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Exam 16: Mastering Financial Management

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Question 71

True/False

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Most financial managers consider long-term financing to be money that will be used for longer than one year.

A) True
B) False

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Question 72

Multiple Choice

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With regard to the ongoing expense of long-term corporate financing, which of the following would be the most expensive?

A) Long-term loans
B) Corporate bonds
C) Debenture bonds
D) Common stock
E) Trade credit

F) C) and E)
G) B) and E)

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Question 73

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Morgan's Transition Morgan 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 financ -Refer to Morgan's Transition. When Morgan has to counsel clients on short-term versus long-term financing needs, which of the following should he identify as a short-term financing need?

An initial public offering occurs anytime that a corporation sells stock to the general public.

What is a trustee and why type of financing is a trustee associated with?

The lowest rate of interest charged by a bank for a short-term loan is known as

Melissa feels confident about obtaining short-term financing for her art gallery because, like many companies, she has a(n)

For a manufacturer, it is impossible to have cash-flow problems before peak sales periods.

Sanchez Company sells its garden hoses to Gary's Lawn and Garden Center but does not require Gary's to pay for them right away. If this is a standard trade-credit agreement, Gary's will have to pay for the garden hoses in

The two types of stock a company can sell are

Borrowed money that will be used for more than one year is called

During 2010, Bedford Technology sold common stock for the first time to whoever wanted to buy it. This was the ____ for Bedford.

In order to catch problems before they get out of hand, a business firm should compare its financial performance against various budgets.

The amounts owed to a firm by its customers are called

The right to vote on major corporate actions belongs to

McGines, Inc. Sam McGines, CEO of McGines, Inc., decided that upon his retirement, he would elect his son Derrick to become the new CEO. Sam thought it would be a good idea to have Derrick shadow him at work to understand the roles and responsibilities of a CEO. Derrick shadowed his father for months in order to learn every aspect of the business. Sam knew that the best way for Derrick to learn was to actually perform some of the tasks he did on a daily basis, rather than simply describe them. The company generally focused on short-term financing, and Sam felt that it was important for Derrick to understand the different types of financing. Derrick learned about the type of bonds that the company usually offered to raise capital. These bonds allow the purchasers of the bond to keep them until maturity. Derrick also learned the process of obtaining bonds and the various types of long-term financing methods. Job shadowing was indeed a worthwhile experience for Derrick. -Refer to McGines, Inc. If Derrick were to offer advice to a client about obtaining a loan, which of the following would be the first step?

A term-loan agreement is a promissory note that requires a borrower to repay a loan in monthly, quarterly, semiannual, or annual installments.

All of the activities concerned with obtaining money and using it effectively are called financial management.

McGines, Inc. Sam McGines, CEO of McGines, Inc., decided that upon his retirement, he would elect his son Derrick to become the new CEO. Sam thought it would be a good idea to have Derrick shadow him at work to understand the roles and responsibilities of a CEO. Derrick shadowed his father for months in order to learn every aspect of the business. Sam knew that the best way for Derrick to learn was to actually perform some of the tasks he did on a daily basis, rather than simply describe them. The company generally focused on short-term financing, and Sam felt that it was important for Derrick to understand the different types of financing. Derrick learned about the type of bonds that the company usually offered to raise capital. These bonds allow the purchasers of the bond to keep them until maturity. Derrick also learned the process of obtaining bonds and the various types of long-term financing methods. Job shadowing was indeed a worthwhile experience for Derrick. -Refer to McGines, Inc. If Derrick has learned and understood the business, he should know that today most corporate bonds are

Max Beauty Supply has ordered $5,000 worth of merchandise from Kelly's Beauty Supply, Inc. The invoice to Max has discount terms of 2/10, net/30. Max writes a check within ten days for