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Exam 18: Financial Management

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Question 71

Multiple Choice

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The owner of a Mountain Cycle Shop worries that cash flows may be insufficient to pay his current operating expenses.While he anticipates a surplus of cash inflows as warm weather approaches,he needs to borrow funds now to meet his immediate obligations.He can best resolve his cash flow concerns by obtaining ________ financing.

A) intermediate
B) contingency
C) short-term
D) long-term

E) A) and D)
F) B) and D)

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Question 72

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Most companies have the ready cash available to make large purchases.

A) True
B) False

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Question 73

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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%.

Tax payments are important to the finance manager because they represent a cash inflow to a firm.

Carlos wants to know the income potential for his computer consulting business during the next five years.Which of the following would be most helpful?

Leverage refers to the use of borrowed funds to increase a firm's rate of return.

The types of organizations who can issue bonds are privately and publicly held corporations,exclusively.

Financial managers are responsible for controlling cash flows.

As a result of cash flow shortages,Millard's Department Stores has fallen behind in payments to suppliers.Some suppliers are withholding shipments to Millard's until they receive payments on overdue accounts.To meet their immediate needs,Millard's Department Stores should utilize:

Managing a firm's resources so that it can meet its goals and objectives is the goal of financial accounting.

What are two major forms of debt financing? Describe and differentiate between the two types.

Businesses acquire long-term financing from two major sources:

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

The interest paid for debt financing is a tax-deductible expense for the firm.

Small businesses rely heavily on long-term financing.

Factoring refers to the process of selling inventory to generate short-term funds.

A _________ represents a long-term debt obligation issued by a corporation or a government.

A less established company,or a company with a high debt to equity ratio would be considered a riskier investment to the lender.Which of the following principles attests to this axiom?

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 an) :

Which of the following statements about taxes is accurate?