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Exam 18: Financial Management

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Question 51

True/False

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Long-term loans are often more expensive than short-term loans.

A) True
B) False

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Question 52

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_________ offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public with the promise of repayment within 270 days.

A) Trade credit
B) A line of credit
C) Factoring
D) Commercial paper

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

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Question 53

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A promissory note is a written contract between a supplier and a business customer,with a promise that customer will pay supplier a specified amount by a certain date.

Which of these statements about corporate bonds is correct?

Most companies require long-term capital to purchase fixed assets such as plant and equipment,to develop new products and services,or to finance an expansion.

Tax management by financial managers involves the development of strategies to evade tax liabilities.

Tri-State Concrete Construction Company relies on factoring to meet its short-term financing needs.This means that Tri-State borrows money from a finance company and pledges its accounts receivable as collateral.

Carlos wants to know the income potential for his computer consulting business during the next five years.Which of the following would be most helpful?

Commercial paper is unsecured short-term debt.

Which of the following would normally involve long-term financing?

Preferred Pet Care,Inc.plans to purchase a second mobile unit next year that will cost an estimated $55,000.The finance manager will include this projected purchase in the company's capital budget.

The budget that estimates a firm's projected cash inflows and outflows,as well as cash shortages or surpluses during a given time period is called the ________ budget.

The duties and responsibilities of a financial manager are virtually identical to the duties and responsibilities of an accountant.

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.

Debt financing refers to funds acquired from the profitable operations of a firm or through the sale of ownership in the firm.

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

___________ refers to the process that identifies variances by comparing actual revenues and expenses to projected revenues and expenses.

To be effective,budgets are prepared independently of organizational forecasts.

Financial managers are responsible for controlling cash flows.

If a firm sells shares of stock,it is financing with _______.