Question 1

Many small businesses rely on factoring as a source of short-term financing because:

Accepted Answer

A)  factoring provides a much cheaper source of funds than bank loans. 
B)  interest paid to a factor qualifies for a tax credit. 
C)  small firms often find it difficult to qualify for bank loans. 
D)  loans provided by factors do not require collateral. 
A)  factoring provides a much cheaper source of funds than bank loans. 
B)  interest paid to a factor qualifies for a tax credit. 
C)  small firms often find it difficult to qualify for bank loans. 
D)  loans provided by factors do not require collateral. C

Question 2

Drew's work in the finance department of his firm consists of checking accounting records and financial statements to verify that proper procedures are followed.Drew serves his company as a(n):

Accepted Answer

A)  internal auditor. 
B)  comptroller. 
C)  CPA. 
D)  financial advisor. 
A)  internal auditor. 
B)  comptroller. 
C)  CPA. 
D)  financial advisor. A

Question 3

One of the primary factors that influences the interest rate a firm pays on long-term loans is the:

Accepted Answer

A)  Intensity of competition the firm faces with new products. 
B)  Current level of government regulations. 
C)  General level of market interest rates. 
D)  Exchange rate of the euro to the U.S.dollar. 
A)  Intensity of competition the firm faces with new products. 
B)  Current level of government regulations. 
C)  General level of market interest rates. 
D)  Exchange rate of the euro to the U.S.dollar. C

Question 4

Finance is the function in a business that acquires funds for the firm and manages those funds within the firm.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following represents a capital expenditure?

Accepted Answer

A)  Issuing paychecks to workers 
B)  Paying for advertising on a local radio station 
C)  Purchasing raw materials to be used in the production of a firm's product 
D)  Purchasing a building to be used for office space 
A)  Issuing paychecks to workers 
B)  Paying for advertising on a local radio station 
C)  Purchasing raw materials to be used in the production of a firm's product 
D)  Purchasing a building to be used for office space

Question 6

A capital budget combines all of the other budgets into one detailed plan for monitoring the operations of the firm.

Accepted Answer

A) True 
 B)False

Question 7

Small businesses rely heavily on long-term financing.

Accepted Answer

A) True 
 B)False

Question 8

Explain the role the operating budget,the capital budget,and the cash budget play in financial planning.

Accepted Answer

The operating budget (master budget)ties

Question 9

Which of the following presents an effective technique to improve cash management?

Accepted Answer

A)  Speed up cash payments and slow down cash collections 
B)  Speed up cash collections and slow down cash payments 
C)  Speed up both collections and payments of cash 
D)  Slow down both the payment and collections of cash 
A)  Speed up cash payments and slow down cash collections 
B)  Speed up cash collections and slow down cash payments 
C)  Speed up both collections and payments of cash 
D)  Slow down both the payment and collections of cash

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Equity financing represents funds acquired from within the firm or through the sale of stock,representing ownership in the company.

Accepted Answer

A) True 
 B)False

Question 12

Which business function involves credit management/collecting funds from customers?

Accepted Answer

A)  Accounting 
B)  Production 
C)  Marketing 
D)  Finance 
A)  Accounting 
B)  Production 
C)  Marketing 
D)  Finance

Question 13

The rationale behind offering customers credit is:

Accepted Answer

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 customer's credit helps with the firm's cash flow position. 
C)  Offering customer's 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. 
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 customer's credit helps with the firm's cash flow position. 
C)  Offering customer's 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.

Question 14

If you are at the Phoenix Sky Harbor International Airport,you will no longer get a pat-down if you go through the metal detector.The airport now has full body screening ports that scan the entire body and readily detect weapons or explosive devices that someone may want to take on board a plane.These expensive devices represent:

Accepted Answer

A)  Long-term assets 
B)  Short-term assets 
C)  Intangible assets 
D)  Interest-bearing assets 
A)  Long-term assets 
B)  Short-term assets 
C)  Intangible assets 
D)  Interest-bearing assets

Question 15

A firm negotiates a(n)_________ with its bank.This arrangement gives the firm access to a specified amount of unsecured short-term funds,provided the bank has the funds available.

Accepted Answer

A)  asset drawing account 
B)  capital drawing agreement 
C)  reserve account 
D)  line of credit 
A)  asset drawing account 
B)  capital drawing agreement 
C)  reserve account 
D)  line of credit

Question 16

Since short-term financial forecasts predict expected future events,they should not be influenced by recent financial statements.

Accepted Answer

A) True 
 B)False

Question 17

Generally accepted accounting principles require that any assessment of a firm's financial statements be performed by independent outside auditors.

Accepted Answer

A) True 
 B)False

Question 18

Much of a financial manager's day-to-day activities involve managing the short-term financial needs of the firm.

Accepted Answer

A) True 
 B)False

Question 19

The overall objective of financial planning is to optimize the firm's profitability and make the best use of its money.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 18: Financial Management

Many small businesses rely on factoring as a source of short-term financing because:

Drew's work in the finance department of his firm consists of checking accounting records and financial statements to verify that proper procedures are followed.Drew serves his company as a(n):

One of the primary factors that influences the interest rate a firm pays on long-term loans is the:

Finance is the function in a business that acquires funds for the firm and manages those funds within the firm.

Which of the following represents a capital expenditure?

A capital budget combines all of the other budgets into one detailed plan for monitoring the operations of the firm.

Small businesses rely heavily on long-term financing.

Explain the role the operating budget,the capital budget,and the cash budget play in financial planning.

Which of the following presents an effective technique to improve cash management?

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

Equity financing represents funds acquired from within the firm or through the sale of stock,representing ownership in the company.

Which business function involves credit management/collecting funds from customers?

The rationale behind offering customers credit is:

A firm negotiates a(n)_________ with its bank.This arrangement gives the firm access to a specified amount of unsecured short-term funds,provided the bank has the funds available.

Since short-term financial forecasts predict expected future events,they should not be influenced by recent financial statements.

Generally accepted accounting principles require that any assessment of a firm's financial statements be performed by independent outside auditors.

Much of a financial manager's day-to-day activities involve managing the short-term financial needs of the firm.

The overall objective of financial planning is to optimize the firm's profitability and make the best use of its money.

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

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding How Economics Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Adapting Organizations to Todays Markets

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employee-Management Issues and Relationships

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Appendix A: Using Technology to Manage Information

Appendix B: Managing Risk

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