq,part of the ___ market,provides price information on more than 3,600 stocks.

Use of a warehouse receipt in short-term financing indicates that

When constructing budgets,most managers begin with departmental budgets for sales and various expenses that are then combined into a company-wide cash budget.

For a department store such as JCPenney,the most likely need for short-term financing will be for

Which of the following is not an advantage that promissory notes have over trade credit from the perspective of the seller?

Money obtained through various types of loans is called

Allen imports furniture from China.He travels to his suppliers' businesses three times a year to inspect how the furniture is made,the conditions at the factory,and how much workers are paid.When he is satisfied that the supplier meets his standards for humanitarian treatment of workers and ethical work practices,he places an order for furniture to be made by the company.The suppliers usually require part of the payment upfront or proof that payment will be made on delivery.Because Allen has been in business for many years,and has used the same bank for his business for the entire time he has been in business,he works out an agreement with his banker that the bank will advance him funds for a short-term at prime interest rate plus two percent.What kind of transaction did Allen enter into with the bank?

When compared with selling stocks to the public,a private placement has

Short-term financing not backed by collateral is called

Thorough,Inc.,builds computerized vacuum cleaners that utilize GPS and artificial intelligence to learn furniture locations,stair locations,and other things that will hamper their operation.The chief financial officer for the company recently met with the accounting staff to discuss current assets,current liabilities,and the current ratio as a part of setting quantifiable goals for future expenditures.Which financial management activity was the chief financial officer and accounting staff engaged in?

Jef,age five,was given a share of common stock in the Walt Disney Company.As a ____ he has the right to vote on major corporate actions.