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Exam 17: Financial Management

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Question 71

True/False

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Trade credit represents one of the most expensive forms of short-term financing.

A) True
B) False

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Question 72

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By selling shares of ownership in their company,Ottawa Scientific acquires the funds needed to finance their research and development projects.Ottawa Scientific provides for their long-term funding needs through ________ financing.

A) debt
B) equity
C) retained
D) asset

E) None of the above
F) A) and C)

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Question 73

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Factoring represents the least expensive way for a firm to raise short-term funds.

Undercapitalization refers to the problem of insufficient start-up funds.

Bankers are often reluctant to make loans to small businesses.

What is the major advantage for a business to use a term-loan agreement?

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.

Financial managers use data prepared by accountants to develop strategies for improving the financial strength of the firm.

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

A capital budget highlights the expected funds to be provided by owner investments.

Equity financing represents funds provided by the owners of a firm.

Suppliers offer trade credit to their business customers by providing merchandise and requiring payment at a later date.

Businesses acquire long-term financing from two major sources:

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

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

Family and friends represent the most important source of credit for most small businesses.

As a financial manager for a large manufacturing firm,Gail evaluates the purchase of expensive machinery and construction of new facilities.She is analyzing capital expenditure proposals.

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

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

What are the tax benefits of equity financing?