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Exam 18: Financial Management

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Question 131

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Acquiring and storing inventory represents a sizable expenditure for many businesses.

A) True
B) False

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Question 132

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By identifying variances from the financial plan, managers are able to focus on those departments that require corrective action.

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B) False

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Question 133

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The types of organizations who can issue bonds are privately and publicly held corporations, exclusively.

Financial managers devote the majority of their time obtaining long-term financing to fund the firm's capital expenditures.

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

, nations such as Saudi Arabia have a repository where they keep excess money for future investment. Internationally, this is known as a(n) .

Liberty Electronics wants to predict how much money it can make this coming year. Liberty would benefit from developing a:

The long-term financial forecast plays a crucial part in the company's long-term strategic plan.

Since commercial finance companies offer loans to higher risk customers than commercial banks, the interest rates they charge are usually than rates charged by banks.

The indenture terms refer to the agreements of a bond issue, such as how much interest it promises to pay and when it promises to repay the issue.

A line of credit from a bank guarantees a firm that a specified amount of financing will be available when it is needed.

The first step in financial planning is to develop a budget to better control costs.

According to the boxed material in the "Making Ethical Decisions" box in Chapter 18, which of the following best describes the auditing problem?

When it involves securing capital, the recession has not affected small businesses as much as large businesses.

Acquiring funds through debt financing actually decreases the overall risk of the firm.

Allison Robards, owner of Backstreet Books, an eclectic bookstore near a large university, is seeking additional financing for books and CDs that she plans to buy and sell in the same fiscal year. Even though it will be a sizeable investment in inventory, Allison is seeking short-term financing.

Tax payments are important to the finance manager because they represent a cash inflow to a firm.

The budget that estimates a firm's projected cash inflows and outflows, as well as cash shortages or surpluses during a given time period is called the budget.

Green Builder's Supply, Inc. 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:

Typically, only highly regarded customers with financial stability receive .