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Exam 18: Financial Management

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Question 61

Multiple Choice

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A just-in-time inventory system allows a firm to:

A) extend credit to new customers.
B) provide sufficient inventory for most contingencies.
C) reduce their investment in inventory.
D) reduce capital expenditures.

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

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Question 62

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A secured loan means the borrower has the security of knowing repayment is not due for several years.

A) True
B) False

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Question 63

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Karen,a financial manager with Bigbux Incorporated,regularly compares actual revenues and expenses against their projected values.After identifying areas with significant deviations from planned values,she investigates to find the cause of these variances.Karen's activities represent the steps involved in the preparation of Bigbux's capital budget.

An effective strategy to manage cash flows requires retail businesses to eliminate their inventory.

The financial manager of Carolina Graphics negotiated a ________ with her bank that allows Carolina 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 Carolina borrows money.The preapproved short-term loan agreement is contingent upon the bank having the funds available.

Unlike bonds,stocks offer the advantage of tax-deductible interest payments.

Which of these is a common source of long-term financing for a corporation?

Finance managers spend the majority of their time managing _____.

Corporations that issue debenture bonds are required to provide collateral.

Money has time value due to the fact that if invested,it has the potential to earn more money at some point in the future.

When using ________ financing,the company incurs a legal obligation to repay the amount borrowed.

Family and friends represent "problem free" sources of financing for most small businesses.

Inventory financing represents the selling of accounts receivables as collateral for a loan.

Acquiring funds through debt financing actually decreases the overall risk of the firm.

The first step in financial planning is to develop a budget to better control costs.

One of the primary factors that influences the interest rate a firm pays on long-term loans is the:

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

Carlos is the manager of Oh! Canada Sporting Goods.During the past six months,his cash expenditures have exceeded his cash receipts.Oh! Canada is suffering from an) ________ problem.

Preferred Pet Care,Inc. ,a mobile pet care company is planning for the future.The company owners two seasoned veterinarians)have brought together the vice president of marketing and the director of information systems to talk about how their expansion campaign: "We come to you!" The talks are in the preliminary stages,so there is no need to concern the finance team at this time because cash flow is currently not a problem.

A _________ forecast predicts the revenues,costs,and expenses a firm will incur for a period of one year or less.