Question 1

As John considers approaching a venture capital firm to provide funding for his new software firm,he should realize that a venture capital firm will:

Accepted Answer

A)  offer no more than 20 percent of the funding he needs.
B)  charge a higher interest rate than a commercial bank.
C)  expect the company to provide a steady dividend income.
D)  probably want an ownership interest in the business.

Question 2

Corporations must comply with the Securities and Exchange Commission SEC)requirements in order to sell their stock publicly.

Accepted Answer

A) True 
 B)False

Question 3

Long-term financing would normally be used to purchase:

Accepted Answer

A)  supplies.
B)  inventory.
C)  buildings.
D)  highly liquid assets.

Question 4

Through equity financing,stockholders become _________ of the firm.

Accepted Answer

A)  creditors
B)  employees
C)  suppliers
D)  owners

Question 5

There is actually a stronger relationship between finance and marketing than there is between finance and accounting.

Accepted Answer

A) True 
 B)False

Question 6

Jackson Plumbing,a medium-sized company,wants to guarantee that it can obtain short-term funds to meet unexpected future cash needs.Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should:

Accepted Answer

A)  issue commercial paper as needed.
B)  request that the firm's board of directors approve an issue of additional shares of common stock.
C)  arrange for a revolving credit agreement with Jackson Plumbing's commercial bank.
D)  eliminate credit sales to improve their cash inflows and reduce the firm's investment in accounts receivable.

Question 7

The most widely used source of short-term funding is trade credit.

Accepted Answer

A) True 
 B)False

Question 8

Accountants truly represent the financial managers of a business.

Accepted Answer

A) True 
 B)False

Question 9

An unsecured corporate bond is known as a debenture bond.

Accepted Answer

A) True 
 B)False

Question 10

Preferred Pet Care,Inc.plans to purchase a second mobile unit next year that will cost an estimated $55,000.The finance manager will include this projected purchase in the company's capital budget.

Accepted Answer

A) True 
 B)False

Question 11

With plans to build a $50 million theme park,Extreme Entertainment,Inc.intends to finance this project through the sale of additional shares of ownership in their firm.Selling new shares of stock represents ___________ financing.

Accepted Answer

A)  retained
B)  debt
C)  initial offering
D)  equity

Question 12

As a financial manager for a very profitable manufacturer of specialty steel,Kurt has been asked to investigate sources of long-term funds to finance the construction of a new facility.Kurt would prefer a funding source that does not require interest payments or involve major underwriting fees.Kurt will consider using retained earnings to fund the construction project.

Accepted Answer

A) True 
 B)False

Question 13

Chunky Chicken,Inc.announced yesterday that it plans to issue $100 million in debenture bonds to fund the expansion of its fast food chain of restaurants.In financial terms,this means:

Accepted Answer

A)  The corporation will borrow $100 million worth of long-term financing.The bond issue will not carry any collateral.
B)  The corporation will issue $100 million worth of equity financing.The bond issue will be backed by the property and buildings purchased with the funds.
C)  The corporation will borrow $100 million worth of long-term financing.The issue will be backed by the property and buildings purchased with the funds.
D)  The corporation will issue $100 million worth of interest free bonds.Financiers will be paid from the revenues created by the individual franchises.

Question 14

Investors and entrepreneurs should have an understanding of financial issues.

Accepted Answer

A) True 
 B)False  True

Question 15

Which of the following activities is most likely to be performed by a financial manager?

Accepted Answer

A)  design of a marketable product that satisfies an unmet need
B)  identification of specific target markets for a firm's goods
C)  preparation of the balance sheet and income statement for the firm
D)  analysis of the tax implications of various managerial decisions

Question 16

Which of the following situations represents a successful use of financial leverage?

Accepted Answer

A)  A firm issues new shares of stock and uses the proceeds from the sale to retire its outstanding debt.
B)  A firm borrows money at 8% and earns an 11% return on its investment of these funds.
C)  A firm attracts the interest of two venture capitalists,and plays one against the other to gain the best deal.
D)  A retail firm purchases merchandise at $10 and sells it for $15. B

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Lancer Wholesale Company wants to improve cash flow.Which of the following strategies would be most likely to help Lancer achieve this objective?

Accepted Answer

A)  Relaxing its credit policy for new customers
B)  Offering cash discounts to buyers who pay their accounts promptly
C)  Accepting IOUs from customers who buy in large quantities
D)  Offering extended payment plans to qualified buyers B

Question 19

Acquiring funds through borrowing represents:

Accepted Answer

A)  debt financing.
B)  venture capital.
C)  speculative capital.
D)  equity financing.

Question 20

An example of a firm using leverage to its advantage is a firm that borrows funds at 9% and invests those funds to earn 14%.

