Question 1

Companies raising funds must choose either debt or equity sources,but not both.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following organizations would be most likely to acquire short-term funding by issuing commercial paper?

Accepted Answer

A) A small business that is unable to qualify for loans from commercial banks. 
B) A firm with a significant percentage of current assets held as accounts receivable. 
C) A well-known,financially stable corporation. 
D) A company that prefers equity financing to obtain short-term funds.

Question 3

Susan is convinced that her new business failed because she lacked the necessary funds to do the things that it takes to get a new business up and running.Her problem apparently was:

Accepted Answer

A) a cash flow issue. 
B) undervalued inventory. 
C) undercapitalization. 
D) inadequate financial control.

Question 4

Farmers Savings Co.agreed to extend Eckert's Orchards $200,000 of unsecured short-term funds,contingent upon the bank having the funds available.This arrangement represents a:

Accepted Answer

A) trade voucher. 
B) pledge agreement. 
C) line of credit. 
D) factoring agreement.

Question 5

Akiko realizes the importance of developing a ______for her interior design business. Akiko knows of no better way of establishing revenue expectations and allocating resources in order to achieve the goals of her firm.

Accepted Answer

A) cash flow analysis 
B) financial forecast 
C) budget 
D) market prediction

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

White Palace operates a chain of restaurants specializing in hamburgers.The firm plans to expand to new communities.The acquisition of land and construction of new restaurants represent capital expenditures.

Accepted Answer

A) True 
 B)False

Question 8

Small businesses rely heavily on long-term financing.

Accepted Answer

A) True 
 B)False

Question 9

Equity financing refers to the money a firm receives from the sale of bonds.

Accepted Answer

A) True 
 B)False

Question 10

Businesses often require customers with poor credit ratings to sign a promissory note as a condition for obtaining credit.

Accepted Answer

A) True 
 B)False

Question 11

Most small businesses are unable to secure long-term financing.

Accepted Answer

A) True 
 B)False

Question 12

The budget that estimates a firm's projected cash inflows and outflows,and helps managers anticipate borrowing needs,debt repayment,operating expenses and short-term investments is called the______ budget.

Accepted Answer

A) operating 
B) cash 
C) capital 
D) monetary

Question 13

A(n)______allocates dollars to various costs and expenses needed to operate a business at an estimated level of sales revenue.

Accepted Answer

A) budget 
B) balance sheet 
C) income statement 
D) forecast

Question 14

Financial managers identify three steps to financial planning.Which of the following is not one of the three key steps to financial planning?

Accepted Answer

A) Preparing the income statement and balance sheet. 
B) Establishing financial control to see how well the company is following the financial plans. 
C) Forecasting both short-term and long-term financial needs. 
D) Developing budgets to meet anticipated needs.

Question 15

Which of the following activities is most likely to be performed by a financial manager?

Accepted Answer

A) Preparation of the balance sheet and income statement for the firm. 
B) Design of a marketable product that satisfies an unmet need. 
C) Identification of specific target markets for a firm's goods. 
D) Analysis of the tax implications of various managerial decisions.

Question 16

Trade credit is the practice of buying goods now and paying for them later.

Accepted Answer

A) True 
 B)False

Question 17

When using equity financing,firms incur a legal obligation to repay the amount of money invested.

Accepted Answer

A) True 
 B)False

Question 18

The timing of a short-term forecast is more important than the forecast's accuracy.

Accepted Answer

A) True 
 B)False

Question 19

The time value of a dollar reflects the interest that could be earned by investing that dollar.

Accepted Answer

A) True 
 B)False

Question 20

Short-term financing refers to borrowed funds that will be repaid in a year or less.

Accepted Answer

A) True 
 B)False

Exam 17: Financial Management Appendix C Managing Risk

Companies raising funds must choose either debt or equity sources,but not both.

Which of the following organizations would be most likely to acquire short-term funding by issuing commercial paper?

Susan is convinced that her new business failed because she lacked the necessary funds to do the things that it takes to get a new business up and running.Her problem apparently was:

Farmers Savings Co.agreed to extend Eckert's Orchards $200,000 of unsecured short-term funds,contingent upon the bank having the funds available.This arrangement represents a:

Akiko realizes the importance of developing a ______for her interior design business. Akiko knows of no better way of establishing revenue expectations and allocating resources in order to achieve the goals of her firm.

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

White Palace operates a chain of restaurants specializing in hamburgers.The firm plans to expand to new communities.The acquisition of land and construction of new restaurants represent capital expenditures.

Small businesses rely heavily on long-term financing.

Equity financing refers to the money a firm receives from the sale of bonds.

Businesses often require customers with poor credit ratings to sign a promissory note as a condition for obtaining credit.

Most small businesses are unable to secure long-term financing.

The budget that estimates a firm's projected cash inflows and outflows,and helps managers anticipate borrowing needs,debt repayment,operating expenses and short-term investments is called the______ budget.

A(n) ______allocates dollars to various costs and expenses needed to operate a business at an estimated level of sales revenue.

Financial managers identify three steps to financial planning.Which of the following is not one of the three key steps to financial planning?

Which of the following activities is most likely to be performed by a financial manager?

Trade credit is the practice of buying goods now and paying for them later.

When using equity financing,firms incur a legal obligation to repay the amount of money invested.

The timing of a short-term forecast is more important than the forecast's accuracy.

The time value of a dollar reflects the interest that could be earned by investing that dollar.

Short-term financing refers to borrowed funds that will be repaid in a year or less.