Reading comprehension 16 Flashcards
The assets most commonly used as collateral for short-term financing include
a. cash and accounts receivable.
b. accounts payable and notes payable.
c. inventory and equipment.
d. marketable securities and owners’ equity
e. accounts receivable and inventory.
e. accounts receivable and inventory.
The primary sources of funds available to a business include all of the following except
a. debt capital.
b. sales of assets.
c. government grants.
d. sales revenue.
e. equity capital.
c. government grants.
Retained earnings are
a. the same as net profit.
b. interest earned on bond investments.
c. nontaxable income.
d. a form of equity financing.
e. the portion of the profit paid to stockholders.
d. a form of equity financing.
For a corporation, equity capital is obtained from
a. bondholders.
b. banks.
c. stockholders.
d. insurance companies.
e. credit unions.
c. stockholders.
The most popular form of short-term financing is
a. bank loans.
b. trade credit.
c. sale of bonds.
d. sale of stock.
e. loans from insurance companies.
b. trade credit.
Which of the following statements is true?
a. Financial leverage should not be considered when a firm borrows money.
Correctb.
Under the right circumstances, the use of borrowed money can improve a firm’s return on owners’ equity.
c. There is no good reason for a firm to borrow money when it has cash to finance expansion.
d. The use of borrowed money always reduces a firm’s return on owners’ equity.
e. Return on owners’ equity is not an important financial calculation.
b. Under the right circumstances, the use of borrowed money can improve a firm’s return on owners’ equity.
Financial managers should
a. ignore minor budgeting problems and concentrate on major problems when budgeting
b. establish a means of monitoring financial performance on an interim basis.
c. prepare budgets and hope for the best.
d. hire a person to go over interim budgets.
e. fire or demote individual managers when budgeting goals are not achieved.
b. establish a means of monitoring financial performance on an interim basis.
Borrowed money that will be used for more than one year is called
a. trade credit.
b. long-term financing.
c. equity capital.
d. secured financing.
e. short-term financing.
b. long-term financing.
A statement that projects income and/or expenditures over a specified future period is called a
a. financial plan.
b. cash flow plan.
c. resources plan.
d. resource allocation statement.
e. budget.
e. budget.
All of the activities concerned with obtaining money and using it effectively are called
a. financial management.
b. long-term financing.
c. budgeting.
d. financial planning.
e. unsecured financing.
a. financial management.
