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Exam 18: Financial Management

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Question 101

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Carlos is the manager of Oh! Canada Sporting Goods. During the past six months, his cash expenditures have exceeded his cash receipts. Oh! Canada is suffering from a(n) ________ problem

A) accounting
B) undercapitalization
C) cash flow
D) exchange rate

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

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Question 102

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A promissory note is a written contract between a supplier and a business customer, with a promise that customer will pay supplier a specified amount by a certain date.

A) True
B) False

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Question 103

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Accepting credit cards, such as MasterCard or Visa, enables a firm to decrease the expense of extending credit to customers.

A loan backed by collateral represents a(n) :

A _________ forecast predicts the revenues, costs, and expenses a firm will incur for a period of one year or less

Arborview Plant Science Company has invented a drought resistant grass seed that only needs watering three times each year. In order to expand distribution worldwide, the company whose product produces lush green foliage needs serious funding. The handful of seed scientists that own the company are seeking ____________, but understand that they will relinquish a sizeable share of ownership in order to obtain the funds

The long-term financial forecast gives top management some sense of the profit potential of various strategic decisions.

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

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

When his firm is owed money, the financial manager tries to collect as early as possible.

As a result of cash flow shortages, Millard's Department Stores has fallen behind in payments to suppliers. Some suppliers are withholding shipments to Millard's until they receive payments on overdue accounts. To meet their immediate needs, Millard's Department Stores should utilize:

Finance managers need funds for capital purchases, but seldom for the day-to-day operations.

A company's capital budget helps management plan for cash shortages or surpluses.

While finance is a critical activity for profit-seeking organizations, by definition nonprofit organizations are not required to fulfill the finance function.

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

Financial managers are responsible for controlling cash flows.

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

Selling accounts receivable to obtain short-term funds is called:

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

Identify and describe three types of short-term financing.