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Exam 17: Financial Management

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Question 31

True/False

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Effective financial managers carefully review customer credit histories to decrease inventory costs.

A) True
B) False

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Question 32

Multiple Choice

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Category Development,a leader in residential housing,recently negotiated a financing arrangement with TD Bank.The short-term funding agreement guarantees a specified amount of funds would be made available upon Category Development's request.This arrangement represents a:

A) line of credit.
B) pledging agreement.
C) revolving credit agreement.
D) contingency reserve.

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

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Question 33

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As a management consultant,Lamont knows that regardless of how good a firm's product might be,the firm has little chance of success without a(n) :

_____________ is the function in business that is responsible for acquiring funds for the firm,and managing funds within the firm.

Money has a time value because:

Financial managers devote the majority of their time obtaining long-term financing to fund the firm's capital expenditures.

Business organizations exclusively use long-term financing for their short-term and long-term needs.

________ describes the short-term financing available to firms that buy merchandise from their suppliers and are not required to pay for their purchase until some future date.

The interest paid on ________ financing represents a tax deductible business expense.

The most widely used source of short-term funding is trade credit.

Rather than requiring cash payment for all sales,some firms offer credit to:

Identify and describe the major steps involved in financial planning.

A capital budget combines all of the other budgets into one detailed plan used to monitor the operations of the firm.

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

A bond represents a long-term debt obligation of a corporation or government.

Rod was required to pledge his house and car as collateral for a loan he received from CIBC.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 their claims.

The financial manager of Caroline Graphics negotiated a ________ with her bank that allows Caroline to borrow up to $50,000 without collateral.This arrangement eliminates the need to renegotiate the terms of the loan and complete new paper work each time Caroline borrows money.The preapproved loan agreement is contingent upon the bank having the funds available.

)Production scheduling represents one of the responsibilities of financial managers.

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:

Which of the following presents an effective technique to improve cash management?