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Exam 18: Financial Management

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Question 141

Multiple Choice

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After seeing Mort's advertisement: "You Aren't Gettin' Any Younger! Start Planning for Heaven Today!" a(n) ________ firm decided the aging population was a good investment. Although they typically look at start-ups with great promise, they approached Mort with $6 million dollars for his new idea of a major three-city expansion that included six new funeral homes, a crematory, and mausoleum. After researching the offer, Mort agreed to give up 50% ownership of the business in order to secure these funds. His last thoughts as he began to sign the papers were: "Now, I'll be able to compete with the big guys!"

A) retained earnings
B) indentured
C) venture capital
D) leveraged buyout

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Question 142

Multiple Choice

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

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

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Question 143

Multiple Choice

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________ 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.

A firm's short-term forecast helps top management in preparing a company budget.

When using equity financing, firms incur a legal obligation to repay the amount of money invested.

Marcus, a management consultant, knows that regardless of how good his firm's product might be, the business has little chance of success without a(n)

Shopper's Choice Department Stores has fallen behind in payments to suppliers due to cash flow shortages. Some suppliers are withholding shipments to Shopper's Choice until they receive payments on overdue accounts. To meet their immediate needs, Shopper's Choice Department Stores should utilize

Businesses match their long-term capital needs to

Melanie, a financial manager, holds responsibilities that include the interpretation of financial statements provided by the firm's accountants and the preparation of recommendations to top management.

Financial management is more important for a large firm than it is for a small firm.

Unlike bonds, stocks offer the advantage of tax-deductible interest payments.

Snowy Mountain Ski Lodge owners know that the lifts on the north slope will need replacing in the next two years. Three months prior to replacement, they will include the expenditure in their cash budget.

Tax management by financial managers involves the development of strategies to evade tax liabilities.

Successful businesses establish restrictive credit policies encouraging customers to pay cash.

Selling accounts receivable to obtain short-term funds is called

The main objective of financial control is to establish priorities for the purchase of plant and equipment.

Treetop Nursery offers customer credit terms of 2/15 net 30. This gives customers a

Portable Pet Care plans to purchase a second mobile veterinary clinic next year that will cost an estimated $95,000. The finance manager will include this projected purchase in the company's capital budget.

Efficient cash management requires firms to pay their bills as quickly as possible, and delay the collection of accounts receivable.

Acquiring funds through borrowing represents