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Exam 18: Financial Management

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Question 151

True/False

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An internal auditor is responsible for paying the company's bills and collecting overdue payments from customers.

A) True
B) False

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Question 152

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Chunky Chicken,Inc.announced yesterday that it plans to issue $100 million in debenture bonds to fund the expansion of its fast food chain of restaurants.In financial terms,this means:

A) The corporation will borrow $100 million worth of long-term financing.The bond issue will not carry any collateral.
B) The corporation will issue $100 million worth of equity financing.The bond issue will be backed by the property and buildings purchased with the funds.
C) The corporation will borrow $100 million worth of long-term financing.The issue will be backed by the property and buildings purchased with the funds.
D) The corporation will issue $100 million worth of interest free bonds.Financiers will be paid from the revenues created by the individual franchises.

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

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Question 153

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Acquiring funds through debt financing enhances the firm's ability to increase profits.

What is financial management? Identify the duties and responsibilities of financial managers.

Business match their long-term capital needs to:

When Liberty Industries renegotiated their loan agreement,they borrowed an additional $2 million.The new loan requires Liberty to repay the new amount in nine months.Liberty's activity represents ________ financing.

Expansion into new markets (either domestic or global)is sometimes financed with long-term funds.

Which of the following correctly identifies areas of authority and responsibility for a chief financial officer (CFO) ?

Long-term loans are often more expensive than short-term loans.

A loan backed by collateral represents a:

After thoroughly studying the feasibility for expansion,Preferred Pet Care Inc,a mobile pet care company that operates in the greater Chicago area,plans to offer a similar service in the Indianapolis metropolitan area.This endeavor will require a large capital expenditure.Due to the nature of this project,the firm will only consider equity financing.

Akiko realizes the importance of developing a ________ for her interior design business.Akiko understands the importance of appropriately allocating resources in order to achieve the goals of her firm.

Equity financing may involve the sale of stock (representing ownership)to new investors.

Mini-Case Tishian's Funeral Home has been in business for over eighty years.Throughout its history,the firm has been a family-run operation.Today,the business is managed by Mort Tishian,a grandson of the founder.Unfortunately,Mort Tishian's tenure has been plagued with problems neither his father nor grandfather before him experienced.The reason is simple: the funeral business is undergoing rapid change.Small,family-owned funeral homes are losing ground to a new type of competitor,a large national network service that resembles a franchise system.More and more families "in their time of need" are choosing the new,highly promoted competitors instead of the traditional small family-operated funeral homes. This trend has required a response from organizations like Tishian's Funeral Home.Bigger and better facilities are needed to remain competitive.All of this puts more pressure on the family-owners to be more active in the financial side of the business.Mort summed it up best when he said,"Grandpa told people,'you pay me when you can,I ain't goin' nowheres.'" His creditors did the same with him.Today,it's a different game.Cash flow is key,and obtaining funds is no simple task.Additionally,creditors want their money now,not later.Banks are also more demanding."Heck,Grandpa knew all the bankers he dealt with personally.I see new faces every time I go to the bank.If things don't get better,I suspect after eighty years of service,Tishian's Funeral Home will have its own funeral." -Mort is seriously considering a major expansion in the size of his funeral home.The money spent on this type of project would be classified as a(n) :

Financial managers are responsible for the management of accounts receivable and accounts payable.

According to the boxed material in the Making Ethical Decisions box in Chapter 18,which of the following best describes the auditing problem?

The CFO of a well known satellite radio company was trying to work his magic today as he solicited another telecommunications/entertainment company to invest in his company in order to prevent bankruptcy.Having refinanced the company less than a year ago,the satellite radio finance manager had a $75 million note coming due today.The current financing arrangement represents:

Mini-Case Tishian's Funeral Home has been in business for over eighty years.Throughout its history,the firm has been a family-run operation.Today,the business is managed by Mort Tishian,a grandson of the founder.Unfortunately,Mort Tishian's tenure has been plagued with problems neither his father nor grandfather before him experienced.The reason is simple: the funeral business is undergoing rapid change.Small,family-owned funeral homes are losing ground to a new type of competitor,a large national network service that resembles a franchise system.More and more families "in their time of need" are choosing the new,highly promoted competitors instead of the traditional small family-operated funeral homes. This trend has required a response from organizations like Tishian's Funeral Home.Bigger and better facilities are needed to remain competitive.All of this puts more pressure on the family-owners to be more active in the financial side of the business.Mort summed it up best when he said,"Grandpa told people,'you pay me when you can,I ain't goin' nowheres.'" His creditors did the same with him.Today,it's a different game.Cash flow is key,and obtaining funds is no simple task.Additionally,creditors want their money now,not later.Banks are also more demanding."Heck,Grandpa knew all the bankers he dealt with personally.I see new faces every time I go to the bank.If things don't get better,I suspect after eighty years of service,Tishian's Funeral Home will have its own funeral." -After much searching,Mort located an old banking friend of his father's.The banker offered Mort up to $25,000 in unsecured funds,which Mort's firm could borrow any time within a year,as long as the bank has the money available.Mort was offered a(n) :

Which of the following statements about taxes is accurate?

A revolving credit agreement is designed to reduce the risk of lending money.