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Exam 18: Financial Management

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Question 101

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When Portable Pet Care, a mobile veterinary company, first started operations, it extended three months of credit to customers. It soon began to experience a cash flow problem. A finance professional was hired to

A) manage accounts receivable.
B) manage accounts payable.
C) develop tax strategies.
D) audit the company ledgers.

E) B) and C)
F) A) and D)

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Question 102

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Equity financing must be repaid.

A) True
B) False

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Question 103

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Leverage refers to the use of borrowed funds to increase a firm's rate of return.

Inadequate control of expenses represents a common financial problem that contributes to business failure.

Corporations that issue stock to raise long-term funds accept the legal obligation to repay the amount borrowed.

Explain the role the operating budget, the capital budget, and the cash budget play in financial planning.

Identify and describe the major steps involved in financial planning.

To maximize the benefits of using financial leverage, a firm should

Factoring refers to the process of selling accounts receivable for cash.

Investors and entrepreneurs should have an understanding of financial issues.

Expansion into new markets (either domestic or global) is sometimes financed with long-term funds.

A promissory note is a written contract between a supplier and a business customer, with a promise that customer will pay supplier a specified amount by a certain date.

The importance of financial managers to firms with large cash inflows is greater than for firms with smaller cash flows.

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

Diana is a financial manager for Eagle Eye Care, a chain of retail stores offering optical care and glasses. The majority of Diana's day likely involves efforts to locate and secure long-term financing to fund Eagle Eye Care's capital expenditures.

One important consideration for a firm accepting funds from a venture capitalist is the ownership interest demanded by the venture capital firm.

The most widely used source of short-term funding is

Some suppliers hesitate to offer trade credit to firms with a poor credit history. In these cases, the supplier may insist that the customer sign a(n)

The operating (master) budget identifies the funds (and the allocation of those funds) required to operate a business at a projected level of revenue.

When a firm is owed money, the financial manager tries to collect as early as possible.