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Exam 18: Financial Management

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Question 111

Multiple Choice

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One of the challenges of effective financial management is:

A) to have sufficient cash on hand without compromising the firm's investment potential.
B) ensuring the satisfaction of each of the stakeholder groups.
C) working within the strict regulations of the Financial Accounting Standards Board (FASB) .
D) providing the financial data in a timely manner for management consultants to improve decision making.

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

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Question 112

True/False

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

A) True
B) False

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Question 113

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According to the risk/return trade-off,the higher the risk,the lower the interest rate charged by the lender.

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

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

Venture capital firms look to invest their funds in firms that _________.

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

Big Bear Ski Lodge's cash budget for the month of March,2012,shows a negative amount.Due to the fact that the months of January and February were quite lucrative and showed positive amounts,the finance manager will not borrow any money on the short-term to cover for March's deficit.

The first time a company offers to sell its stock to the general public is called an initial private label (IPL).

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

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

Trade credit is the practice of buying goods now and paying for them later.

Charging interest on past due customer accounts reflects that:

A revolving credit agreement is designed to reduce the risk of lending money.

Some suppliers hesitate to offer trade credit to firms with a poor credit history.In these cases,the supplier may insist that the customer sign a(n) :

The indenture terms refer to the agreements of a bond issue,such as how much interest it promises to pay and when it promises to repay the issue.

Lancer Wholesale Company wants to improve cash flow.Which of the following strategies would be most likely to help Lancer achieve this objective?

Business organizations always use long-term financing for (both)short-term and long-term needs,but they never use short-term financing for (both)short-term and long-term needs.

Anna operates a florist shop specializing in weddings.While she knows that her competitors allow customers to buy on credit,she is concerned about the risk and expense of unpaid customer accounts.One strategy to reduce risk and collect sales revenue more quickly would be to accept bank-issued credit cards.

Finance managers need funds for capital purchases,but seldom for the day-to-day operations.