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Exam 18: Financial Management

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Question 111

Multiple Choice

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If a company secures a three-year bank loan, this is considered

A) short-term financing.
B) asset funding.
C) liability funding.
D) long-term financing.

E) A) and B)
F) None of the above

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Question 112

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The first step in financial planning is to develop a budget to better control costs.

A) True
B) False

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Question 113

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A capital budget combines all of the other budgets into one detailed plan for monitoring the operations of the firm.

Small businesses rely heavily on long-term financing.

Portable Pet Care, Inc., a mobile veterinary clinic, is planning for the future. The company owners (two seasoned veterinarians) have brought together the vice president of marketing and the director of information systems to talk about their expansion campaign, "We come to you!" The talks are in the preliminary stages, so there is no need to concern the finance team at this time because cash flow is currently not a problem.

As a finance manager at Outdoor Adventure Sporting Goods, Roman worries about the firm's borrowing requirements for the upcoming year. He knows the benefit of estimating the company's cash disbursements and short-term investment expectations. Facing these concerns, a(n) ________ would provide Roman with valuable information by providing a good estimation of whether the firm will need to do short-term borrowing.

Which of the following would normally involve long-term financing?

According to the Spotlight on Small Business box, to be a venture capitalist, a person needs to have years of expertise in the field of businesses they are funding.

To improve cash flow and profitability, effective managers attempt to minimize the firm's investment in inventory.

Accepting credit cards, such as MasterCard or Visa, enables a firm to decrease the expense of extending credit to customers.

When Asher received a loan from Bigbux Bank, he was required to pledge his house and car as collateral. The money from the loan was used to start his new business, which unfortunately failed within 6 months. The bank can now claim Asher's house and car to satisfy its claim.

The effective management of accounts receivable requires financial managers to

An effective strategy to manage cash flows requires retail businesses to eliminate their inventory.

________ offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public with the promise of repayment within 270 days.

Inadequate expense control typically occurs as a result of undercapitalization.

Managing a firm's resources so that it can meet its goals and objectives is the goal of financial accounting.

What is equity financing? Identify and describe the major sources of equity financing.

The first step in the financial planning process is

Worldwide Wholesale Company wants to improve cash flow. Which of the following strategies would be most likely to help Worldwide achieve this objective?

The chief financial officer (CFO) is responsible for accounting and financial functions.