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Exam 18: Financial Management

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Question 131

True/False

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The indenture terms refer to the agreements of a bond issue, such as how much interest it promises to pay and when it promises to repay the issue.

A) True
B) False

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Question 132

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Typically, only highly regarded customers with financial stability receive .

A) secured loans
B) bank premiums
C) unsecured loans
D) commercial paper

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

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Question 133

Multiple Choice

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, nations such as Saudi Arabia have a repository where they keep excess money for future investment. Internationally, this is known as a(n) .

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

According to the boxed material in the "Making Ethical Decisions" box in Chapter 18, which of the following best describes the auditing problem?

By identifying variances from the financial plan, managers are able to focus on those departments that require corrective action.

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

Allison Robards, owner of Backstreet Books, an eclectic bookstore near a large university, is seeking additional financing for books and CDs that she plans to buy and sell in the same fiscal year. Even though it will be a sizeable investment in inventory, Allison is seeking short-term financing.

Since commercial finance companies offer loans to higher risk customers than commercial banks, the interest rates they charge are usually than rates charged by banks.

The budget that estimates a firm's projected cash inflows and outflows, as well as cash shortages or surpluses during a given time period is called the budget.

The long-term financial forecast plays a crucial part in the company's long-term strategic plan.

Acquiring and storing inventory represents a sizable expenditure for many businesses.

Financial managers devote the majority of their time obtaining long-term financing to fund the firm's capital expenditures.

A line of credit from a bank guarantees a firm that a specified amount of financing will be available when it is needed.

Liberty Electronics wants to predict how much money it can make this coming year. Liberty would benefit from developing a:

Corporations that issue stock to raise long-term funds accept the legal obligation to repay the amount borrowed.

When it involves securing capital, the recession has not affected small businesses as much as large businesses.

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

Tax payments are important to the finance manager because they represent a cash inflow to a firm.

Green Builder's Supply, Inc. does not offer customers a cash discount for early payment of their accounts receivable. As a result, most customers wait to pay their bill on the last day before late penalties are charged. These customers apparently understand the: