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Exam 18: Financial Management

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Question 121

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Since short-term financial forecasts predict expected future events, they should not be influenced by recent financial statements.

A) True
B) False

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Question 122

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A represents a long-term debt obligation issued by a corporation or a government.

A) share of stock
B) commercial note
C) certificate of deposit
D) bond

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

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Question 123

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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.

The finance manager at AllSports Communication has asked his assistant, Ben, to prepare the budget. Ben will gather as much information as possible by utilizing the firm's other budgets and any documents that summarize proposed financial activities.

Offering cash discounts to customers who pay their bills by a certain date represents an effective technique to manage accounts receivable.

In 2009, it was rumored that the previous owners of Skype (the internet calling service) , were interested in buying it back from its current owner, eBay. The two way, the purchase of Skype would be financed with .

Financial managers are responsible for the management of accounts receivable and accounts payable.

Backstreet Books Is seeking financing to fund the opening of two more locations in a major university town. There is no need to consider debt financing for this project. It will require a sizeable investment in equity funds.

Inadequate expense control typically occurs as a result of undercapitalization.

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

An effective budget requires:

Trade credit means the seller will sell and deliver products and/or services to the buyer, with the understanding that the buyer will pay for these products and/or services at a later date.

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

Funds obtained from venture capitalists are considered equity financing.

When Preferred Pet Care Inc, a mobile veterinary care company, first started operations, it extended three months of credit to customers. It soon began to experience a cash flow problem. A finance professional was hired to:

Although best used as a last resort, many small businesses find it convenient to use as a short-term source of financing. Although this form short-term debt comes with high interest rates, it provides a quick line of credit for many firms, including start-up companies who may not be able to secure bank loans.

Much of a financial manager's day-to-day activities involve managing the short-term financial needs of the firm.

The overall objective of financial planning is to optimize the firm's profitability and make the best use of its money.

One step in the financial planning process is to establish control procedures that allow managers to monitor the organization's performance.

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