Question 1

As a stockholder in 3M, Doug knows that corporations are required by law to have a stockholder meeting

Accepted Answer

A)  never.
B)  once a quarter.
C)  once a year.
D)  every other year.
E)  when a special need arises.

Question 2

During the recent economic crisis, many companies found that it was

Accepted Answer

A)  accessible and easy to acquire and use many of the traditional sources of short- and long-term financing that they were accustomed to.
B)  easy to shift their methods of financing from one traditional method to another.
C)  an opportune time to acquire long-term loans and build their current inventory.
D)  increasingly difficult to acquire and use many of the traditional sources of financing that they were accustomed to.
E)  increasingly easy to sell stock for the first time to the general public.

Question 3

Inventories and accounts receivable are the assets most commonly used as collateral for short-term financing.

Accepted Answer

A) True 
 B)False

Question 4

When a small-business owner applies for a loan, the bank officer will

Accepted Answer

A)  turn the loan down unless the firm doesn't need the money.
B)  check to see if the firm has issued corporate stocks or bonds.
C)  reject the loan if the firm has any outstanding debts.
D)  ask the business owner to fill out a loan application.
E)  approve the loan if the firm has never borrowed money from a competing bank.

Question 5

A revolving credit agreement is a guaranteed line of credit.

Accepted Answer

A) True 
 B)False

Question 6

The use of borrowed funds to increase the return on owners' equity is called

Accepted Answer

A)  financial planning.
B)  investment management.
C)  management leverage.
D)  financial leverage.
E)  return on leverage.

Question 7

The costs of selling stock to the general public are referred to as flotation costs.

Accepted Answer

A) True 
 B)False

Question 8

Kliting Co. is concerned with whether or not it will be able to pay its bills with money coming in from sales. It would be helpful for Kliting to prepare a ____ to better understand its needs.

Accepted Answer

A)  capital budget
B)  zero-based budget
C)  cash budget
D)  loan application
E)  revolving credit agreement

Question 9

When would a company be likely to call its preferred stock?

Accepted Answer

A)  If it decides it would rather have corporate bonds
B)  When it needs additional long-term financing
C)  As the preferred stock matures and must be redeemed
D)  When the call premium becomes high enough to justify the call
E)  When it can issue new common stock to replace the preferred stock

Question 10

According to the risk-return ratio, conservative decisions actually result in more risk when compared to decisions that are often considered high-risk decisions.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following firms is most likely to receive venture capital?

Accepted Answer

A)  Virtual reality Internet company
B)  Laundromat
C)  Local fast-food restaurant
D)  Book retailer
E)  Convenience store

Question 12

​A corporation that does not distribute all of its profit to stockholders has ___.

Accepted Answer

A)  ​retained earnings
B)  ​unpaid dividends
C)  ​cash on hand
D)  ​accounts payable

Question 13

Which of the following sources of funds would be the last resort for a corporation?

Accepted Answer

A)  Sales revenues
B)  Common stock
C)  Preferred stock
D)  Debt capital
E)  The sale of assets

Question 14

Which of the following statements is true?

Accepted Answer

A)  Financial leverage should not be considered when a firm borrows money.
B)  Under the right circumstances, the use of borrowed money can improve a firm's return on owners' equity.
C)  There is no good reason for a firm to borrow money when it has cash to finance expansion.
D)  The use of borrowed money always reduces a firm's return on owners' equity.
E)  Return on owners' equity is not an important financial calculation.

Question 15

Which of the following statements is incorrect?

Accepted Answer

A)  The size of the investment banker's commission depends on the financial health of the corporation issuing stock.
B)  Although a corporation can have only one IPO, it can sell additional stock after the IPO.
C)  The cost of selling stock is referred to as flotation costs.
D)  The ongoing costs associated with selling stock are low.
E)  All of these statements are correct.

Question 16

Often high-risk decisions generate larger returns while conservative decisions generate lesser returns. From a financial management standpoint does this make sense?

Accepted Answer

Answers will vary. The risk-return ratio...

Question 17

Reagan purchases a corporate bond from Mattel. On the bond it states that Reagan will receive her money back on February 15, 2022. This is the bond's ____ date.

Accepted Answer

A)  declaration
B)  maturity
C)  conversion
D)  redemption
E)  expiration

Question 18

A venture capital firm

Accepted Answer

A)  provides financing to only large businesses.
B)  looks for business that will provide a steady, average return.
C)  receives corporate bonds from firms it finances.
D)  consists of a pool of investors or a family partnership.
E)  is a large, diversified corporation looking for investment opportunities.

Question 19

When a seller allows a buyer thirty to sixty days to pay for a purchase, the sales arrangement is called

Accepted Answer

A)  a bank loan.
B)  trade credit.
C)  a promissory note.
D)  equity financing.
E)  None of these answers is correct.

Question 20

When constructing budgets, most managers begin with departmental budgets for sales and various expenses that are then combined into a company-wide cash budget.

Accepted Answer

A) True 
 B)False

Exam 16: Mastering Financial Management

When would a company be likely to call its preferred stock?

Correct AnswerverifiedShow Answer

Which of the following sources of funds would be the last resort for a corporation?

Correct AnswerverifiedShow Answer

The use of borrowed funds to increase the return on owners' equity is called

Correct AnswerverifiedShow Answer

When constructing budgets, most managers begin with departmental budgets for sales and various expenses that are then combined into a company-wide cash budget.

Correct AnswerverifiedShow Answer

When a small-business owner applies for a loan, the bank officer will

Correct AnswerverifiedShow Answer

A revolving credit agreement is a guaranteed line of credit.

Correct AnswerverifiedShow Answer

Kliting Co. is concerned with whether or not it will be able to pay its bills with money coming in from sales. It would be helpful for Kliting to prepare a ____ to better understand its needs.

Correct AnswerverifiedShow Answer

The costs of selling stock to the general public are referred to as flotation costs.

Correct AnswerverifiedShow Answer

Often high-risk decisions generate larger returns while conservative decisions generate lesser returns. From a financial management standpoint does this make sense?

Correct AnswerverifiedAnswers will vary. The risk-return ratio...View AnswerShow Answer

During the recent economic crisis, many companies found that it was

Correct AnswerverifiedShow Answer

Which of the following firms is most likely to receive venture capital?

Correct AnswerverifiedShow Answer

Reagan purchases a corporate bond from Mattel. On the bond it states that Reagan will receive her money back on February 15, 2022. This is the bond's ____ date.

Correct AnswerverifiedShow Answer

Inventories and accounts receivable are the assets most commonly used as collateral for short-term financing.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

When a seller allows a buyer thirty to sixty days to pay for a purchase, the sales arrangement is called

Correct AnswerverifiedShow Answer

​A corporation that does not distribute all of its profit to stockholders has ___.

Correct AnswerverifiedShow Answer

A venture capital firm

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Which of the following statements is incorrect?

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As a stockholder in 3M, Doug knows that corporations are required by law to have a stockholder meeting

Correct AnswerverifiedShow Answer

According to the risk-return ratio, conservative decisions actually result in more risk when compared to decisions that are often considered high-risk decisions.

Correct AnswerverifiedShow Answer

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Answers will vary. The risk-return ratio...
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A corporation that does not distribute all of its profit to stockholders has ___.

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