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Exam 18: Financial Management

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Question 111

Multiple Choice

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The overall objective of financial planning is to

A) forecast the impact of technological trends.
B) prepare financial statements for managers.
C) optimize the firm's profitability.
D) establish budgets for financial control.

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

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Question 112

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

A) True
B) False

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Question 113

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A firm will choose to seek debt financing only for the purpose of paying for short-term operating needs.

Which of the following commonly results in the financial failure of a firm?

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

Identify and describe three types of short-term financing.

A major concern for firms selling on credit is

Epic Electronics holds commercial paper issued by SafeONE Insurance that matures in 180 days. However, shortly after Epic purchased the commercial paper, SafeONE went out of business. The finance manager for Epic is not worried because his loan to the corporation is secured by collateral that he can now claim.

Businesses acquire long-term financing from two major sources,

Snowy Mountain Ski Lodge's cash budget for the month of March 2019 shows a negative amount. Due to the fact that the months of January and February were quite lucrative and showed positive amounts, the finance manager will not borrow any money in the short term to cover for March's deficit.

Which of the following would normally involve long-term financing?

Which of the following provides the buyer with collateral?

Long-term financing would normally be used to purchase

________ provide financing to new or emerging companies with high profit potential. In return, these organizations expect a share of ownership in the company.

________ offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public with the promise of repayment within 270 days.

Which of the following correctly identifies areas of authority and responsibility for a chief financial officer (CFO) ?

Pages and Pages Booksellers is seeking financing to fund the opening of two new locations in nearby college towns. There is no need to consider debt financing for this project. It will require a sizeable investment in equity funds.

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

Many small businesses rely on factoring as a source of short-term financing because

A term-loan agreement requires the borrower to repay the loan in one lump sum at the end of the loan period.