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Exam 18: Financial Management

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Question 31

Multiple Choice

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

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

E) A) and C)
F) All of the above

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Question 32

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Effective financial managers evaluate customers' ability to pay for merchandise purchased on credit.

A) True
B) False

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Question 33

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One very important responsibility of the finance department in both large and small businesses involves acquiring needed funds to operate the business.

Typically,only highly regarded customers with financial stability receive __________.

Successful use of financial leverage requires a firm to:

As the chief financial officer (CFO)for a medium-sized service company,Shelley is concerned about the possibility of temporary cash shortages.Given the irregular cash flows from seasonal sales,she wants to ensure that her company's bank will provide adequate funds to cover any potential cash flow problem.The best strategy to ease Shelley's concern would be to arrange a revolving credit agreement with the bank.

Businesses acquire long-term financing from two major sources:

The main objective of financial control is to establish priorities for the purchase of plant and equipment.

After enjoying increased sales and profits of several popular products,Braggs & Stritton plans to expand their production facilities.The firm,a well-known producer of lawn care products,prefers financing this project with a funding source that avoids interest and dividend payments as well as underwriting costs.Which of the following best meets the needs of Braggs & Stritton?

A firm's short-term financial forecast provides a projected sales estimate.

With added competition,firms prefer not to offer the availability of credit sales to their customers.

The concept of the time value of money is based on the interest-earning power of money.

The rate of return a company must earn to meet the demands of its lenders and expectations of its equity holders is called:

Funds obtained from venture capitalists are considered equity financing.

Financial managers are responsible for buying merchandise on credit and collecting payment from accounts receivable.

A loan backed by collateral represents a(n) :

Managing a firm's resources so that it can meet its goals and objectives is the goal of financial accounting.

Financial control is a process where firms compare actual revenues and costs with budgeted revenues and costs.

One of the most common ways for a firm to fail financially is poor control over cash flow.

________ examine the data prepared by ________ and then make recommendations to top management regarding strategies for improving the firm.