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Exam 17: Financial Management

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Question 1

Multiple Choice

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Which of the following would not normally involve long-term financing?

A) Worker's salaries
B) Plant expansion
C) Purchase of modern equipment
D) Purchase of a large tract of land

E) A) and B)
F) A) and C)

Correct Answer

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Question 2

Multiple Choice

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A ________ refers to a line of credit that is guaranteed by the bank.

A) collateral trust fund
B) revolving credit agreement
C) contract credit agreement
D) commercial credit agreement

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

Correct Answer

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B

Question 3

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Sound financial management involves determining the most appropriate sources of funds to meet the short-term and long-term needs of an organization.

Financial managers generally oppose credit sales because of the impact on cash flows.

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

Explain the role the operating budget,the capital budget,and the cash budget play in financial planning.

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.

___________ offer short-term secured loans to high-risk borrowers.

If a buyer is offered the terms of sale of "3/10,net 30" this means that the buyer can receive a 10 percent discount by making full payment within 3 days of the billing date.

Manitoba Supply offers their customers trade credit with terms 2/15 net 30.This implies that:

What is the overall objective of financial planning?

Maple Leaf Innovations is planning to purchase a sophisticated supercomputer in the next year that will cost over $43,000,000.This purchase would be included in Maple Leaf's capital budget.

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

Tax payments represent a cash inflow to a firm.

Debt financing exclusively provides funds to satisfy short-term financing needs.

Capital expenditures are major investments in long-term assets such as equipment,and trademarks.

Typically,only highly regarded customers of a bank receive:

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

A loan that requires the borrower to provide collateral represents a:

Corporations that issue debenture bonds are required to provide collateral.