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Exam 18: Financial Management

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Question 1

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The concept, "time value of money" indicates:

A) the value of a dollar decreases over time as prices increase.
B) the prices of goods and services will fluctuate over time due to inflation and higher costs of production.
C) monetary systems tend to become more sophisticated over time.
D) a dollar received today is worth more than a dollar received a year from today.

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Question 2

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A firm's most recent financial statements often serve as the basis for predicting future sales, costs and expenses.

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Question 3

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According to the "Spotlight on Small Business" box in Chapter 18, small business owner, James "Hoss" Boyd knows all too well about potential financial failure. Of the three common reasons for financial failure, only one, his inability to control his own costs is keeping his business on the brink of failure.

Akiko realizes the importance of developing a for her interior design business. Akiko understands the importance of appropriately allocating resources in order to achieve the goals of her firm.

Generally accepted accounting principles require that any assessment of a firm's financial statements be performed by independent outside auditors.

The owners of Preferred Pet Care, Inc., a mobile pet care company, have approached you about obtaining long-term financing. They must choose between debt financing and equity financing. Which of the following statements reflects accurate information that you share with this company?

The CFO of a well known satellite radio company was trying to work his magic today as he solicited another telecommunications/entertainment company to invest in his company in order to prevent bankruptcy. Having refinanced the company less than a year ago, the satellite radio finance manager had a $75 million note coming due today. The current financing arrangement represents:

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:

By selling shares of ownership in their company, California Scientific acquires the funds needed to finance their research and development projects. California Scientific provides for their long-term funding needs through financing.

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 a large amount of funding - fast! The handful of seed scientists that own the company decides to offer shares of stock to general investors. This first-time offering is a(n) :

The first step in the financial planning process is:

An unsecured loan does not require a borrower to provide collateral to secure a loan.

By borrowing $10 million from First Dayton Bank, Hi-Lo Industries is utilizing .

Rod was required to pledge his house and car as collateral for a loan he received from the First National Bank. The money from the loan was used to start his new business, which unfortunately failed within 6 months. The bank can now claim Rod's house and car to satisfy its claim.

is a form of short-term financing. Businesses buy merchandise from their suppliers, but are not required to pay for their purchases until some future date.

Inventory financing represents the pledging of accounts receivables as collateral for a loan.

Businesses acquire long-term financing from two major sources:

One of the most common ways for a firm to fail financially is poor control over cash flow.

The importance of financial managers to firms with large cash inflows is greater than for firms with smaller cash flows.

The terms of the agreement in a bond issue are referred to as the: