Question 1

Pro forma statements are idealized financial statements that show the firm's average financial performance over the past 10 years.

Accepted Answer

A) True 
 B)False

Question 2

What do we call short-term unsecured promissory notes issued by financial institutions and other major corporations?

Accepted Answer

A)  C-notes 
B)  T-bills 
C)  money market mutual funds 
D)  commercial paper 
A)  C-notes 
B)  T-bills 
C)  money market mutual funds 
D)  commercial paper

Question 3

Retained earnings is the net income a firm makes when revenues exceed liabilities.

Accepted Answer

A) True 
 B)False

Question 4

Spontaneous financing arises as a natural result of a firm's business operations without the need for special arrangements.

Accepted Answer

A) True 
 B)False

Question 5

Financial capital may be used to purchase a factory and equipment or to launch a new product line.

Accepted Answer

A) True 
 B)False

Question 6

Cash budgets can help financial managers determine when their firms are likely to have short-term surpluses of cash available to pay off loans or invest in other assets.

Accepted Answer

A) True 
 B)False

Question 7

George's Car Repair Shop buys parts from a local parts distributor. The distributor delivers the parts promptly under terms stated on the invoice that say: 3/15 net 30. George has always paid the bill in just 30 days and has never really worried about these invoice terms. What would you tell George to advise him on this matter?

Accepted Answer

A)  George should not react to these payment terms because they are a tactic used by many distributors to get customers to pay early, with little or no benefit to George. 
B)  These terms mean that the payment is due in 30 days, but that as long as he is not more than 15 days late, he can avoid the 3 percent late penalty. Thus, George could actually delay payment until the 45th day without incurring a penalty. 
C)  He is smart to wait until the 30th day before making payment because this gives him the use of cash for the maximum possible amount of time. 
D)  If possible, it is smart to pay the bill within 15 days after receipt because then he will receive a 3 percent discount. If he does a lot of business with this firm, this will result in a sizeable savings for George by year's end. 
A)  George should not react to these payment terms because they are a tactic used by many distributors to get customers to pay early, with little or no benefit to George. 
B)  These terms mean that the payment is due in 30 days, but that as long as he is not more than 15 days late, he can avoid the 3 percent late penalty. Thus, George could actually delay payment until the 45th day without incurring a penalty. 
C)  He is smart to wait until the 30th day before making payment because this gives him the use of cash for the maximum possible amount of time. 
D)  If possible, it is smart to pay the bill within 15 days after receipt because then he will receive a 3 percent discount. If he does a lot of business with this firm, this will result in a sizeable savings for George by year's end.

Question 8

There are two broad approaches to budget preparation: top-down and bottom-up.

Accepted Answer

A) True 
 B)False

Question 9

A wealthy relative offers you $1000 today but doesn't actually get around to giving you the money until a year later. The delay in receiving the money causes you to lose the opportunity to earn a year's worth of interest. This example illustrates the rationale for the time value of money.

Accepted Answer

A) True 
 B)False

Question 10

Jorge is the credit manager for Timmy's Timbers, a local landscaping company. Just recently, his mulch supplier noted on the invoice the terms of 3/15 net 30. What does this mean?

Accepted Answer

A)  Timmy's Timbers has to pay the invoice within 30 days. Late payment penalties are 3 percent if the bill is paid in less than 60 days, but they rise to 15 percent if payment is not made within 60 days. 
B)  The entire amount is due in 30 days, but the 3 percent late penalty will only be imposed if payment is more than 15 days late. 
C)  Timmy's Timbers Tree Farm must pay 15 percent of the amount due in 3 days; then the remaining 85 percent is due in 30 days. 
D)  Timmy's Timbers will get a 3 percent cash discount if the balance owed to the supplier is paid within 15 days; otherwise the entire balance is due in 30 days. 
A)  Timmy's Timbers has to pay the invoice within 30 days. Late payment penalties are 3 percent if the bill is paid in less than 60 days, but they rise to 15 percent if payment is not made within 60 days. 
B)  The entire amount is due in 30 days, but the 3 percent late penalty will only be imposed if payment is more than 15 days late. 
C)  Timmy's Timbers Tree Farm must pay 15 percent of the amount due in 3 days; then the remaining 85 percent is due in 30 days. 
D)  Timmy's Timbers will get a 3 percent cash discount if the balance owed to the supplier is paid within 15 days; otherwise the entire balance is due in 30 days.

