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Exam 18: Financial Management

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Question 51

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Trade credit is the practice of buying goods now and paying for them later.

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Question 52

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Big Bear Ski Lodge's cash budget for the month of March 2015 shows a negative amount. Due to the fact that the months of January and February were quite lucrative and showed positive amounts, the finance manager will not borrow any money in the short term to cover for March's deficit.

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Question 53

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A firm negotiates a(n) _________ with its bank. This arrangement gives the firm access to a specified amount of unsecured short-term funds, provided the bank has the funds available

Financial managers use data prepared by accountants to develop strategies for improving the financial performance of the firm.

Based on the time value of money, $100 received a year from today is worth more than $100 received today.

Although best used as a last resort, many small businesses find it convenient to use __________ as a short-term source of financing. Although this form short-term debt comes with high interest rates, it provides a quick line of credit for many firms, including start-up companies who may not be able to secure bank loans

Inadequate control of expenses represents a common financial problem that contributes to business failure.

Big Ticket Technologies holds commercial paper issued by Prude Insurance Corporation that matures in 180 days. However, shortly after Big Ticket purchased the commercial paper, Prude Insurance went out of business. The finance manager for Big Ticket is not worried because his loan to the corporation is secured by collateral that he can now claim.

Much of a financial manager's day-to-day activities involve managing the short-term financial needs of the firm.

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

Which of the following organizations would be most likely to acquire short-term funding by issuing commercial paper?

Which of these is backed only by the reputation of the issuer?

A secured loan means the borrower has the security of knowing repayment is not due for several years.

According to the Reaching Beyond Our Borders box, some of the largest sovereign wealth funds are operated by Norway, Saudi Arabia, and Singapore.

A major concern for firms selling on credit is:

Backstreet Books is seeking financing to fund the opening of two more locations in a major university town. There is no need to consider debt financing for this project. It will require a sizeable investment in equity funds.

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

___________ refers to the process that identifies variances by comparing actual revenues and expenses to projected revenues and expenses

One important consideration for a firm accepting funds from a venture capitalist is the ownership interest demanded by the venture capital firm.

Many sellers offer a 2% discount to a buyer that makes payment 20 days before the due date, (2/10, net 30). Firms that fail to take advantage of this early payment discount are giving up approximately 36%.