Question 1

Based on the time value of money,$100 received a year from today is worth more than
$100 received today.

Accepted Answer

A) True 
 B)False

Question 2

The main reason why companies want to maintain a minimum cash balance is:

Accepted Answer

A)  cash,in and of itself,can earn a very high rate of return.
B)  they are required by law.
C)  to make sure there is a pool of cash available to deal with an expected need.
D)  the balance sheet always needs to reflect a cash balance.E) A) and B)
F) A) and C)

Question 3

A firm's most recent financial statements often serve as the basis for predicting future sales,costs,and expenses.

Accepted Answer

A) True 
 B)False

Question 4

To be effective,budgets are prepared independently of organizational forecasts.

Accepted Answer

A) True 
 B)False

Question 5

While firms finance their long-term needs with debt financing,their short-term needs are provided by equity financing.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is most accurate?

Accepted Answer

A)  Financial managers keep the books for a firm.
B)  Accounting and finance are not related.
C)  Financial managers need to understand accounting.
D)  Non-profit organizations must choose between accounting and finance.E) A) and B)
F) C) and D)

Question 7

Undercapitalization refers to the problem of insufficient start-up funds.

Accepted Answer

A) True 
 B)False

Question 8

Financial managers generally oppose credit sales because of the impact on cash flows.

Accepted Answer

A) True 
 B)False

Question 9

The______budget is generally the most detailed and used budget that a firm prepares.

Accepted Answer

A)  operating
B)  cash
C)  capital
D)  all of the answers are correctE) A) and D)
F) All of the above

Question 10

Acquiring and storing inventory represents a sizable expenditure for many businesses.

Accepted Answer

A) True 
 B)False

Question 11

Equity financing comes from the______ of the firm.

Accepted Answer

A)  owners
B)  employees
C)  suppliers
D)  creditorsE) B) and D)
F) B) and C)

Question 12

Financial managers are involved in tax management and budgeting.

Accepted Answer

A) True 
 B)False

Question 13

A firm acquires ______through the sale of ownership in the firm.

Accepted Answer

A)  debt financing
B)  equity financing
C)  liability funding
D)  spectator capitalE) A) and B)
F) All of the above

Question 14

The operating (master)budget identifies the allocation of funds required to operate a business at a projected level of revenue.

Accepted Answer

A) True 
 B)False

Question 15

Typically,only highly regarded customers of a bank receive:

Accepted Answer

A)  commercial paper.
B)  bank premiums.
C)  unsecured loans.
D)  secured loans.E) A) and B)
F) All of the above

Question 16

As a financial manager,Sabrina's responsibilities include the interpretation of financial statements provided by the firm's accountants and the preparation of recommendations to top management.

Accepted Answer

A) True 
 B)False

Question 17

Raising funds through borrowing to increase a firm's rate of return is known as a debt-equity swap.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following provides the buyer with collateral?

Accepted Answer

A)  Secured bond
B)  Unsecured bond
C)  Debenture bonds
D)  Common stockE) C) and D)
F) A) and B)

Question 19

Kereck owns commercial paper issued by Prude Insurance Corporation that matures in 180 days.However,shortly after Kereck purchased the commercial paper,Prude Insurance went out of business.Kereck is not worried because his loan to the corporation is secured by collateral that he can now claim.

Accepted Answer

A) True 
 B)False

Question 20

Debt financing exclusively provides funds to satisfy short-term financing needs.

Accepted Answer

A) True 
 B)False

Exam 17: Financial Management Appendix C Managing Risk

Financial managers generally oppose credit sales because of the impact on cash flows.

Correct AnswerverifiedShow Answer

Typically,only highly regarded customers of a bank receive:

Correct AnswerverifiedShow Answer

Which of the following statements is most accurate?

Correct AnswerverifiedShow Answer

Undercapitalization refers to the problem of insufficient start-up funds.

Correct AnswerverifiedShow Answer

Equity financing comes from the______ of the firm.

Correct AnswerverifiedShow Answer

Financial managers are involved in tax management and budgeting.

Correct AnswerverifiedShow Answer

To be effective,budgets are prepared independently of organizational forecasts.

Correct AnswerverifiedShow Answer

A firm acquires ______through the sale of ownership in the firm.

Correct AnswerverifiedShow Answer

Kereck owns commercial paper issued by Prude Insurance Corporation that matures in 180 days.However,shortly after Kereck purchased the commercial paper,Prude Insurance went out of business.Kereck is not worried because his loan to the corporation is secured by collateral that he can now claim.

Correct AnswerverifiedShow Answer

Based on the time value of money,$100 received a year from today is worth more than $100 received today.

Correct AnswerverifiedShow Answer

While firms finance their long-term needs with debt financing,their short-term needs are provided by equity financing.

Correct AnswerverifiedShow Answer

The operating (master)budget identifies the allocation of funds required to operate a business at a projected level of revenue.

Correct AnswerverifiedShow Answer

Debt financing exclusively provides funds to satisfy short-term financing needs.

Correct AnswerverifiedShow Answer

As a financial manager,Sabrina's responsibilities include the interpretation of financial statements provided by the firm's accountants and the preparation of recommendations to top management.

Correct AnswerverifiedShow Answer

The main reason why companies want to maintain a minimum cash balance is:

Correct AnswerverifiedShow Answer

Raising funds through borrowing to increase a firm's rate of return is known as a debt-equity swap.

Correct AnswerverifiedShow Answer

Acquiring and storing inventory represents a sizable expenditure for many businesses.

Correct AnswerverifiedShow Answer

A firm's most recent financial statements often serve as the basis for predicting future sales,costs,and expenses.

Correct AnswerverifiedShow Answer

Which of the following provides the buyer with collateral?

Correct AnswerverifiedShow Answer

The______budget is generally the most detailed and used budget that a firm prepares.

Correct AnswerverifiedShow Answer

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