Deck 17: Financial Management

Question 1

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

Answer 1

k

Question 2

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

Answer 2

p

Question 3

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

Answer 3

b

Question 4

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

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

Question 7

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

Question 8

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

Question 9

MATCHING
Complete the following using the terms listed.
a.asset intensity
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.bonds
n.trade credit
o.leverage
p.capital structure
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 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

Explain the concept of risk-return trade-off.

Question 15

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

Question 16

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

Question 17

Explain what can be indicated by the growing importance of financial professionals.

Question 18

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

Question 19

MATCHING
Complete the following using the terms listed.
a.asset intensity
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divesture
k.marketable securities
l.financial manager
m.bonds
n.trade credit
o.leverage
p.capital structure
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 20

Explain how the cash inflows and outflows of a business are similar to those of a household.

Question 21

Why do firms divest assets?

Question 22

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

Question 23

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

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

Question 24

Explain why companies frequently choose to use debt.

Question 25

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 26

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

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

Question 27

The senior financial manager has the title of ________.

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

Question 28

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 29

Major current assets include all of the following EXCEPT ________.

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

Question 30

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

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

What is an LBO?

Question 33

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 34

Describe hedge funds.

Question 35

What is the purpose of a financial plan?

Question 36

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

A)strategic planning
B)financial planning
C)budgeting
D)financial control

Question 37

Explain the concept of leverage.

Question 38

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

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

Question 39

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 40

Describe a disadvantage of equity capital.

Question 41

________ 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 42

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

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

Question 43

The sovereign wealth fund is a variation of ________.

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

Question 44

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 45

Most private placements are ________.

A)U.S.government securities
B)corporate debt issues
C)corporate equity issues
D)municipal debt issues

Question 46

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

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

Question 47

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 48

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

A)acquisition
B)merger
C)takeover
D)synergy

Question 49

In most firms the controller is the chief accounting manager.

Question 50

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

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

Question 51

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

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

Question 52

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

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

Question 53

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)angel investor
B)combination of debt and equity capital
C)debt capital
D)equity capital

Question 54

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 55

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

A)lowers;lowers
B)lowers;raises
C)raises;lowers
D)raises;raises

Question 56

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

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

Question 57

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

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

Question 58

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 59

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

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

Question 60

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 61

Increasing leverage decreases management's flexibility in future financing decisions.

Question 62

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

Question 63

Short-term sources of funds are loans that are repaid within one year.

Question 64

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

Question 65

Investments that promise the highest returns tend to involve the lowest amount of risk.

Question 66

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 67

Financial managers are responsible for increasing profits to shareholders.

Question 68

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

Question 69

Whenever a company borrows money,it creates leverage.

Question 70

The treasurer is the chief financial officer of most firms.

Question 71

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 72

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 $100 of additional assets.

Question 73

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

Question 74

Managing assets for an international company creates several new challenges for a financial manager.

Question 75

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

Question 76

The balance sheet hedge is often one of the most difficult activities for minimizing the challenges that come with exchange rates.

Question 77

Trade credit is a major source of short-term financing.

Question 78

Debt capital is always preferable to equity capital.

Question 79

A balance sheet hedge provides a method for global companies to reduce risks associated with exchange rate fluctuations.

Question 80

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