Question 11

Which of the following determines the types of assets needed to achieve the goals of the organization and determines the best way to obtain the funds needed to acquire those assets?

Accepted Answer

A)  finance 
B)  asset management 
C)  credit 
D)  debt financing 
A)  finance 
B)  asset management 
C)  credit 
D)  debt financing

Question 12

Which of the following forecasts the sales, expenses, and net income for the firm in some future time period?

Accepted Answer

A)  pro forma balance sheet 
B)  inventory turnover ratio 
C)  net working capital 
D)  pro forma income statement 
A)  pro forma balance sheet 
B)  inventory turnover ratio 
C)  net working capital 
D)  pro forma income statement

Question 13

Financial managers measure the benefits and costs of long-term investment proposals in terms of which of the following?

Accepted Answer

A)  the cash flows it will generate 
B)  whether it will be financed with debt or equity 
C)  how accounts receivable will be affected 
D)  the lines of credit that will be needed 
A)  the cash flows it will generate 
B)  whether it will be financed with debt or equity 
C)  how accounts receivable will be affected 
D)  the lines of credit that will be needed

Question 14

United Financial Corporation is a large, well-known company with an excellent credit rating. Its financial managers project that United Financial will need to obtain some short-term financing in the near future. These same managers believe that interest rates on short-term loans from banks are currently undesirably high. What is one financing option that these financial managers might find attractive?

Accepted Answer

A)  establish a revolving credit arrangement with its banker 
B)  issue T-bills 
C)  sell some additional bonds 
D)  issue commercial paper 
A)  establish a revolving credit arrangement with its banker 
B)  issue T-bills 
C)  sell some additional bonds 
D)  issue commercial paper

Question 15

Which of the following projects the types and amounts of assets a firm will require to carry out its future plans and forecasts the amount of additional funds that will be needed to acquire those assets?

Accepted Answer

A)  prototype operating budget 
B)  pro forma income sheet 
C)  pro forma balance sheet 
D)  statement of net working capital 
A)  prototype operating budget 
B)  pro forma income sheet 
C)  pro forma balance sheet 
D)  statement of net working capital

Question 16

Which of the following is intended to protect creditors by preventing borrowers from pursuing policies that might jeopardize the lenders' funds?

Accepted Answer

A)  factors 
B)  discounts 
C)  covenants 
D)  debts 
A)  factors 
B)  discounts 
C)  covenants 
D)  debts

Question 17

Identify the key issues managers must consider when determining a firm's capital structure.

Accepted Answer

A firm's capital structure refers to the

Question 18

In financing terms, what is factoring?

Accepted Answer

A)  buying the accounts receivable of other firms 
B)  selling the accounts payable to other firms 
C)  dividing the accounts receivable and forgiving some of the receivables 
D)  dividing the accounts payable and forgiving some of the debt 
A)  buying the accounts receivable of other firms 
B)  selling the accounts payable to other firms 
C)  dividing the accounts receivable and forgiving some of the receivables 
D)  dividing the accounts payable and forgiving some of the debt

Question 19

Finance is the functional area of business that is responsible for finding the best sources of funds and the best ways to use them.

Accepted Answer

A) True 
 B)False

Question 20

Pro forma income statements forecast the assets a firm will need in the next accounting period.

Accepted Answer

A) True 
 B)False

Pro forma statements are idealized financial statements that show the firm's average financial performance over the past 10 years.

What do we call short-term unsecured promissory notes issued by financial institutions and other major corporations?

Retained earnings is the net income a firm makes when revenues exceed liabilities.

Spontaneous financing arises as a natural result of a firm's business operations without the need for special arrangements.

Financial capital may be used to purchase a factory and equipment or to launch a new product line.

Cash budgets can help financial managers determine when their firms are likely to have short-term surpluses of cash available to pay off loans or invest in other assets.

There are two broad approaches to budget preparation: top-down and bottom-up.

A wealthy relative offers you $1000 today but doesn't actually get around to giving you the money until a year later. The delay in receiving the money causes you to lose the opportunity to earn a year's worth of interest. This example illustrates the rationale for the time value of money.

Jorge is the credit manager for Timmy's Timbers, a local landscaping company. Just recently, his mulch supplier noted on the invoice the terms of 3/15 net 30. What does this mean?

