Deck 17: Financial Management

Question 1

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
Funds obtained through borrowing are _____.

Answer 1

e

Question 2

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
_____ is the amount of assets needed to generate a given level of sales.

Answer 2

q

Question 3

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
The technique of increasing the rate of return on an investment by financing it with borrowed funds is called _____.

Answer 3

o

Question 4

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
_____ raise money from wealthy individuals and institutional investors,and invest these funds in small,start-up companies.

Question 5

Explain each role in the hierarchy of financial management at a large firm.

Question 6

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
A transaction in which public shareholders are bought out and the firm reverts to private status is known as a(n)_________.

Question 7

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
Certificates of indebtedness sold to raise long-term funds for a corporation or government agency are known as _____.

Question 8

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
Stocks or bonds that are sold exclusively to a small group of large investors are known as _____.

Question 9

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
The process by which decisions are made regarding investments in long-lived assets is _____.

Question 10

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
_____ is extended by suppliers when a firm receives goods or services,agreeing to pay them at a later date.

Question 11

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
An offer made by an outside investor or firm to the target firm's shareholders is a ____.

Question 12

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
A mix of a firm's debt and equity capital is ____.

Question 13

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
A(n)_____ is a sale of assets by a company.

Question 14

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
Selling receivables to another party for cash is _____

Question 15

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
_____ consists of funds provided by the firm's owners when they reinvest earnings,make additional contributions,liquidate assets,issue stock,or raise capital.

Question 16

What is the purpose of a financial plan?

Question 17

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
_____ are low-risk securities that either have short maturities or can easily be sold in secondary markets.

Question 18

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
A(n)________ is a document that specifies the funds a firm will need for a period of time,the time of inflows and outflows,and the most appropriate uses of funds.

Question 19

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
Similar to venture capitalist funds,these companies raise money to invest in all types of promising companies,including mature firms.

Question 20

MATCHING
Complete the following using the terms listed.
a.venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leverage buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.tender offer
n.trade credit
o.leverage
p.capital structure
q.asset intensity
r.bonds
A(n)_____ is an executive who develops and implements the firm's financial plan and determines the most appropriate sources and uses of funds.

Question 21

The gain or loss that results from an investment over a specified period of time is known as ________.

A) risk
B) return
C) uncertainty
D) expected value

Question 22

List the major sources of short-term and long-term funds.

Question 23

Explain the three steps in preparing a financial statement.

Question 24

Explain the difference between an expansion decision and a replacement decision.

Question 25

Why is commercial paper an attractive short-term financing option?

Question 26

Identify the major sources of equity capital.

Question 27

Why do firms divest assets?

Question 28

The financial manager for a typical corporation is responsible for ________.

A) designing the accounting system
B) determining the most appropriate sources and uses of funds
C) gathering,recording,and reporting financial information
D) preparing operating budgets for various departments

Question 29

Which of the following individuals has the direct responsibility for shareholder relations?

A) Controller
B) Chief financial officer
C) Chief executive officer
D) Treasurer

Question 30

Explain the concept of leverage.

Question 31

A(n)________ is a document that specifies the funds a firm will need for a period of time,the timing of inflows and outflows,and the most appropriate sources and uses of funds.

A) asset management plan
B) budget
C) strategic plan
D) financial plan

Question 32

Differentiate among the roles of vice president for financial management,treasurer,and controller.

Question 33

Explain the concept of risk-return trade-off.

Question 34

In the typical firm,the ________ is the chief accounting manager.

A) chief financial officer
B) treasurer
C) controller
D) chief executive officer

Question 35

The process that periodically checks actual revenues and expenses against forecast values is ________.

A) asset management
B) budgeting
C) financial control
D) financial planning

Question 36

The senior financial manager has the title of ________.

A) chief financial officer
B) chief operations officer
C) treasurer
D) controller

Question 37

Jasmine works in the financial division of her company and is responsible for preparing monetary forecasts and analyzing major investment decisions.What is Jasmine's title?

A) Treasurer
B) CFO
C) Vice President for Financial Management
D) Controller

Question 38

What is an LBO?

Question 39

Which of the following is the best definition of financial risk?

A) Risk is the possibility that an investment will lose money.
B) Risk is the possibility that an investment will earn a negative return.
C) Risk is the possibility that an investment's actual return will be less than its expected return.
D) Risk is the uncertainty regarding the gain or loss from an investment.

Question 40

What is an important determinant of a firm's dividend policy?

Question 41

Leverage ________ the return to shareholders and ________ the risk of their investment.

A) lowers;lowers
B) lowers;increases
C) increases;lowers
D) increases;increases

Question 42

Mitch raises money from wealthy individuals and institutional investors for a variety of promising new companies.In exchange,he will become part owner of those businesses.Mitch is a(n)________.

A) underwriter
B) venture capitalist
C) entrepreneur
D) angel investor

Question 43

When a firm receives goods or services from a supplier and agrees to pay for them at a later date,this arrangement is called ________.

