Question 1

Equity financing may involve the sale of stock (representing ownership)to new investors.

Accepted Answer

A) True 
 B)False

Question 2

An internal auditor is responsible for paying the company's bills and collecting overdue payments from customers.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Jackson Plumbing,a medium-sized company,wants to guarantee that it can obtain short-term funds to meet unexpected future cash needs.Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should:

Accepted Answer

A)   issue commercial paper as needed.
B)   request that the firm's board of directors approve an issue of additional shares of common stock.
C)   arrange for a revolving credit agreement with Jackson Plumbing's commercial bank.
D)   eliminate credit sales to improve their cash inflows and reduce the firm's investment in accounts receivable.E) A) and C)
F) All of the above

Question 6

Retained earnings represent a source of equity financing.

Accepted Answer

A) True 
 B)False

Question 7

Reality Films,Inc.is a very profitable company whose stock has appreciated in market value during the past ten years.Even though the firm was established several years ago,it does not pay its stockholders dividends.Reality Films reinvests its earnings.Which of the following statements might best reflect the sentiments of its chief financial officer (CFO) ?

Accepted Answer

A)   There is no purpose in paying dividends to stockholders when it is not required by law.After all,dividends are not tax deductible!
B)   Stockholders receive interest payments twice each year.They do not receive dividends.
C)   Retained earnings are an important source of equity funds for the company.Reinvestment of earnings helps to lower the overall cost of capital.
D)   Retained earnings increase a firm's cost of capital.The higher the cost of capital,the higher the rate of return to investors.E) A) and B)
F) None of the above

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Companies raising funds must choose either debt or equity sources,but not both.

Accepted Answer

A) True 
 B)False

Question 11

Successful businesses establish restrictive credit policies encouraging customers to pay cash.

Accepted Answer

A) True 
 B)False

Question 12

Effective managers strive to minimize their firm's cost of capital.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)   Commercial banks
B)   Venture capital firms
C)   Federal Reserve banks
D)   Investment bankersE) B) and C)
F) None of the above

Question 14

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.

Accepted Answer

A)   higher
B)   lower
C)   more predictable
D)   subject to lower taxesE) B) and C)
F) C) and D)

Question 15

When Preferred Pet Care Inc,a mobile veterinary care 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:

Accepted Answer

A)   manage accounts receivable
B)   manage accounts payable
C)   develop tax strategies
D)   audit the company ledgersE) None of the above
F) C) and D)

Question 16

Trade credit means the seller will sell and deliver products and/or services to the buyer,with the understanding that the buyer will pay for these products and/or services at a later date.

Accepted Answer

A) True 
 B)False

Question 17

Many sellers offer a 2% discount to a buyer that makes payment 20 days before the due date, (2/10,net 30).Firms that fail to take advantage of this early payment discount are giving up approximately 36%.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following represents a source of short-term funding?

Accepted Answer

A)   Retained earnings
B)   Commercial paper
C)   Common stock
D)   Corporate bondsE) A) and B)
F) A) and C)

Question 19

Maryland Nursery offers customers credit terms of 3/15 net 30.This gives customers a:

Accepted Answer

A)   fifteen percent discount if they pay in three days.
B)   three percent discount if they pay in thirty days.
C)   three percent discount if they pay in fifteen days.
D)   fifteen percent discount if they pay in thirty days.E) B) and C)
F) A) and B)

Question 20

A comptroller is responsible for the acquiring and managing of funds for an organization.

Accepted Answer

A) True 
 B)False

Exam 18: Financial Management

An internal auditor is responsible for paying the company's bills and collecting overdue payments from customers.

Correct Answer
verified

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

Correct Answer
verified

Jackson Plumbing,a medium-sized company,wants to guarantee that it can obtain short-term funds to meet unexpected future cash needs.Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should:

Correct Answer
verified

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.

Correct Answer
verified

Many sellers offer a 2% discount to a buyer that makes payment 20 days before the due date, (2/10,net 30).Firms that fail to take advantage of this early payment discount are giving up approximately 36%.

Correct Answer
verified

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

Correct Answer
verified

Companies raising funds must choose either debt or equity sources,but not both.

Correct Answer
verified

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

Correct Answer
verified

Which of the following represents a source of short-term funding?

Correct Answer
verified

Retained earnings represent a source of equity financing.

Correct Answer
verified

Equity financing may involve the sale of stock (representing ownership)to new investors.

Correct Answer
verified

Effective managers strive to minimize their firm's cost of capital.

Correct Answer
verified

Maryland Nursery offers customers credit terms of 3/15 net 30.This gives customers a:

Correct Answer
verified

Trade credit means the seller will sell and deliver products and/or services to the buyer,with the understanding that the buyer will pay for these products and/or services at a later date.

Correct Answer
verified

A comptroller is responsible for the acquiring and managing of funds for an organization.

Correct Answer
verified

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

Correct Answer
verified

Successful businesses establish restrictive credit policies encouraging customers to pay cash.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

When Preferred Pet Care Inc,a mobile veterinary care 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:

Correct Answer
verified

Exam 18: Financial Management

An internal auditor is responsible for paying the company's bills and collecting overdue payments from customers.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Jackson Plumbing,a medium-sized company,wants to guarantee that it can obtain short-term funds to meet unexpected future cash needs.Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should:

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Many sellers offer a 2% discount to a buyer that makes payment 20 days before the due date, (2/10,net 30).Firms that fail to take advantage of this early payment discount are giving up approximately 36%.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Companies raising funds must choose either debt or equity sources,but not both.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following represents a source of short-term funding?

Correct AnswerverifiedShow Answer

Retained earnings represent a source of equity financing.

Correct AnswerverifiedShow Answer

Equity financing may involve the sale of stock (representing ownership)to new investors.

Correct AnswerverifiedShow Answer

Effective managers strive to minimize their firm's cost of capital.

Correct AnswerverifiedShow Answer

Maryland Nursery offers customers credit terms of 3/15 net 30.This gives customers a:

Correct AnswerverifiedShow Answer

Trade credit means the seller will sell and deliver products and/or services to the buyer,with the understanding that the buyer will pay for these products and/or services at a later date.

Correct AnswerverifiedShow Answer

A comptroller is responsible for the acquiring and managing of funds for an organization.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Successful businesses establish restrictive credit policies encouraging customers to pay cash.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When Preferred Pet Care Inc,a mobile veterinary care 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:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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