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Exam 18: Financial Management

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Question 131

Multiple Choice

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When Newport 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.

A) equity
B) debt
C) revitalized
D) secured

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

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Question 132

Multiple Choice

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An effective budget requires

A) a successful advertising campaign.
B) accurate forecasts.
C) management approval.
D) stakeholder consensus.

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

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Question 133

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Jason manages credit and collections at Barkatorium Pet Supplies. He is responsible for accounts receivable and accounts payable. These activities suggest that Jason's job is in financial management.

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 30 days of the billing date.

________ offer short-term secured loans to high-risk borrowers. These loans usually require collateral.

A capital budget highlights a firm's spending plans for major assets, such as property, buildings, and equipment.

Money has a time value because

Forecasting means determining how closely the actual revenue and expense results matched up with the predicted revenues and expenses.

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

Which of these statements about corporate bonds is correct?

If you are at the Phoenix Sky Harbor International Airport, you will no longer get a pat-down if you go through the metal detector. The airport now has full body screening ports that scan the entire body and readily detect weapons or explosive devices that someone may want to take on board a plane. These expensive devices represent

Burger Barn is a chain of hamburger restaurants on the West Coast. The corporation plans to expand to the Midwest and then along the East Coast. The acquisition of land and construction of new restaurants represent major capital expenditures.

Lydia is a financial manager with Securitas Financial. She 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. Lydia's activities represent the steps involved in the preparation of Securitas's capital budget.

Inadequate expense control typically occurs as a result of undercapitalization.

Acquiring funds through debt financing enhances the firm's ability to increase profits.

Theme Park Thrillers has plans to build a new $175 million theme park and intends to finance this project through the sale of additional shares of ownership in their firm. Selling new shares of stock represents ________ financing.

Venture capitalists expect lower than average returns on their investment since they are exposed to little risk.

Commercial finance companies normally charge lower rates on short-term loans than those charged by commercial banks.

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

The operating (master) budget identifies the funds (and the allocation of those funds) required to operate a business at a projected level of revenue.