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Exam 18: Financial Management

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Question 31

Multiple Choice

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The rationale behind offering customers credit is

A) permitting customers to pay with credit cards or on credit makes it easier for them to buy, and it also attracts new customers.
B) offering customers credit helps with the firm's cash flow position.
C) offering customers credit helps match revenues with expenses for the same time period.
D) permitting customers to pay with credit cards or on credit forces a company to rely less on accounts receivables and more on accounts payables.

E) A) and D)
F) A) and C)

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Question 32

True/False

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Diana is a financial manager for Eagle Eye Care, a chain of retail stores offering optical care and glasses. The majority of Diana's day likely involves efforts to locate and secure long-term financing to fund Eagle Eye Care's capital expenditures.

A) True
B) False

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Question 33

Multiple Choice

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Typically, only highly regarded customers with financial stability receive

Funds obtained from venture capitalists are considered equity financing.

The managers of Comfort Clothing regularly compare actual profits with the firm's projected profits. When deviations occur, the managers use the feedback to take corrective action when necessary. The management of Comfort Clothing is exercising financial

The budget that estimates a firm's projected cash inflows and outflows, as well as cash shortages or surpluses during a given time period, is called the ________ budget.

An example of a firm using leverage to its advantage is a firm that borrows funds at 9% and invests those funds to earn 14%.

Financial control is a process where firms compare actual revenues and costs with budgeted revenues and costs.

Recently, Epic Electronics borrowed $600,000 from Dinero Finance to secure financing for a planned expansion. The ________ loan agreement requires that Epic Electronics provide the title to their factory as collateral.

Which of the following companies is undercapitalized?

Pure Power issued $300 million of bonds to finance a major upgrade of its largest power plant in Georgia. The issuance of these bonds indicates that Pure Power utilizes equity capital to meet its long-term financing needs.

Financial managers examine the data prepared by accountants and make recommendations to top management regarding strategies for improving the financial performance of the company.

If a firm sells shares of stock, it is financing with

A line of credit is a given amount of unsecured short-term funds a bank will lend to a business.

A share of stock represents a company-issued IOU including a promise to repay on a certain date.

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

Most companies require long-term capital to purchase fixed assets such as plant and equipment, to develop new products and services, or to finance an expansion.

What are two major forms of debt financing? Describe and differentiate between the two types.

A(n) ________ job includes forecasting, budgeting, cash flow analysis, cost control, taxes, and credit management.

A secured loan means the borrower has the security of knowing repayment is not due for several years.