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Exam 18: Financial Management

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Question 61

True/False

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As a financial manager of a small firm, Jerry needs to determine how much his company will have to borrow in the coming months, and when the borrowed funds will be needed. The preparation of the cash budget will help.

A) True
B) False

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Question 62

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As a financial manager for a large manufacturing firm, Gail evaluates the purchase of expensive machinery and construction of new facilities. She is analyzing capital expenditure proposals.

A) True
B) False

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Question 63

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Acquiring funds through borrowing represents:

The timing of a short-term forecast is more important than the forecast's accuracy.

Venture capitalists expect lower than average returns on their investment since they are exposed to little risk.

Funds obtained from venture capitalists are considered equity financing.

The rationale behind offering customers credit is:

The cost to a retailer of accepting credit cards is generally greater than the benefits provided.

Is there something in a name? April Gardner was told that she would grow up to be a master gardener. She didn't really believe that stuff, but now she finds herself in charge at a large city-owned botanical garden. She is requiring her staff to pursue continuing education. To put her money where her mouth is, she will enroll in a couple of accounting and finance courses at the local community college because this is an area where she is weak. This is a good plan, especially since she is the boss.

Short-term financing refers to borrowed funds that must be repaid in a year or less.

After enjoying increased sales of and profits from several popular products, Braggs & Stritton plans to expand their production facilities. The firm, a well-known producer of lawn care products, prefers financing this project with a funding source that avoids interest and dividend payments as well as underwriting costs. Which of the following best meets the needs of Braggs & Stritton?

To improve cash flow and profitability, effective managers attempt to minimize the firm's investment in inventory.

Robert intends to major in business. He has never had much interest in subjects with numbers. He would like to avoid taking any finance courses if possible. Robert should:

No matter the size of the business, finance is a critical activity for:

Factoring refers to the process of selling accounts receivable for cash.

A budget's primary purpose is to provide managers with a financial summary of past operations.

Generally accepted accounting principles require that any assessment of a firm's financial statements be performed by independent outside auditors.

Lending institutions may offer a borrower a percentage of the value of the borrower's accounts receivable so the borrowing firm can continue to operate while it waits to collect on its credit sales. This process is called __________

The chief financial officer (CFO) is responsible for accounting and financial functions.

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