Accepted Answer

A) True 
 B)False

Exam 18: Financial Management

As John considers approaching a venture capital firm to provide funding for his new software firm,he should realize that a venture capital firm will:

Correct Answer
verified

Corporations must comply with the Securities and Exchange Commission SEC)requirements in order to sell their stock publicly.

Correct Answer
verified

Long-term financing would normally be used to purchase:

Correct Answer
verified

Through equity financing,stockholders become _________ of the firm.

Correct Answer
verified

There is actually a stronger relationship between finance and marketing than there is between finance and accounting.

Correct Answer
verified

Jackson Plumbing,a medium-sized company,wants to guarantee that it can obtain short-term funds to meet unexpected future cash needs.Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should:

Correct Answer
verified

The most widely used source of short-term funding is trade credit.

Correct Answer
verified

Accountants truly represent the financial managers of a business.

Correct Answer
verified

An unsecured corporate bond is known as a debenture bond.

Correct Answer
verified

Preferred Pet Care,Inc.plans to purchase a second mobile unit next year that will cost an estimated $55,000.The finance manager will include this projected purchase in the company's capital budget.

Correct Answer
verified

With plans to build a $50 million theme park,Extreme Entertainment,Inc.intends to finance this project through the sale of additional shares of ownership in their firm.Selling new shares of stock represents ___________ financing.

Correct Answer
verified

Correct Answer
verified

Chunky Chicken,Inc.announced yesterday that it plans to issue $100 million in debenture bonds to fund the expansion of its fast food chain of restaurants.In financial terms,this means:

Correct Answer
verified

Investors and entrepreneurs should have an understanding of financial issues.

Correct Answer
verified
True

Which of the following activities is most likely to be performed by a financial manager?

Correct Answer
verified

Which of the following situations represents a successful use of financial leverage?

Correct Answer
verified
B

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

Correct Answer
verified

Lancer Wholesale Company wants to improve cash flow.Which of the following strategies would be most likely to help Lancer achieve this objective?

Correct Answer
verified
B

Acquiring funds through borrowing represents:

Correct Answer
verified

An example of a firm using leverage to its advantage is a firm that borrows funds at 9% and invests those funds to earn 14%.

Correct Answer
verified

Exam 18: Financial Management

As John considers approaching a venture capital firm to provide funding for his new software firm,he should realize that a venture capital firm will:

Correct AnswerverifiedShow Answer

Corporations must comply with the Securities and Exchange Commission SEC)requirements in order to sell their stock publicly.

Correct AnswerverifiedShow Answer

Long-term financing would normally be used to purchase:

Correct AnswerverifiedShow Answer

Through equity financing,stockholders become _________ of the firm.

Correct AnswerverifiedShow Answer

There is actually a stronger relationship between finance and marketing than there is between finance and accounting.

Correct AnswerverifiedShow Answer

Jackson Plumbing,a medium-sized company,wants to guarantee that it can obtain short-term funds to meet unexpected future cash needs.Which of the following strategies would best meet the financing needs of Jackson Plumbing? Financial managers at Jackson Plumbing should:

Correct AnswerverifiedShow Answer

The most widely used source of short-term funding is trade credit.

Correct AnswerverifiedShow Answer

Accountants truly represent the financial managers of a business.

Correct AnswerverifiedShow Answer

An unsecured corporate bond is known as a debenture bond.

Correct AnswerverifiedShow Answer

Preferred Pet Care,Inc.plans to purchase a second mobile unit next year that will cost an estimated $55,000.The finance manager will include this projected purchase in the company's capital budget.

Correct AnswerverifiedShow Answer

With plans to build a $50 million theme park,Extreme Entertainment,Inc.intends to finance this project through the sale of additional shares of ownership in their firm.Selling new shares of stock represents ___________ financing.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Chunky Chicken,Inc.announced yesterday that it plans to issue $100 million in debenture bonds to fund the expansion of its fast food chain of restaurants.In financial terms,this means:

Correct AnswerverifiedShow Answer

Investors and entrepreneurs should have an understanding of financial issues.

Correct AnswerverifiedTrue

Which of the following activities is most likely to be performed by a financial manager?

Correct AnswerverifiedShow Answer

Which of the following situations represents a successful use of financial leverage?

Correct AnswerverifiedB

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

Correct AnswerverifiedShow Answer

Lancer Wholesale Company wants to improve cash flow.Which of the following strategies would be most likely to help Lancer achieve this objective?

Correct AnswerverifiedB

Acquiring funds through borrowing represents:

Correct AnswerverifiedShow Answer

An example of a firm using leverage to its advantage is a firm that borrows funds at 9% and invests those funds to earn 14%.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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True

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B

Correct Answer
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B

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Correct Answer
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