Question 1

​Suppose Sears Roebuck & Company dissolved. After creditors are paid, what is the name of the next group to have claim on profits and assets?

Accepted Answer

A)  ​Preferred shareholders.
B)  ​Common stockholders.
C)  ​Incorporators.
D)  ​Corporate officers.E) C) and D)
F) B) and D)

Question 2

​Money invested in small firms that have the potential to become very successful is called

Accepted Answer

A)  ​venture capital.
B)  ​small business loans.
C)  ​lines of credit.
D)  ​angel credit.E) B) and C)
F) A) and C)

Question 3

When Platinum Fitness sells its accounts receivable to a financial institution, it receives less than the full value of the accounts receivable. Which of the following is a benefit Platinum Fitness receives from this arrangement?

Accepted Answer

A)  It will receive the money in one month instead of two months.
B)  It will have more inventory than its competitors.
C)  This will allow closer relationships with its customers.
D)  The time and expense of collecting accounts shifts to the factor.
E)  Platinum will be responsible for collecting the accounts.F) B) and E)
G) B) and D)

Question 4

The denominations for corporate bonds range from $1,000 to $50,000.

Accepted Answer

A) True 
 B)False  True

Question 5

The steps in effective financial planning are

Accepted Answer

A)  establishing organizational goals and objectives, identifying expenses, and budgeting.
B)  establishing organizational goals and objectives, budgeting for financial needs, and identifying sources of financing.
C)  developing a plan of action, monitoring the plan, and evaluating.
D)  identifying sources of financing, budgeting, and evaluating.
E)  None of these answers are correct.F) B) and D)
G) B) and C)

Question 6

Each of the following causes a cash flow problem except

Accepted Answer

A)  a large proportion of credit sales.
B)  embezzlement of company funds.
C)  unexpected slow selling seasons.
D)  slow-paying customers.
E)  customers who pay early.F) B) and D)
G) A) and C)

Question 7

Short-term financing not backed by collateral is called

Accepted Answer

A)  debt capital.
B)  unsecured financing.
C)  mortgage bonds.
D)  trade credit.
E)  unprotected financing.F) A) and E)
G) All of the above

Question 8

Although Hargrove Co. makes enough money to pay for everything it needs, it still chooses to have some debt and pay a larger portion of retained earnings back to the stockholders. What is likely the best explanation for this decision?

Accepted Answer

A)  Reduced interest rate
B)  Financial leverage
C)  Return multiplier
D)  Equity leverage
E)  Debt multiplierF) C) and D)
G) C) and E)

Question 9

It is not unusual for companies to issue ____ type(s)  of common stock and ____ type(s)  of preferred stock.

Accepted Answer

A)  one; one
B)  two; one
C)  one; many
D)  many; one
E)  zero; severalF) A) and C)
G) B) and E)

Question 10

Rick's Wholesale Office Supplies prefers to handle its accounts receivable itself, but it also needs to use them to facilitate short-term borrowing. What can Rick's do?

Accepted Answer

A)  Use floor planning.
B)  Purge its accounts receivable.
C)  Pledge them as collateral.
D)  Force all customers to pay now.
E)  Sell commercial paper.F) A) and C)
G) None of the above C

Question 11

​Common stockholders have the right to ___, but preferred stockholders do not have this right.

Accepted Answer

A)  ​vote
B)  ​buy stock
C)  ​dividends
D)  ​sell their stockE) A) and C)
F) C) and D)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

It is not necessary to give most lenders a current business plan or audited financial statements when requesting a long-term business loan.

Accepted Answer

A) True 
 B)False

Question 14

The maturity date is the date on which the corporation is to repay the money borrowed from bondholders.

Accepted Answer

A) True 
 B)False

Question 15

​A written order for a bank to pay a third party a stated amount of money on a specified date is a

Accepted Answer

A)  ​banker's acceptance.
B)  ​letter of credit.
C)  ​bank deposit.
D)  ​line of credit.E) None of the above
F) A) and B)

Question 16

Maria has been asked by top management to develop financial ____ that the company will achieve over the next one- to ten-year period.

