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Exam 18: Financial Management

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Question 61

True/False

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Most small businesses can expect to obtain venture capital financing if they have a good credit history of paying their bills on time.

A) True
B) False

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Question 62

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Money obtained through various types of loans is called

A) cash flow.
B) factor proceeds.
C) dividends.
D) equity capital.
E) debt capital.

F) A) and B)
G) C) and D)

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Question 63

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Each year Caliente, Inc., follows a budgeting process.The first step is always to look at the previous year's budget and see if anything needs to be updated.Caliente uses ____ budgeting.

If Sunbelt Computers were to take out a short-term loan from Chase for €5 million and were required to keep €500,000 of that in its Chase account, this would be called a(n)

Selling a firm's unneeded assets is a reasonable last resort when neither equity capital nor debt capital can be found to meet a firm's need for capital.

The most basic form of corporate ownership is ordinary share.

Inventory requires considerable investment for most manufacturers, wholesalers, and retailers.This problem is complicated by the fact that most goods are manufactured four to nine months before they are actually sold to consumers.Manufacturers that engage in this type of speculative production often need short-term financing to do all of the following except

The right to vote on major corporate actions belongs to

The amounts owed to a firm by its customers are called

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

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

Debbie Brooks purchased a €1,000 corporate bond that pays 9 percent interest.The face value of her bond is €1,000.What is the amount of interest that she will receive each year?

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.At one point, Derrick was not sure about which type of bond was backed only by the reputation of the issuing corporation.Which of the following would you suggest?

When bonds issued at the same time mature on different dates, they are referred to as ____ bonds.

A firm that specialises in buying other firms' accounts receivable is called a(n)

For a corporation such as AT&T, what are the two primary advantages of equity financing?

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

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

The board of directors of a corporation usually is elected by

Trade credit is the most popular form of short-term financing available for most businesses.