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Exam 18: Financial Management

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Question 61

True/False

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Money has time value due to the fact that if invested, it has the potential to earn more money at some point in the future.

A) True
B) False

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Question 62

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The owners of Spokes Bicycle Shop worry that cash flow this winter may be insufficient to meet the current operating expenses. While they anticipate a surplus of cash inflow as warm weather approaches, they need funds now to meet the company's immediate obligations. The owners can best resolve cash flow concerns by obtaining ________ financing.

A) intermediate
B) contingency
C) short-term
D) long-term

E) A) and D)
F) B) and D)

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Question 63

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

________ represent a favorable source of meeting long-term financing needs because there are no interest payments, dividends, or underwriting fees required when using this source.

Luna, the owner of Pages and Pages Booksellers, is seeking additional financing for books that she plans to buy and sell in the same fiscal year. Even though it will be a sizeable investment in inventory, Luna is seeking short-term financing.

The primary focus of a cash flow forecast is the firm's revenue and costs for the current operating period.

Suppliers prefer to offer trade credit to customers with poor credit ratings or no credit history.

A ________ represents a long-term debt obligation issued by a corporation or a government.

There is actually a stronger relationship between finance and marketing than there is between finance and accounting.

According to the Spotlight on Small Business box, to be a venture capitalist, a person needs to have years of expertise in the field of businesses they are funding.

A ________ forecast predicts the future cash inflows and outflows in future periods.

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

________ is the function in business that is responsible for acquiring funds for the firm, and managing funds within the firm.

A budget reflects management's expectations for revenues and allocates the use of specific resources throughout the firm.

As Miles considers approaching a venture capital firm to provide funding for his new mobile app, he should realize that a venture capital firm will

If a company wants to predict how much money it can make this coming year, it would benefit from developing a

A tool that provides lots of convenience, credit cards are a source of a readily available line of credit for a small business because they provide convenience.

The financial manager of Picture Perfect Graphics negotiated a ________ with her bank that allows Picture Perfect to borrow up to $75,000 without collateral. This arrangement eliminates the need to renegotiate the terms of the loan and complete new paperwork each time Picture Perfect borrows money. The preapproved short-term loan agreement is contingent upon the bank having the funds available.

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

Ezra is the manager of Outdoor Adventure Sporting Goods. During the past six months, his cash expenditures have exceeded his cash receipts. Outdoor Adventure is suffering from a(n) ________ problem.