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Exam 18: Financial Management

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Question 31

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Successful use of financial leverage requires a firm to:

A) negotiate with lenders to establish a line of credit.
B) establish and operate a venture capital organization to minimize the use of equity financing.
C) register with the local government commission that administers market leverage.
D) earn a higher return on its investments than the interest rate it pays to acquire funds.

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

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Question 32

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The main objective of financial control is to establish priorities for the purchase of plant and equipment.

A) True
B) False

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Question 33

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With added competition,firms prefer not to offer the availability of credit sales to their customers.

Financial managers are responsible for buying merchandise on credit and collecting payment from accounts receivable.

Businesses acquire long-term financing from two major sources:

After enjoying increased sales and profits of several popular products,Braggs & Stritton plans to expand their production facilities.The firm,a well-known producer of lawn care products,prefers financing this project with a funding source that avoids interest and dividend payments as well as underwriting costs.Which of the following best meets the needs of Braggs & Stritton?

The rate of return a company must earn to meet the demands of its lenders and expectations of its equity holders is called:

Managing a firm's resources so that it can meet its goals and objectives is the goal of financial accounting.

Financial control is a process where firms compare actual revenues and costs with budgeted revenues and costs.

When Liberty Industries renegotiated their loan agreement,they borrowed an additional $2 million.The new loan requires Liberty to repay the new amount in nine months.Liberty's activity represents ________ financing.

Funds obtained from venture capitalists are considered equity financing.

Effective financial managers evaluate customers' ability to pay for merchandise purchased on credit.

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

A loan backed by collateral represents a(n) :

The concept of the time value of money is based on the interest-earning power of money.

As the chief financial officer (CFO)for a medium-sized service company,Shelley is concerned about the possibility of temporary cash shortages.Given the irregular cash flows from seasonal sales,she wants to ensure that her company's bank will provide adequate funds to cover any potential cash flow problem.The best strategy to ease Shelley's concern would be to arrange a revolving credit agreement with the bank.

One of the most common ways for a firm to fail financially is poor control over cash flow.

Typically,only highly regarded customers with financial stability receive __________.

One very important responsibility of the finance department in both large and small businesses involves acquiring needed funds to operate the business.

A firm's short-term financial forecast provides a projected sales estimate.