Accepted Answer

A)  strategies
B)  directives
C)  plans
D)  objectives
E)  goalsF) C) and D)
G) A) and E)

Question 17

Effective financial management involves careful planning to determine the best financial sources and to ensure that projected uses are in keeping with the organization's goals.

Accepted Answer

A) True 
 B)False

Question 18

If money is reserved each year to guarantee that a bond will be paid off at maturity, the money will be held in a ____ fund.

Accepted Answer

A)  capitalization
B)  sinking
C)  compounding
D)  retirement
E)  redemptionF) All of the above
G) C) and D) B

Question 19

The Nasdaq only carries small company's stocks; by regulation, large firms' stock must trade on the NYSE, not on the Nasdaq.

Accepted Answer

A) True 
 B)False

Question 20

Bonds that are secured by various assets of the issuing corporation are called debenture bonds.

Accepted Answer

A) True 
 B)False

Exam 16: Mastering Financial Management

​Suppose Sears Roebuck & Company dissolved. After creditors are paid, what is the name of the next group to have claim on profits and assets?

Correct AnswerverifiedShow Answer

​Money invested in small firms that have the potential to become very successful is called

Correct AnswerverifiedShow Answer

When Platinum Fitness sells its accounts receivable to a financial institution, it receives less than the full value of the accounts receivable. Which of the following is a benefit Platinum Fitness receives from this arrangement?

Correct AnswerverifiedShow Answer

The denominations for corporate bonds range from $1,000 to $50,000.

Correct AnswerverifiedTrue

The steps in effective financial planning are

Correct AnswerverifiedShow Answer

Each of the following causes a cash flow problem except

Correct AnswerverifiedShow Answer

Short-term financing not backed by collateral is called

Correct AnswerverifiedShow Answer

Although Hargrove Co. makes enough money to pay for everything it needs, it still chooses to have some debt and pay a larger portion of retained earnings back to the stockholders. What is likely the best explanation for this decision?

Correct AnswerverifiedShow Answer

It is not unusual for companies to issue ____ type(s) of common stock and ____ type(s) of preferred stock.

Correct AnswerverifiedShow Answer

Rick's Wholesale Office Supplies prefers to handle its accounts receivable itself, but it also needs to use them to facilitate short-term borrowing. What can Rick's do?

Correct AnswerverifiedC

​Common stockholders have the right to ___, but preferred stockholders do not have this right.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

It is not necessary to give most lenders a current business plan or audited financial statements when requesting a long-term business loan.

Correct AnswerverifiedShow Answer

The maturity date is the date on which the corporation is to repay the money borrowed from bondholders.

Correct AnswerverifiedShow Answer

​A written order for a bank to pay a third party a stated amount of money on a specified date is a

Correct AnswerverifiedShow Answer

Maria has been asked by top management to develop financial ____ that the company will achieve over the next one- to ten-year period.

Correct AnswerverifiedShow Answer

Effective financial management involves careful planning to determine the best financial sources and to ensure that projected uses are in keeping with the organization's goals.

Correct AnswerverifiedShow Answer

If money is reserved each year to guarantee that a bond will be paid off at maturity, the money will be held in a ____ fund.

Correct AnswerverifiedB

The Nasdaq only carries small company's stocks; by regulation, large firms' stock must trade on the NYSE, not on the Nasdaq.

Correct AnswerverifiedShow Answer

Bonds that are secured by various assets of the issuing corporation are called debenture bonds.

Correct AnswerverifiedShow Answer

Suppose Sears Roebuck & Company dissolved. After creditors are paid, what is the name of the next group to have claim on profits and assets?

Correct Answer
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Money invested in small firms that have the potential to become very successful is called

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True

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It is not unusual for companies to issue type(s) of common stock and type(s) of preferred stock.

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C

Common stockholders have the right to ___, but preferred stockholders do not have this right.

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A written order for a bank to pay a third party a stated amount of money on a specified date is a

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B

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