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Exam 18: Financial Management

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Question 121

Multiple Choice

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Securitas Financial Services is contemplating purchasing and installing a new, expensive computer network. This is the type of expenditure that would be included in a(n)

A) capital budget.
B) cash budget.
C) operating budget.
D) asset budget.

E) None of the above
F) B) and C)

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Question 122

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A financial manager makes recommendations to top executives regarding strategies for improving the financial strength of a firm.

A) True
B) False

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Question 123

Multiple Choice

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Gemstone Jewelers obtains needed short-term funds by selling its accounts receivable to the Friendly Finance Company. Friendly Finance usually pays Gemstone about 80% of the value of the receivables. Gemstone Jewelers utilizes ________ as a means of raising short-term funds.

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

Roman, the finance manager at Outdoor Adventure Sporting Goods, has asked his assistant, Vincent, to prepare the ________ budget. Vincent will gather as much information as possible by utilizing the firm's other budgets and any documents that summarize proposed financial activities.

No matter the size of the business, finance is a critical activity for

Inability to attract and retain qualified employees is one of the most common ways for a firm to fail financially.

In order to assist in revenue realization, a(n) ________ allocates resources throughout the firm.

The most widely used source of short-term funding is

Financially stable firms are able to sell commercial paper to raise short-term funds.

Explain the term leverage. When is it more favorable for firms to use this strategy?

Mort approached the chief lending officer at First Virginia Bank about obtaining a $75,000 loan. The banker said she would approve the loan provided that the funeral home's building was pledged as collateral. The banker was offering a(n)

A line of credit is designed to reduce the risk of lending money.

The Making Ethical Decisions box "Good Finance or Bad Medicine" has an important message for managers who make financial decisions. Which of the following statements summarizes this message?

A capital budget highlights the expected funds provided by owner investments.

Acquiring funds through equity financing requires the firm to pay annual dividends.

According to the risk/return trade-off, the higher the risk, the lower the interest rate charged by the lender.

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

Financial managers are responsible for the management of accounts receivable and accounts payable.

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