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Exam 18: Financial Management

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Question 91

Multiple Choice

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If a company secures a three year bank loan,it is considered __________.

A) short-term financing
B) asset funding
C) liability funding
D) long-term financing

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

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Question 92

Multiple Choice

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The terms of the agreement in a bond issue are referred to as the:

A) articles of the issue.
B) terms of indebtedness.
C) bond specifications.
D) indenture terms.

E) A) and D)
F) C) and D)

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Question 93

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Short-term financing refers to borrowed funds that must be repaid in a year or less.

What are two major forms of debt financing? Describe and differentiate between the two types.

_________ 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.

Which of the following organizations would be most likely to acquire short-term funding by issuing commercial paper?

A share of stock represents a company-issued IOU including a promise to repay on a certain date.

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

__________ refers to the strategy of using borrowed funds to increase the rate of return for stockholders.

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

Businesses acquire long-term financing from two major sources:

Which of the following companies is undercapitalized?

Forecasting means determining how closely the actual revenue and expense results matched up with the predicted revenues and expenses.

Trade credit means the seller will sell and deliver products and/or services to the buyer,with the understanding that the buyer will pay for these products and/or services at a later date.

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

The first step in the financial planning process is:

To secure financing for a planned expansion,Ohio Electronics borrowed $400,000 from King Finance.The ________ loan agreement requires that Ohio Electronics provide the title to their factory as collateral.

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?

To be effective,an internal auditor must be critical of any improprieties or deficiencies found in the financial activities of the firm.

The importance of financial managers to firms with large cash inflows is greater than for firms with smaller cash flows.