A) a short-term loan
B) a repurchase agreement
C) trade credit
D) commercial credit

Question 44

Kaitlyn's company needs to obtain funds in order to keep the business going;however,she does not want stockholders influencing the direction of her company.What type of financing should Kaitlyn acquire?

A) Equity capital
B) Combination of debt and equity capital
C) Angel investor
D) Debt capital

Question 45

Two types of divestitures are _____.

A) sell-offs and trade-offs
B) trade-offs and spin-offs
C) buy-offs and spin-offs
D) sell-offs and spin-offs

Question 46

A company would most likely finance ________ using short-term sources.

A) inventory
B) buildings
C) another company
D) machinery

Question 47

A(n)________ is the reverse of a merger.

A) LBO
B) divestiture
C) acquisition
D) tender offer

Question 48

A company's financial plan should answer all of the following questions EXCEPT ________.

A) What is the contingency plan in case of bankruptcy?
B) What funds will the firm require during the appropriate period of operations?
C) How will it obtain the necessary money?
D) When will it need more cash?

Question 49

All of the following are considered to be marketable securities EXCEPT ________.

A) treasury bills
B) commercial paper
C) repurchase agreements
D) bonds

Question 50

Which of the following assets would a firm most likely finance using long-term sources?

A) Inventory
B) Accounts receivable
C) Marketable securities
D) Another company

Question 51

All of the following actions result in equity capital EXCEPT ________.

A) issuing bonds
B) liquidating assets
C) issuing stock
D) reinvesting earnings

Question 52

All of the following are sources of short-term funds EXCEPT ________.

A) trade credit
B) bank loans
C) commercial paper
D) bonds

Question 53

Central Valley Pharmaceuticals needs to raise funds to buy new production equipment.The financial manager would probably suggest that his company raise debt capital by ________.

A) using accumulated earnings
B) selling stock
C) selling marketable securities
D) borrowing money from a bank

Question 54

Most private placements are ________.

A) Canadian government securities
B) corporate debt issues
C) corporate equity issues
D) municipal debt issues

Question 55

Grace is the financial manager for Manitoba Fabrication and has decided to raise additional funds for the company by raising equity capital.She might do so by ________.

A) establishing a line of credit with a local bank
B) selling marketable securities
C) persuading existing owners to contribute additional funds
D) selling a bond

Question 56

The sovereign wealth fund is a variation of _____.

A) the private equity fund
B) debt capital
C) market securities
D) private placements

Question 57

Borrowing money ________.

A) creates leverage
B) increases financial flexibility
C) decreases risk to shareholders
D) decreases expected returns to shareholders due to interest payments

Question 58

Short-term assets are expected to be converted into cash within _____.

A) a week
B) six months
C) a month
D) a year

Question 59

________ would be the LEAST likely to obtain a private placement.

A) Commercial banks
B) Pension fund managers
C) Small individual investors
D) Life insurance companies

Question 60

The term used to describe the benefits produced by a merger or acquisition is _____.

A) partnership
B) leverage
C) synergy
D) profit

Question 61

Investments that promise the highest returns tend to involve the most risk.

Question 62

Virtually all financial decisions involve a trade-off between risk and return.

Question 63

Major current assets include all of the following EXCEPT________.

A) cash
B) marketable securities
C) stockholders' equity
D) accounts receivable

Question 64

In most firms the controller is the chief accounting manager.

Question 65

Leverage increases the potential return to a firm's shareholders,but also reduces the risk of their investment because shareholders have contributed less capital.

Question 66

The treasurer is the chief financial officer of most firms.

Question 67

In many companies,a CEO is promoted to the position of CFO.

Question 68

Debt capital is always preferable to equity capital.

Question 69

If a firm has numerous investment opportunities and wishes to finance some of them with equity funding,it will likely pay large dividends to shareholders.

Question 70

Interest rates on short-term move up and down frequently.

Question 71

The exercise of employee stock options is a source of equity capital for a business.

Question 72

A(n)_____ is a transaction in which one company buys another.

A) synergy
B) take-over
C) acquisition
D) merger

Question 73

Risk is defined as the uncertainty of a profit or a loss.

Question 74

The major purpose of cash is to pay day-to-day expenses.

Question 75

Whenever a company borrows money,it creates leverage.

Question 76

Managing assets for an international company reduces challenges faced by a financial manager.

Question 77

_____ are investment companies that raise funds from wealthy individuals and institutional investors and use the funds to make investments in both public and private companies.

A) Venture capitalists
B) Private placements
C) Hedge funds
D) Private equity funds

Question 78

Financial managers are responsible for increasing profits to shareholders.

Question 79

Financial plans that focus on projections no more than a year or two in the future are known as strategic plans.

Question 80

Chemical manufacturer DuPont has approximately $0.68 in assets for every dollar in sales.According to asset intensity,for every $100 increase in sales,the firm would need about $68 of additional assets.