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Exam 18: Financial Management

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Question 81

True/False

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The most widely used source of short-term funding is trade credit.

A) True
B) False

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Question 82

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By purchasing stock in Entertainment Today,Veronica has become a(n) ________ the company.

A) creditor of
B) owner of
C) general partner of
D) venture capitalist in

E) B) and C)
F) All of the above

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Question 83

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The long-term financial forecast gives top management some sense of the profit potential of various strategic decisions.

Inventory financing represents the pledging of accounts receivables as collateral for a loan.

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

The rationale behind offering customers credit is:

___________ offer short-term secured loans to high-risk borrowers.These loans usually require collateral.

Factoring refers to the process of selling inventory to generate short-term funds.

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

Vitale Jewelers obtains needed short-term funds by selling its accounts receivable to the Friendly Finance Company.Friendly Finance usually pays Vitale about 80% of the value of the receivables.Vitale Jewelers utilizes ________ as a means of raising short-term funds.

Offering cash discounts to customers who pay their bills by a certain date represents an effective technique to manage accounts receivable.

The two primary sources of long-term business financing are government loans and debt capital.

As John considers approaching a venture capital firm to provide funding for his new software firm,he should realize that a venture capital firm will:

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

If a firm earns 10% return on funds they borrowed at 15% interest,the owners of the firm realize a benefit from using leverage.

Winter Haven,Florida has begun charging victims of accidents a fee when police officers and firefighters respond to the scene of the accident.In order to alleviate ___________ problems during recessions,cities,counties,and even states must pass along some of the costs that are normally covered by taxes.

Budgets are prepared after the financial forecasts are developed.

A line of credit represents a guarantee from a bank to lend a firm a given amount of money.

An unsecured loan does not require a borrower to provide collateral to secure a loan.

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