Question 1

Financial managers examine the data prepared by accountants and make recommendations to top management regarding strategies for improving the financial performance of the company.

Accepted Answer

A) True 
 B)False

Question 2

Mort Tishian feels it's necessary to predict revenues,costs,and expenses on a six-month basis."It's the only way you get an idea of what to expect," explains Mort.In order to obtain these predictions,Mort needs to develop an) :

Accepted Answer

A)  cash-basis accounting system.
B)  short-term forecast.
C)  capital budget.
D)  econometric model.E) All of the above
F) A) and B)

Question 3

Which of the following statements represents good advice prior to making capital expenditures?

Accepted Answer

A)  Capital expenditures represent borrowed funds that must be repaid in one year or less.It is important to seek the advice of your accountant prior to committing.
B)  Capital expenditures represent investment in inventories and expendable type assets that the firm will use in one year or less.It is important to maintain the appropriate level of monthly cash flow to pay for these expenditures.
C)  Most firms do not value capital expenditures on their balance sheets,so it is important to stay abreast of the market value of these assets at all times,in case you want to sell them.
D)  Capital expenditures are major investments - meaning they require large sums of funds.Companies should weight all possible options before committing available resources to projects that take significant amounts of funds and extended time.E) A) and C)
F) A) and D)

Question 4

Corporations that issue stock to raise long-term funds accept the legal obligation to repay the amount borrowed.

Accepted Answer

A) True 
 B)False

Question 5

Rod was required to pledge his house and car as collateral for a loan he received from the First National Bank.The money from the loan was used to start his new business,which unfortunately failed within 6 months.The bank can now claim Rod's house and car to satisfy its claim.

Accepted Answer

A) True 
 B)False

Question 6

To maximize the benefits of using financial leverage,a firm should:

Accepted Answer

A)  strive to minimize their cost of capital.
B)  avoid securing funds through long-term debt financing.
C)  limit their investments to projects with minimum risk levels.
D)  incorporate in states with relatively low tax rates.E) All of the above
F) A) and D)

Question 7

The terms "2/10,net 30" indicate that the seller is offering a 10% discount for early payment.

Accepted Answer

A) True 
 B)False

Question 8

In order to assist in revenue realization,an) ________ allocates resources throughout the firm.

Accepted Answer

A)  forecast
B)  balance sheet
C)  budget
D)  income statementE) B) and D)
F) A) and B)

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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:

Accepted Answer

A)  line of credit.
B)  pledge agreement.
C)  factoring agreement.
D)  trade voucher.E) A) and C)
F) A) and D)

Question 11

Financial managers understand the time value of money.They try to maximize cash expenditures,as opposed to minimizing cash expenditures.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Suppliers prefer to offer trade credit to customers with poor credit ratings or no credit history.

Accepted Answer

A) True 
 B)False

Question 14

A tool that provides lots of convenience,credit cards are a source of a readily available line of credit for a small business because they provide convenience.

Accepted Answer

A) True 
 B)False

Question 15

A firm's most recent financial statements often serve as the basis for predicting future sales,costs and expenses.

Accepted Answer

A) True 
 B)False

Question 16

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.

Accepted Answer

A) True 
 B)False

Question 17

After earning $30 million in net income,Rolatrim Industries distributed $5 million in dividends to their stockholders.The board of directors of the firm decided to invest the remaining $25 million back into the business.This $25 million reinvestment of profits represents:

Accepted Answer

A)  a trust fund.
B)  retained earnings.
C)  preferred capital.
D)  mutual funds.E) A) and B)
F) All of the above

Question 18

A _________ forecast predicts the revenues,costs,and expenses a firm will incur for a period longer than one year.

Accepted Answer

A)  cash flow
B)  short-term
C)  capital expenditures
D)  long-termE) None of the above
F) A) and D)

Question 19

To reduce the time and expense of collecting their accounts receivable,some firms:

Accepted Answer

A)  extend credit to new customers.
B)  offer extended payment plans to existing customers.
C)  adopt a just-in-time inventory policy.
D)  accept bank credit cards.E) All of the above
F) A) and B)

Question 20

"Good Finance or Bad Medicine," the topic title of the Making Ethical Decisions box,has an important message for managers who make financial decisions.Which of the following statements summarizes this passage's theme?

Accepted Answer

A)  Managers must balance good economic decisions with socially forward thinking decisions.
B)  Financial decisions must be based on what insurance companies are willing to pay.
C)  Checking academic credentials of recently graduated doctors is imperative due to the cost of laws suits that patients may file if they learn that they were served by a surgeon without a license.
D)  The support of a good law firm is worth every penny a hospital might pay.The finance manager should always budget for a legal team.E) C) and D)
F) B) and D)

Exam 18: Financial Management

Financial managers examine the data prepared by accountants and make recommendations to top management regarding strategies for improving the financial performance of the company.

Correct AnswerverifiedShow Answer

"Good Finance or Bad Medicine," the topic title of the Making Ethical Decisions box,has an important message for managers who make financial decisions.Which of the following statements summarizes this passage's theme?

Correct AnswerverifiedShow Answer

A firm's most recent financial statements often serve as the basis for predicting future sales,costs and expenses.

Correct AnswerverifiedShow Answer

In order to assist in revenue realization,an) ________ allocates resources throughout the firm.

Correct AnswerverifiedShow Answer

To reduce the time and expense of collecting their accounts receivable,some firms:

Correct AnswerverifiedShow Answer

A _________ forecast predicts the revenues,costs,and expenses a firm will incur for a period longer than one year.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Rod was required to pledge his house and car as collateral for a loan he received from the First National Bank.The money from the loan was used to start his new business,which unfortunately failed within 6 months.The bank can now claim Rod's house and car to satisfy its claim.

Correct AnswerverifiedShow Answer

Which of the following statements represents good advice prior to making capital expenditures?

Correct AnswerverifiedShow Answer

After earning $30 million in net income,Rolatrim Industries distributed $5 million in dividends to their stockholders.The board of directors of the firm decided to invest the remaining $25 million back into the business.This $25 million reinvestment of profits represents:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppliers prefer to offer trade credit to customers with poor credit ratings or no credit history.

Correct AnswerverifiedShow Answer

Corporations that issue stock to raise long-term funds accept the legal obligation to repay the amount borrowed.

Correct AnswerverifiedShow Answer

Financial managers understand the time value of money.They try to maximize cash expenditures,as opposed to minimizing cash expenditures.

Correct AnswerverifiedShow Answer

The terms "2/10,net 30" indicate that the seller is offering a 10% discount for early payment.

Correct AnswerverifiedShow Answer

Mort Tishian feels it's necessary to predict revenues,costs,and expenses on a six-month basis."It's the only way you get an idea of what to expect," explains Mort.In order to obtain these predictions,Mort needs to develop an) :

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

A tool that provides lots of convenience,credit cards are a source of a readily available line of credit for a small business because they provide convenience.

Correct AnswerverifiedShow Answer

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:

Correct AnswerverifiedShow Answer

To maximize the benefits of using financial leverage,a firm should:

Correct AnswerverifiedShow Answer

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