Intro B chapter 18

13 June 2024
4.4 (244 reviews)
30 test answers

Unlock all answers in this set

Unlock answers (26)
question
Undercapitalization refers to the problem of
answer
insufficient start-up funds.
question
Which of the following is a primary area of concern for financial managers?
answer
undercapitalization
question
A(n) __________ is responsible for verifying that the accounting procedures within a firm are consistent with established accounting principles.
answer
internal auditor
question
Ezra is the manager of Outdoor Adventure Sporting Goods. During the past six months, his cash expenditures have exceeded his cash receipts. Outdoor Adventure is suffering from a(n) ________ problem.
answer
cash flow
question
The overall objective of financial planning is to
answer
optimize the firm's profitability.
question
The budget that estimates a firm's projected cash inflows and outflows, as well as cash shortages or surpluses during a given time period, is called the ________ budget.
answer
cash
question
_____ refers to the process that identifies variances by comparing actual revenues and expenses to projected revenues and expenses.
answer
Financial control
question
An effective budget requires
answer
accurate forecasts.
question
Which of the following would be most helpful for a company looking to know the income potential during the next five years?
answer
long-term forecast
question
One of the challenges of effective financial management is
answer
to have sufficient cash on hand without compromising the firm's investment potential.
question
The concept time value of money indicates
answer
a dollar received today is worth more than a dollar received a year from today.
question
To reduce the time and expense of collecting their accounts receivable, some firms
answer
accept bank credit cards.
question
The effective management of accounts receivable requires financial managers to
answer
review the credit history of new customers.
question
Which of the following would normally involve long-term financing?
answer
purchase of modern equipment
question
Which of the following represents a capital expenditure?
answer
purchasing a building to be used for office space
question
Which of the following statements represents good advice prior to making capital expenditures?
answer
Capital expenditures are major investments, meaning they require large sums of funds. Companies should weigh all possible options before committing available resources to projects that take significant amounts of funds and extended time.
question
According to the Not What the Doctor Ordered! box, a just-in-time inventory system allows a firm to
answer
reduce their investment in inventory.
question
Finance managers spend the majority of their time managing
answer
short-term financial needs.
question
Typically, only highly regarded customers with financial stability receive
answer
unsecured loans.
question
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.
answer
line of credit
question
Selling accounts receivable to obtain short-term funds is called
answer
factoring.
question
Many small businesses rely on factoring as a source of short-term financing because
answer
small firms often find it difficult to qualify for bank loans.
question
Businesses match their long-term capital needs to
answer
their long-term goals and objectives.
question
The terms of the agreement in a bond issue are referred to as the
answer
indenture terms.
question
______ represent a favorable source of meeting long-term financing needs because there are no interest payments, dividends, or underwriting fees required when using this source.
answer
Retained earnings
question
____ provide financing to new or emerging companies with high profit potential. In return, these organizations expect a share of ownership in the company.
answer
Venture capital firms
question
___ refers to the strategy of using borrowed funds to increase the rate of return for stockholders.
answer
Leverage
question
The interest paid on ________ represents a tax-deductible business expense.
answer
bonds
question
One of the primary factors that influences the interest rate a firm pays on long-term loans is the
answer
general level of market interest rates.
question
Which of these statements about corporate bonds is?
answer
Interest paid to bondholders represents a tax-deductible business expense.