Question 1

Financial managers measure the benefits and costs of long-term investment proposals in terms of which of the following?

Accepted Answer

A) the cash flows it will generate 
B) whether it will be financed with debt or equity 
C) how accounts receivable will be affected 
D) the lines of credit that will be needed

Question 2

Alison has $5000 to invest and is trying to decide between two investment opportunities.One investment offers her future cash flows of $2000 for each of the next five years.Another investment offers her future cash flows of $5000 in year five and $7500 in year six.In order for her to compare the future cash flows of these two investments,what will she need to calculate?

Accepted Answer

A) annuity value 
B) average annual payout 
C) common payout value 
D) present value

Question 3

The sooner you receive a sum of money the sooner you can put that money to work to earn even more money.

Accepted Answer

A) True 
 B)False

Question 4

As a short-term arrangement,banks sometimes extend guaranteed lines of credit in which the firm pays a commitment fee on unused portions of the funds the bank has committed.Which of the following describes these arrangements?

Accepted Answer

A) revolving credit agreements 
B) trade credit 
C) short-term bank loans 
D) commercial paper

Question 5

The evaluation of long-run investment opportunities is one responsibility of financial managers.

Accepted Answer

A) True 
 B)False

Question 6

The debt-to-equity ratio measures the extent to which a firm relies on debt financing by dividing total debt by total owners' equity.The higher the value of this ratio,the more the firm is relying on debt.

Accepted Answer

A) True 
 B)False

Question 7

William is the credit manager for Timmy's Timbers,a local landscaping company.Just recently,his mulch supplier noted on the invoice the terms of 3/15 net 30.What does this mean?

Accepted Answer

A) Timmy's Timbers has to pay the invoice within 30 days. Late payment penalties are 3% if the bill is paid in less than 60 days, but they rise to 15% if payment is not made within 60 days. 
B) The entire amount is due in 30 days, but the 3% late penalty will only be imposed if payment is more than 15 days late. 
C) Timmy's Timbers Tree Farm must pay 15% of the amount due in 3 days; then the remaining 85% is due in 30 days. 
D) Timmy's Timbers will get a 3% cash discount if the balance owed to the supplier is paid within 15 days; otherwise the entire balance is due in 30 days.

Question 8

Cash budgets project cash inflows and outflows over a period of several years in order to help financial managers determine the best way to meet long-term financing needs.

Accepted Answer

A) True 
 B)False

Question 9

A cash flow of $1000 received three years from today would have the same present value as a cash flow of $1000 received two years from today.

Accepted Answer

A) True 
 B)False

Question 10

The present value of a cash flow received in a future time period is the amount of money which,if invested today at a specified rate of interest,would grow to become that future amount of money.

Accepted Answer

A) True 
 B)False

Question 11

Dewey Enterprises' capital structure consists of $2 million in debt and $1 million in equity.What is the firm's debt-to-equity ratio?

Accepted Answer

A) .5 
B) 1 
C) 2 
D) 1.5

Question 12

The inventory turnover ratio is an asset management ratio that compares average inventory to total assets.

Accepted Answer

A) True 
 B)False

Question 13

Historically,the goal of financial management has been to achieve a dominant market share.

Accepted Answer

A) True 
 B)False

Question 14

Which process does a firm use to evaluate long-term investment proposals?

Accepted Answer

A) capital accounting 
B) capital forecasting 
C) capital mapping 
D) capital budgeting

Question 15

The current ratio helps financial managers evaluate the ability of a firm to pay short-term liabilities as they come due.

Accepted Answer

A) True 
 B)False

Question 16

One of the functions of financial management is to determine the best strategy for meeting a firm's long-term financing needs.

Accepted Answer

A) True 
 B)False

Question 17

As part of the financial planning process planners would create projected financial statements.What is another name for these statements?

Accepted Answer

A) pro forma 
B) per capita 
C) prescriptive 
D) empirical

Question 18

What is a pro forma statement? Describe the two major types of pro forma statements,and explain the role they play in financial planning.

Accepted Answer

The answer of What is a pro forma statement? Describe...

Question 19

Describe the various key ratios managers rely on,briefly explain what each type of ratio tells the financial manager,and give one specific example of each.

Accepted Answer

The answer of Describe the various key ratios managers rely...

Question 20

Trade credit is credit granted by sellers when they provide firms with materials,parts,or finished goods without requiring payment until some period after delivery.

Accepted Answer

A) True 
 B)False

Exam 8: Finance: Acquiring and Using Funds to Maximize Value

Financial managers measure the benefits and costs of long-term investment proposals in terms of which of the following?

The sooner you receive a sum of money the sooner you can put that money to work to earn even more money.

As a short-term arrangement,banks sometimes extend guaranteed lines of credit in which the firm pays a commitment fee on unused portions of the funds the bank has committed.Which of the following describes these arrangements?

The evaluation of long-run investment opportunities is one responsibility of financial managers.

The debt-to-equity ratio measures the extent to which a firm relies on debt financing by dividing total debt by total owners' equity.The higher the value of this ratio,the more the firm is relying on debt.

William is the credit manager for Timmy's Timbers,a local landscaping company.Just recently,his mulch supplier noted on the invoice the terms of 3/15 net 30.What does this mean?

Cash budgets project cash inflows and outflows over a period of several years in order to help financial managers determine the best way to meet long-term financing needs.

A cash flow of $1000 received three years from today would have the same present value as a cash flow of $1000 received two years from today.

The present value of a cash flow received in a future time period is the amount of money which,if invested today at a specified rate of interest,would grow to become that future amount of money.

Dewey Enterprises' capital structure consists of $2 million in debt and $1 million in equity.What is the firm's debt-to-equity ratio?

The inventory turnover ratio is an asset management ratio that compares average inventory to total assets.

Historically,the goal of financial management has been to achieve a dominant market share.

Which process does a firm use to evaluate long-term investment proposals?

The current ratio helps financial managers evaluate the ability of a firm to pay short-term liabilities as they come due.

One of the functions of financial management is to determine the best strategy for meeting a firm's long-term financing needs.

As part of the financial planning process planners would create projected financial statements.What is another name for these statements?

What is a pro forma statement? Describe the two major types of pro forma statements,and explain the role they play in financial planning.

Describe the various key ratios managers rely on,briefly explain what each type of ratio tells the financial manager,and give one specific example of each.

Trade credit is credit granted by sellers when they provide firms with materials,parts,or finished goods without requiring payment until some period after delivery.