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Exam 18: Financial Management

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Question 131

Multiple Choice

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Which of the following presents an effective technique to improve cash management?

A) Speed up cash payments and slow down cash collections
B) Speed up cash collections and slow down cash payments
C) Speed up both collections and payments of cash
D) Slow down both the payment and collections of cash

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

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Question 132

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While firms finance their long-term needs with debt financing, their short-term needs are served by equity financing.

A) True
B) False

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Question 133

Multiple Choice

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Successful use of financial leverage requires a firm to:

A comptroller is the chief accounting officer of an organization.

With added competition, firms prefer not to offer the availability of credit sales to their customers.

__________ refers to the strategy of using borrowed funds to increase the rate of return for stockholders

Which of the following shows a firm's spending plans on fixed assets such as large equipment?

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

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

One of the challenges of effective financial management is:

Equity financing refers to the money a firm receives from the sale of bonds.

An effective strategy to manage cash flows requires retail businesses to eliminate their inventory.

The concept of the time value of money is based on the interest-earning power of money.

Equity financing represents funds acquired from within the firm or through the sale of stock, representing ownership in the company.

Inability to attract and retain qualified employees is one of the most common ways for a firm to fail financially.

Accountants truly represent the financial managers of a business.

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

Corporations must comply with the Securities and Exchange Commission (SEC) requirements in order to sell their stock publicly.

Which of the following statements is most accurate?

Mini-Case Tishian's Funeral Home has been in business for over 80 years. Throughout its history, the firm has been a family-run operation. Today, the business is managed by Mort Tishian, a grandson of the founder. Unfortunately, Mort Tishian's tenure has been plagued with problems neither his father nor grandfather before him experienced. The reason is simple: the funeral business is undergoing rapid change. Small, family-owned funeral homes are losing ground to a new type of competitor, a large national network service that resembles a franchise system. More and more families "in their time of need" are choosing the new, highly promoted competitors instead of the traditional small family-operated funeral homes. This trend has required a response from organizations like Tishian's Funeral Home. Bigger and better facilities are needed to remain competitive. All of this puts more pressure on the family owners to be more active in the financial side of the business. Mort summed it up best when he said, "Grandpa told people, 'You pay me when you can, I ain't goin' nowheres.'" His creditors did the same with him. Today, it's a different game. Cash flow is key, and obtaining funds is no simple task. Additionally, creditors want their money now, not later. Banks are also more demanding. "Heck, Grandpa knew all the bankers he dealt with personally. I see new faces every time I go to the bank. If things don't get better, I suspect after eighty years of service, Tishian's Funeral Home will have its own funeral." -After seeing Mort's advertisement: "You Aren't Gettin' Any Younger! Start Planning for Heaven Today!" a(n) ___________ firm decided the aging population was a good investment. Although they typically look at start-ups with great promise, they approached Mort with $6 million dollars for his new idea of a major three-city expansion that included six new funeral homes, a crematory, and mausoleum. After researching the offer, Mort agreed to give up 50% ownership of the business in order to secure these funds. His last thoughts as he began to sign the papers were: "Now, I'll be able to compete with the big guys!"