Which of the following determines the types of assets needed to achieve the goals of the organization and determines the best way to obtain the funds needed to acquire those assets?

Which of the following forecasts the sales, expenses, and net income for the firm in some future time period?

Financial managers measure the benefits and costs of long-term investment proposals in terms of which of the following?

Which of the following projects the types and amounts of assets a firm will require to carry out its future plans and forecasts the amount of additional funds that will be needed to acquire those assets?

Which of the following is intended to protect creditors by preventing borrowers from pursuing policies that might jeopardize the lenders' funds?

Identify the key issues managers must consider when determining a firm's capital structure.

In financing terms, what is factoring?

Finance is the functional area of business that is responsible for finding the best sources of funds and the best ways to use them.

Pro forma income statements forecast the assets a firm will need in the next accounting period.

Business Now: Change Is the Only Constant

Business Ethics and Social Responsibility: Doing Well by Doing Good

Economics: The Framework for Business

The World Market-Place: Business Without Borders

Business Formation: Choosing the Form That Fits

Small Business and Entrepreneurship: Economic Rocket Fuel

Accounting: Decision Making by the Numbers

Financial Markets: Allocating Financial Resources

Marketing: Building Profitable Customer Connections

Product and Promotion: Creating and Communicating Value

Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Management, Motivation, and Leadership: Bringing Business to Life

Human Resource Management: Building a Top-Quality Workforce

Managing Information and Technology: Finding New Ways to Learn and Link

Operations Management: Putting It All Together

Business Communication: Creating and Delivering Messages That Matter

Labour Unions and Collective Bargaining

Business Law

Personal Finance

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Exam 8: Finance: Acquiring and Using Funds to Maximize Value

Pro forma statements are idealized financial statements that show the firm's average financial performance over the past 10 years.

What do we call short-term unsecured promissory notes issued by financial institutions and other major corporations?

Retained earnings is the net income a firm makes when revenues exceed liabilities.

Spontaneous financing arises as a natural result of a firm's business operations without the need for special arrangements.

Financial capital may be used to purchase a factory and equipment or to launch a new product line.

Cash budgets can help financial managers determine when their firms are likely to have short-term surpluses of cash available to pay off loans or invest in other assets.

There are two broad approaches to budget preparation: top-down and bottom-up.

A wealthy relative offers you $1000 today but doesn't actually get around to giving you the money until a year later. The delay in receiving the money causes you to lose the opportunity to earn a year's worth of interest. This example illustrates the rationale for the time value of money.

Jorge is the credit manager for Timmy's Timbers, a local landscaping company. Just recently, his mulch supplier noted on the invoice the terms of 3/15 net 30. What does this mean?

Which of the following determines the types of assets needed to achieve the goals of the organization and determines the best way to obtain the funds needed to acquire those assets?

Which of the following forecasts the sales, expenses, and net income for the firm in some future time period?

Financial managers measure the benefits and costs of long-term investment proposals in terms of which of the following?

Which of the following projects the types and amounts of assets a firm will require to carry out its future plans and forecasts the amount of additional funds that will be needed to acquire those assets?

Which of the following is intended to protect creditors by preventing borrowers from pursuing policies that might jeopardize the lenders' funds?

Identify the key issues managers must consider when determining a firm's capital structure.

In financing terms, what is factoring?

Finance is the functional area of business that is responsible for finding the best sources of funds and the best ways to use them.

Pro forma income statements forecast the assets a firm will need in the next accounting period.

Business Now: Change Is the Only Constant

Business Ethics and Social Responsibility: Doing Well by Doing Good

Economics: The Framework for Business

The World Market-Place: Business Without Borders

Business Formation: Choosing the Form That Fits

Small Business and Entrepreneurship: Economic Rocket Fuel

Accounting: Decision Making by the Numbers

Financial Markets: Allocating Financial Resources

Marketing: Building Profitable Customer Connections

Product and Promotion: Creating and Communicating Value

Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Management, Motivation, and Leadership: Bringing Business to Life

Human Resource Management: Building a Top-Quality Workforce

Managing Information and Technology: Finding New Ways to Learn and Link

Operations Management: Putting It All Together

Business Communication: Creating and Delivering Messages That Matter

Labour Unions and Collective Bargaining

Business Law

Personal Finance

Filters