Question 1

As a finance manager at All Sports Communication,Charlie worries about the firm's borrowing and debt repayment requirements for the next year.He knows the benefit of estimating All Sports' money disbursements and short-term investment expectations.Facing these concerns,a(n)______would provide Charlie with valuable information.

Accepted Answer

A) capital budget 
B) line item budget 
C) cash budget 
D) operating budget

Question 2

A ______refers to a line of credit that is guaranteed by the bank.

Accepted Answer

A) collateral trust fund 
B) commercial credit agreement 
C) revolving credit agreement 
D) contract credit agreement

Question 3

Working in the finance department of a firm that operates a chain of dry cleaning and tailoring shops,Demonte discovered that tax management is:

Accepted Answer

A) an area of major concern. 
B) handled by his department,but is not a major concern because businesses that provide services are exempt from most taxes. 
C) not an area of concern for his department,since the accounting department prepares the tax returns. 
D) an activity of his department,but not a major concern because software now available automates the handling of taxes.

Question 4

When Libertine Industries renegotiated their loan agreement,they borrowed an additional $2 million.The new loan requires Libertine to repay the new amount in nine months.Liberty's activity represents______ financing.

Accepted Answer

A) debt 
B) equity 
C) secured 
D) revitalized

Question 5

To improve cash flow and profitability,effective managers attempt to minimize the firm's investment in inventory.

Accepted Answer

A) True 
 B)False

Question 6

Vitale Jewelers obtains needed short-term funds by selling its accounts receivable to the Friendly Finance Company.Friendly Finance usually pays Vitale about 80% of the value of the receivables.Vitale Jewelers utilizes______ as a means of raising short-term funds.

Accepted Answer

A) receivable draft agreements 
B) trade credit 
C) revolving credit agreements 
D) factoring

Question 7

The duties and responsibilities of a financial manager are virtually identical to the duties and responsibilities of an accountant.

Accepted Answer

A) True 
 B)False

Question 8

As a financial manager of a small firm,Jerry needs to determine how much his company will have to borrow in the coming months,and when the borrowed funds will be needed.The preparation of a cash budget will help.

Accepted Answer

A) True 
 B)False

Question 9

Selling accounts receivable to obtain short-term funds is called:

Accepted Answer

A) factoring. 
B) debt financing. 
C) pledging. 
D) equity financing.

Question 10

All of the following are primary areas of concern for financial managers except:

Accepted Answer

A) under-capitalization. 
B) poor control over cash flow. 
C) inability to recruit qualified workers. 
D) inadequate expense control.

Question 11

Describe some of the operational needs for which funds must be readily available to a company.

Accepted Answer

The answer of Describe some of the operational needs for...

Question 12

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

Accepted Answer

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

Question 13

An effective budget requires:

Accepted Answer

A) management approval. 
B) stakeholder consensus. 
C) a successful advertising campaign. 
D) accurate forecasts.

Question 14

New World Chemical does not offer customers a cash discount for early payment of their accounts receivable.As a result,most customers wait to pay their bill on the last day before late penalties are charged.These customers apparently understand the:

Accepted Answer

A) benefits of tax deductible expenses. 
B) time value of money. 
C) government's regulations of the chemical industry. 
D) financial community's perception of equity financing.

Question 15

The two primary sources of long-term business financing are government loans and debt capital.

Accepted Answer

A) True 
 B)False

Question 16

Murray is the manager of Oh! Canada Sporting Goods.He is concerned that his cash expenditures have been exceeding his cash receipts for the last six months.Oh! Canada is suffering from a(n)______problem.

Accepted Answer

A) accounting 
B) exchange rate 
C) undercapitalization 
D) cash flow

Question 17

Suppliers prefer to offer trade credit to customers with poor credit ratings or no credit history.

Accepted Answer

A) True 
 B)False

Question 18

Liberty Electronics is uncertain about their revenues,costs,and expenditures for the coming year.This firm would benefit from developing a:

Accepted Answer

A) consolidated income statement. 
B) short-term forecast. 
C) statement of cash flows. 
D) master budget.

Question 19

The first time a company offers to sell its stock to the general public is called an initial private label (IPL).

Accepted Answer

A) True 
 B)False

Question 20

According to the risk/return tradeoff,the higher the risk the lower the interest rate charged by the lender.

Accepted Answer

A) True 
 B)False

Exam 17: Financial Management Appendix C Managing Risk

A ______refers to a line of credit that is guaranteed by the bank.

Working in the finance department of a firm that operates a chain of dry cleaning and tailoring shops,Demonte discovered that tax management is:

When Libertine Industries renegotiated their loan agreement,they borrowed an additional $2 million.The new loan requires Libertine to repay the new amount in nine months.Liberty's activity represents______ financing.

To improve cash flow and profitability,effective managers attempt to minimize the firm's investment in inventory.

Vitale Jewelers obtains needed short-term funds by selling its accounts receivable to the Friendly Finance Company.Friendly Finance usually pays Vitale about 80% of the value of the receivables.Vitale Jewelers utilizes______ as a means of raising short-term funds.

The duties and responsibilities of a financial manager are virtually identical to the duties and responsibilities of an accountant.

As a financial manager of a small firm,Jerry needs to determine how much his company will have to borrow in the coming months,and when the borrowed funds will be needed.The preparation of a cash budget will help.

Selling accounts receivable to obtain short-term funds is called:

All of the following are primary areas of concern for financial managers except:

Describe some of the operational needs for which funds must be readily available to a company.

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

An effective budget requires:

New World Chemical does not offer customers a cash discount for early payment of their accounts receivable.As a result,most customers wait to pay their bill on the last day before late penalties are charged.These customers apparently understand the:

The two primary sources of long-term business financing are government loans and debt capital.

Murray is the manager of Oh! Canada Sporting Goods.He is concerned that his cash expenditures have been exceeding his cash receipts for the last six months.Oh! Canada is suffering from a(n) ______problem.

Suppliers prefer to offer trade credit to customers with poor credit ratings or no credit history.

Liberty Electronics is uncertain about their revenues,costs,and expenditures for the coming year.This firm would benefit from developing a:

The first time a company offers to sell its stock to the general public is called an initial private label (IPL).

According to the risk/return tradeoff,the higher the risk the lower the interest rate charged by the lender.