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Exam 18: Financial Management

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Question 41

Multiple Choice

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Farmers Savings and Loan agreed to extend Eckert's Orchards $200,000 of unsecured short-term funds, contingent upon the bank having the funds available. This arrangement represents a:

A) line of credit.
B) pledge agreement.
C) factoring agreement.
D) trade voucher.

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Question 42

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Financial managers are responsible for controlling cash flows.

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Question 43

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Carolina Financial Services is considering the purchase and installation of an expensive computer network. This is the type of expenditure that would be included in a (n) :

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

Which of the following would normally involve long-term financing?

Which of the following statements about taxes is accurate?

The finance manager at Preferred Pet Care Inc has asked the company's accountant to prepare a report that shows the amount the firm is spending monthly on veterinary supplies for its western suburb service area, in the hopes of negotiating better payment terms with its suppliers. The purpose of this effort is to increase cash levels within the firm.

Anna operates a florist shop specializing in weddings. While she knows that her competitors allow customers to buy on credit, she is concerned about the risk and expense of unpaid customer accounts. One strategy to reduce risk and collect sales revenue more quickly would be to accept bank-issued credit cards.

Long-term loans are often more expensive than short-term loans.

Which business function involves credit management/collecting funds from customers?

A share of stock represents a company-issued IOU including a promise to repay on a certain date.

Family and friends represent "problem free" sources of financing for most small businesses.

According to an article in STLToday.com, "Anheuser Busch-InBev's tougher line toward suppliers has drawn fire. The U.S. division is losing some suppliers who can't adjust to the company's new policy of taking as long as 120 days to pay bills. Before the InBev takeover, Anheuser-Busch paid many of its accounts in 30 days." This news refers to the brewer's policies.

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

The most widely used source of short-term funding is:

Short-term financing refers to borrowed funds that must be repaid in a year or less.

Corporations that issue debenture bonds are required to provide collateral.

Arborview Plant Science Company has invented a drought resistant grass seed that only needs watering three times each year. In order to expand distribution world wide, 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.

White Palace operates a chain of restaurants specializing in hamburgers. The corporation plans to expand to new communities. The acquisition of land and construction of new restaurants represent major capital expenditures.

Smaller firms have greater access to capital than larger firms.