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Exam 18: Financial Management

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Question 81

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

A) master budget.
B) consolidated income statement.
C) short-term forecast.
D) statement of cash flows.

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

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Question 82

True/False

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As a financial manager for a very profitable manufacturer of specialty steel, Kurt has been asked to investigate sources of long-term funds to finance the construction of a new facility. Kurt would prefer a funding source that does not require interest payments or involve major underwriting fees. Kurt will consider using retained earnings to fund the construction project.

A) True
B) False

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Question 83

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Financial managers are responsible for the management of accounts receivable and accounts payable.

The effective management of accounts receivable requires financial managers to:

An unsecured corporate bond is known as a debenture bond.

Finance is the function in a business that acquires funds for the firm and manages those funds within the firm.

The managers of Dakota Clothing regularly compare their actual profits with the firm's projected profits. When deviations occur, the managers use the feedback to take corrective action when necessary. The management of Dakota Clothing is exercising financial:

An effective budget requires:

As mentioned in the Reaching Beyond Our Borders box, sovereign wealth funds can easily purchase more than 10% of a U.S. company without investigation by the U.S. government.

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

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

Effective financial managers evaluate customers' ability to pay for merchandise purchased on credit.

According to the box, Adapting to Change, it is impossible for small businesses to bring in venture capital from investors.

Farmers Savings and Loan agreed to extend Eckert's Orchards $200,000 of unsecured short-term funds, contingent upon the bank having the funds available. This arrangement represents a:

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

Preferred Pet Care, Inc., a mobile pet care company, is planning for the future. The company owners (two seasoned veterinarians) have brought together the vice president of marketing and the director of information systems to talk about their expansion campaign, "We come to you!" The talks are in the preliminary stages, so there is no need to concern the finance team at this time because cash flow is currently not a problem.

A cash budget helps managers anticipate borrowing, debt repayment, operating expenses, and short-term investment opportunities.

Factoring represents the least expensive way for a firm to raise short-term funds.

A less-established company, or a company with a high debt to equity ratio, would be considered a riskier investment to the lender. Which of the following principles attests to this axiom?

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