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Exam 18: Financial Management

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Question 61

Multiple Choice

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A just-in-time inventory system allows a firm to:

A) extend credit to new customers.
B) provide sufficient inventory for most contingencies.
C) reduce their investment in inventory.
D) reduce capital expenditures.

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

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Question 62

True/False

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

A) True
B) False

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Question 63

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Which of the following represents a source of short-term funding?

Successful use of financial leverage requires a firm to:

Central Vermont Power issued $200 million of bonds to finance a major upgrade of one of its largest power plants.The issuance of these bonds indicates that Central Vermont utilizes equity capital to meet its long-term financing needs.

A firm will choose to seek debt financing only for the purpose of paying for short-term operating needs.

.Firms that fail to take advantage of this early payment discount are giving up approximately 36%.

The duties and responsibilities of a financial manager are virtually identical to the duties and responsibilities of an accountant.

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

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?

The chief financial officer of a company is responsible for managing cash,accounts receivable,and inventory.

Capital expenditures are major investments in long-term assets such as property and equipment.

Lending institutions may offer a borrower a percentage of the value of the borrower's accounts receivable so the borrowing firm can continue to operate while it waits to collect on its credit sales.This process is called __________.

As the owner of Kingdom's Treasures,Jerry negotiates with suppliers who hope to place their products in his high volume retail gift store.Jerry finances his inventory through the ________ credit offered by suppliers who delay his payments for up to 60 days after the merchandise has been delivered to his business.

A company's capital budget helps management plan for cash shortages or surpluses.

Successful businesses establish restrictive credit policies encouraging customers to pay cash.

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.

A _________ forecast predicts the revenues,costs,and expenses a firm will incur for a period of one year or less.

When it involves securing capital,the recession has not affected small businesses as much as large businesses.

According to the Legal Briefcase box in Chapter 18,international factoring is also called "forfeiting."