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Exam 18: Financial Management

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Question 101

Multiple Choice

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To reduce the time and expense of collecting their accounts receivable,some firms:

A) extend credit to new customers.
B) offer extended payment plans to existing customers.
C) adopt a just-in-time inventory policy.
D) accept bank credit cards.

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

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Question 102

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As a financial manager,Sabrina's responsibilities include the interpretation of financial statements provided by the firm's accountants and the preparation of recommendations to top management.

A) True
B) False

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Question 103

Essay

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Identify and describe three types of short-term financing.

As a financial manager for a very profitable manufacturer of specialty steel,Kurt has been asked to investigate sources of long-term funds to finance the construction of a new facility.Kurt would prefer a funding source that does not require interest payments or involve major underwriting fees.Kurt will consider using retained earnings to fund the construction project.

The cost to a retailer of accepting credit cards is generally greater than the benefits provided.

Acquiring funds through equity financing requires the firm to pay annual dividends.

According to the Connecting Across Borders box,in 2012 Middle Eastern countries spent more on foreign investment then they have in the past 20 years.

A budget's primary purpose is to provide managers with a financial summary of past operations.

Admiral Electric is a widely known,successful manufacturer of industrial motors and related equipment.When Admiral Electric anticipates a need for short-term funds,it offers unsecured promissory notes to investors for 180 days.To obtain short-term financing,Admiral Electric utilizes:

Financially stable firms are able to sell commercial paper to raise short-term funds.

Which of the following is a primary area of concern for financial managers?

The finance manager at Preferred Pet Care Inc has asked the company's accountant to prepare a report that shows the amount the firm is spending monthly on veterinary supplies for its western suburb service area,in the hopes of negotiating better payment terms with its suppliers.The purpose of this effort is to increase cash levels within the firm.

The types of organizations who can issue bonds are privately and publicly held corporations,exclusively.

An effective budget requires:

Bill is a financial manager for Great View Eye Care,a local chain of Milwaukee retail stores offering glasses and optical health care.The majority of Bill's day likely involves efforts to locate and secure long-term financing to fund Great View Eye Care's capital expenditures.

A revolving credit agreement represents a line of credit that is guaranteed.

Lending institutions may offer a borrower a percentage of the value of the borrower's accounts receivable so the borrowing firm can continue to operate while it waits to collect on its credit sales.This process is called _________.

The managers of Dakota Clothing regularly compare their actual profits with the firm's projected profits.When deviations occur,the managers use the feedback to take corrective action when necessary.The management of Dakota Clothing is exercising financial:

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

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