Financial Management (18 L.S.)

Question 1

A financial forecast that is for one year or less in considered a(n) ___ - ____ forecast.

Answer 1

short-term forecast

Question 2

Which of the following is true about venture capitalist:

• They only operate in international markets
• They have assigned many major companies during start-up
• They invest in businesses with high potential
• They are a new method of raising capital in the U.S.

Answer 2

• They have assigned many major companies during start-up

- They invest in businesses with high potential

Question 3

A long-term forecast’s time period is generally more than…

Answer 3

1 year

-they are sometimes as long as 5 or 10 years!

Question 4

What are the three steps in the financial planning process in order?

Answer 4

1-forecasting the firm’s short-term and long-term financial needs
2-developing budgets to meet those needs
3-establishing financial controls to see whether the company is achieving its goals

Question 5

Items that may back a secured bond include:

Answer 5

• real estate

- machinery and equipment

Question 6

Financial management is about managing a firm’s ____, so that it can meet its goals and objectives.

Answer 6

Resources

-including all of the firms assets, which include funds (cash), and other short-term assets and long-term assets.

Question 7

The risk/return trade off principle means that…

Answer 7

The greater the risk for a lender making a loan, the higher the interest rate.

Question 8

Unsecured, short-term funds a bank will lend to a business, provided the funds are readily available, as called a(n):

Answer 8

Line of credit

Question 9

Finance is the function of acquiring and managing ____.

Answer 9

Funds

Question 10

Which of the following is a capital expenditure:

• Building and equipment
• Land
• Patents and copyrights
• Inventory and materials

Answer 10

• Building and equipment
• Land
• Patents and copyrights
• -Long-term assets and investments in these are capital expenditures

Question 11

The firm that buys goods and services on a given day, but pays for them later using a(n) ____ credit.

Answer 11

Trade

Question 12

____ are the owners of a public corporation.

Answer 12

Stockholders

Question 13

Which of the following about commercial finance companies are true:

• They make short-term loans
• They are almost always small businesses
• They were made illegal in 2008 financial crisis
• They charge higher rates than banks
• They want borrowers to offer tangible assets as collateral

Answer 13

• They make short-term loans
• They charge higher rates than banks
• They want borrowers to offer tangible assets as collateral

Question 14

Money invested in a new or emerging companies that investors believe have great profit potential is…

Answer 14

Venture capital

Question 15

A firm raising funds through various forms of borrowing with the intent to pay it back is using ___ financing.

Answer 15

Debit financing

Question 16

Which of the following are true about factoring accounts:

• it is the accounts receivable of a firm sold for a discount
• Factoring is a new business process started in the 1990’s
• The firm that buys the accounts receivable collects the amount due
• It is very rare today
• Small businesses often use it for financing in the short term

Answer 16

• it is the accounts receivable of a firm sold for a discount
• The firm that buys the accounts receivable collects the amount due
• Small businesses often use it for financing in the short term

Question 17

Firms will leverage (raise needed funds through borrowing) because it will…

Answer 17

increase a firm’s rate of return on ownership’s investment

Question 18

Firms will leverage (raise needed funds through borrowing) because it will…

Answer 18

increase a firm’s rate of return on ownership’s investment

Question 19

A line of credit that is guaranteed but usually comes with a fee is called…

Answer 19

revolving credit

Question 20

A ____ ____ forecast is part of a short-term forecast to predict monies coming in and going out of a firm.

Answer 20

Cash Flow

Question 21

Which are correct statements about pledging:

• It is illegal under the Sherman Antitrust Act
• As accounts receivable is paid, the money is forwarded to the lender as repayment of the loan
• A firm’s accounts receivable is used as basis for loan
• It is a promise to buy a firm’s product in the future
• The firm gets a percentage of accounts receivable pledged as a loan

Answer 21

• As accounts receivable is paid, the money is forwarded to the lender as repayment of the loan
• A firm’s accounts receivable is used as basis for loan
• The firm gets a percentage of accounts receivable pledged as a loan

Question 22

A(n) ___-____ agreement is a promissory note that requires the borrower to repay the loan with interest in specified monthly or annual installments.

Answer 22

Term-Loan

Question 23

A loan backed by collateral, something valuable like property, is called a(n)…

Answer 23

Secured loan

Question 24

Items that may back a secured bond include:

• Machinery and equipment
• Personal promise to pay
• Real estate
• Long-term goodwill on balance sheet

Answer 24

• Machinery and equipment

- Real estate

Question 25

When a firm decides on a bond term, interest and repayment date, the ____ is being prepared.

Answer 25

indenture

Question 26

Financial control is a process though which a firm periodically compares its budget to which of the following: - Revenues - Cost - Expenses - Stock price

Answer 26

- Revenues - Cost - Expenses

Question 27

When a firm is not putting an asset up as collateral for a loan, the loan is considered....

Answer 27

unsecured

Question 28

When a firm sells its accounts receivable at a discount in return for cash, the firm is....

Answer 28

Factoring

Question 29

Three types of main budgets in financial management include:

Answer 29

- Capital budget - Cash budget - An operating or master budget

Question 30

A(n) ____ bond is one that is backed by assets which may be claimed if the bond's interest is not paid.

Answer 30

Secured bond

Question 31

What is true about COMMERCIAL PAPER: - It is good for unknown businesses - It matures in 270 days or less - It is unsecured promissory notes - It is long term - It has values of $100,000 and up

Answer 31

- It matures in 270 days or less - It is unsecured promissory notes - It has values of $100,000 and up

Question 32

When a company allocates the use of specific resources throughout the firm based on a financial plan indicating management's expectations, then the company is using a(n) ___ as the basis for making decisions.

Answer 32

Budget

Question 33

A financial plan is important to a business because it...

Answer 33

Greatly increases the firm's chance of success

Question 34

Equity financing includes money raised from...

Answer 34

within the firm and operations

Question 35

With regarding to payment in financing, concern for maturity dates of obligations is a sign of ___ financing

Answer 35

Debt

Question 36

Determinants of how much money a firm should borrow include the...

Answer 36

- The seasonal environment of the business - The cash flow forecasts - The cost of inventory

Question 37

The ____ department is responsible for preparing budgets, preparing cash flow analysis, and planning expenditures.

Answer 37

Finance

Question 38

Needs for operating funds include...

Answer 38

- managing day-by-day needs of the business - Controlling credit operations - acquiring needed inventory - making capital expenditures

Question 39

____ ____ represents the profit a firm keeps and reinvests in the firm.

Answer 39

Retained earnings

Question 40

With regard to tax considerations in financing, the fact that interest is tax deductible is a sign of ____ financing.

Answer 40

Debt

Question 41

Lenders and stockholders must be satisfied with a firm's ____ of capital.

Answer 41

Cost

Question 42

Customers are happy when firms extend ___ for purchases.

Answer 42

Credit