Question 1

Tom Jackson, president of Jackson Manufacturing, suspects that the managers of two departments have been padding their budgets for the last three years. To eliminate this problem, Tom 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 D)
G) All of the above

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Tidewater Distributors is successfully using short-term financing to buy inventory for resale. As sales climb, the managers realize that they must decide what to do with the money. Since you are the financial manager, they ask for your advice. You advise them to first

Accepted Answer

A)  repay the short-term obligations out of the sales revenue.
B)  use the money to buy a yacht for the managers.
C)  increase all employees' wages.
D)  enroll all the salespeople in a sales training course.
E)  borrow more money.F) All of the above
G) C) and E)

Question 4

The Nasdaq is the largest and probably best-known securities exchange market in the world.

Accepted Answer

A) True 
 B)False

Question 5

Money that will be used for one year or less is called

Accepted Answer

A)  open credit.
B)  equity capital.
C)  short-term financing.
D)  nonsecured financing.
E)  long-term financing.F) A) and B)
G) A) and C)

Question 6

Private placements are used to sell stock to individual investors.

Accepted Answer

A) True 
 B)False

Question 7

Sally Jackson was told that when she sold her corporate bonds she must endorse her bonds before transferring ownership to the new owner. This means that Sally sold

Accepted Answer

A)  bond indentures.
B)  registered bonds.
C)  trust agreements.
D)  corporate savings bonds.
E)  convertible bonds.F) A) and D)
G) A) and B)

Question 8

Bonds that are backed only by the reputation of the issuing corporation are known as

Accepted Answer

A)  mortgage bonds.
B)  registered bonds.
C)  debenture bonds.
D)  bond indentures.
E)  serial bonds.F) A) and C)
G) A) and E)

Question 9

The representative for bond owners is called a(n)

Accepted Answer

A)  broker.
B)  attorney.
C)  member of the board of directors.
D)  trustee.
E)  bond counselor.F) All of the above
G) B) and C)

Question 10

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 buy...

Question 11

Collateral is not required for most short-term financing.

Accepted Answer

A) True 
 B)False

Question 12

The Electronic Funds Transfer Act protects the customer in case a bank makes an error or the customer's credit or debit card is stolen.

Accepted Answer

A) True 
 B)False

Question 13

The managers at Bally Manufacturing decided to borrow money to finance a new production facility. The loan agreement they signed required that they pay 10 percent interest on the loan. Based on this information, which of the following statements is true?

Accepted Answer

A)  Bally doesn't have to pay the 10 percent if the firm isn't profitable.
B)  Bally can pay the 10 percent whenever its managers vote to pay it.
C)  The company will make more money if the firm earns less than a 10 percent return on its investment in the new plant.
D)  Bally is using financial leverage to increase profits as long as the firm earns more than the 10 percent it pays to borrow the money required to finance the new plant.
E)  Even if the new plant is extremely profitable, Bally should have found another way to finance the new plant.F) C) and E)
G) A) and E)

Question 14

Interest paid on outstanding bonds is usually paid

Accepted Answer

A)  once every two years.
B)  once a year.
C)  semiannually, or every six months.
D)  quarterly, or every three months.
E)  on a monthly basis.F) A) and B)
G) A) and C)

Question 15

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

Accepted Answer

Preparation is the key when applying for...

Question 16

Over the years, Zebra Productions has been slow making payments to its bank. Now it is in need of financing. Based on past experience, the interest rate Zebra will pay is the

Accepted Answer

A)  interest rate determined by the SBA.
B)  finance rate determined by the Department of Commerce.
C)  prime rate.
D)  prime rate plus 4 percent.
E)  prime rate minus 2 percentage points.F) C) and D)
G) A) and B)

Question 17

A marketplace where member brokers meet to buy and sell securities is known as

Accepted Answer

A)  the primary market.
B)  the supplemental market.
C)  the overseas market.
D)  an IPO.
E)  a securities exchange.F) C) and D)
G) B) and C)

Question 18

Jackson Ski Equipment receives an invoice for $10,000 worth of merchandise from one of its suppliers. The invoice has discount terms of 2/10, net/60. Twenty days later, Jackson Ski Equipment writes a check for ____ to pay the invoice.

Accepted Answer

A)  $10,200
B)  $10,000
C)  $9,800
D)  $9,000
E)  $200F) A) and D)
G) B) and C)

Question 19

In regards to cash flow, a firm should ideally have

Accepted Answer

A)  enough money coming into the firm to cover the expenses in that period.
B)  more cash flowing out than in since this represents growth.
C)  to use short-term financing only two to three times a year.
D)  a constant need for short-term financing.
E)  most of its cash going to its customers.F) A) and D)
G) B) and D)

Question 20

While common stockholders have the right to receive dividends, holders of preferred stock elect the board of directors and approve or disapprove major corporate actions.

Accepted Answer

A) True 
 B)False

Exam 16: Mastering Financial Management

Money that will be used for one year or less is called

Correct AnswerverifiedShow Answer

Over the years, Zebra Productions has been slow making payments to its bank. Now it is in need of financing. Based on past experience, the interest rate Zebra will pay is the

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

In regards to cash flow, a firm should ideally have

Correct AnswerverifiedShow Answer

Interest paid on outstanding bonds is usually paid

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Jackson Ski Equipment receives an invoice for $10,000 worth of merchandise from one of its suppliers. The invoice has discount terms of 2/10, net/60. Twenty days later, Jackson Ski Equipment writes a check for ____ to pay the invoice.

Correct AnswerverifiedShow Answer

Bonds that are backed only by the reputation of the issuing corporation are known as

Correct AnswerverifiedShow Answer

The Nasdaq is the largest and probably best-known securities exchange market in the world.

Correct AnswerverifiedShow Answer

The Electronic Funds Transfer Act protects the customer in case a bank makes an error or the customer's credit or debit card is stolen.

Correct AnswerverifiedShow Answer

Sally Jackson was told that when she sold her corporate bonds she must endorse her bonds before transferring ownership to the new owner. This means that Sally sold

Correct AnswerverifiedShow Answer

The managers at Bally Manufacturing decided to borrow money to finance a new production facility. The loan agreement they signed required that they pay 10 percent interest on the loan. Based on this information, which of the following statements is true?

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 buy...View AnswerShow Answer

While common stockholders have the right to receive dividends, holders of preferred stock elect the board of directors and approve or disapprove major corporate actions.

Correct AnswerverifiedShow Answer

Private placements are used to sell stock to individual investors.

Correct AnswerverifiedShow Answer

A marketplace where member brokers meet to buy and sell securities is known as

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The representative for bond owners is called a(n)

Correct AnswerverifiedShow Answer

Collateral is not required for most short-term financing.

Correct AnswerverifiedShow Answer

Tidewater Distributors is successfully using short-term financing to buy inventory for resale. As sales climb, the managers realize that they must decide what to do with the money. Since you are the financial manager, they ask for your advice. You advise them to first

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 buy...
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