Intro to Business Chapter 18 – Flashcards
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Typically, only highly regarded customers with financial stability receive __________. A. secured loans B. bank premiums C. unsecured loans D. commercial paper
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C. unsecured loans
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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. A. asset drawing account B. capital drawing agreement C. reserve account D. line of credit
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D. line of credit
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By selling shares of ownership in their company, California Scientific acquires the funds needed to finance their research and development projects. California Scientific provides for their long-term funding needs through ________ financing. A. debt B. equity C. retained D. asset
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B. equity
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An effective budget requires: A. a successful advertising campaign. B. accurate forecasts. C. management approval. D. stakeholder consensus.
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B. accurate forecasts.
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Delaware Aluminum uses its stock of unsold aluminum products as collateral for a short-term loan. This arrangement represents: A. a secured loan. B. a revolving credit agreement. C. factoring. D. an unsecured loan.
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A. a secured loan.
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By borrowing $10 million from First Dayton Bank, Hi-Lo Industries is utilizing ________. A. equity financing. B. debt financing. C. liability funding. D. asset funding.
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B. debt financing.
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The rationale behind offering customers credit is: A. Permitting customers to pay with credit cards or on credit makes it easier for them to buy, and it also attracts new customers. B. Offering customer's credit helps with the firm's cash flow position. C. Offering customer's credit helps match revenues with expenses for the same time period. D. Permitting customers to pay with credit cards or on credit forces a company to rely less on accounts receivables and more on accounts payables.
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A. Permitting customers to pay with credit cards or on credit makes it easier for them to buy, and it also attracts new customers.
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If a company secures a three year bank loan, it is considered _________. A. short-term financing B. asset funding C. liability funding D. long-term financing
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D. long-term financing
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Which of the following represents a source of short-term funding? A. Retained earnings B. Commercial paper C. Common stock D. Corporate bonds
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B. Commercial paper
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Which of these statements about corporate bonds is correct? A. Bonds provide equity financing. B. Issuing new bonds dilutes the existing ownership in the firm. C. Interest paid to bondholders represents a tax-deductible business expense. D. Debenture bonds require assets pledged as collateral.
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C. Interest paid to bondholders represents a tax-deductible business expense.
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The overall objective of financial planning is to: A. forecast the impact of technological trends. B. prepare financial statements for managers. C. optimize the firm's profitability. D. establish budgets for financial control.
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C. optimize the firm's profitability.
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Which of the following companies is undercapitalized? A. A large corporation that has been hit with a major lawsuit because one of its products has a design flaw that has led to serious injuries B. A new company struggling because it has insufficient start-up funds C. A medium-sized company that has decided to buy out a smaller competitor D. An electric utility that has recently experienced a significant increase in the cost of coal and labor
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B. A new company struggling because it has insufficient start-up funds
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A _________ forecast predicts the revenues, costs, and expenses a firm will incur for a period longer than one year. A. cash flow B. short-term C. capital expenditures D. long-term
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D. long-term
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Undercapitalization refers to the problem of: A. insufficient start-up funds. B. inadequate control of expenses. C. inappropriate cash flows. D. under-valued capital stock.
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A. insufficient start-up funds.
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___________ refers to the process that identifies variances by comparing actual revenues and expenses to projected revenues and expenses. A. Factor analysis B. Forecasting C. Financial planning D. Financial control
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D. Financial control
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No matter the size of the business, finance is a critical activity for: A. profit-seeking, but not for nonprofit organizations. B. profit-seeking and nonprofit organizations. C. nonprofit organizations, but not for profit-seeking businesses. D. accountants, but not for financial managers.
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B. profit-seeking and nonprofit organizations.
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Which of the following commonly results in the financial failure of a firm? A. Diversification B. Undercapitalization C. Control of expenses D. Management of cash flows
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B. Undercapitalization
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The rate of return a company must earn to meet the demands of its lenders and expectations of its equity holders is called: A. opportunity rate. B. retained earning. C. cost of capital. D. acquisition cost.
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C. cost of capital.
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A(n) __________ is responsible for verifying that the accounting procedures within a firm are consistent with established accounting principles. A. managerial accountant B. tax accountant C. bookkeeper D. internal auditor
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D. internal auditor
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Virginia Supply offers their customers trade credit with terms 2/15 net 30. This implies that: A. Virginia's customers have very little incentive to pay within the discount period. B. paying within 30 days will let a customer deduct 15% off the invoice price. C. most customers will pay their bill within 2 days in order to take the maximum discount. D. the annual financing cost of failing to pay within 15 days is about 48%.
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D. the annual financing cost of failing to pay within 15 days is about 48%.
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Money has a time value because: A. inflation increases the value of money over time. B. money earns interest over time. B. monetary systems are more automated than in the past. C. a dollar received today is worth more than a dollar received yesterday.
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B. money earns interest over time.
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In order to assist in revenue realization, a(n) ________ allocates resources throughout the firm. A. forecast B. balance sheet C. budget D. income statement
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C. budget
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A _________ represents a long-term debt obligation issued by a corporation or a government. A. share of stock B. commercial note C. certificate of deposit D. bond
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D. bond
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The interest paid on ________ represents a tax-deductible business expense. A. bonds B. stock C. retained earnings D. depreciated assets
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A. bonds
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The effective management of accounts receivable requires financial managers to: A. review the credit history of new customers. B. provide prompt cash payments to suppliers. C. allow customers more time in paying their past due accounts. D. refuse bank-issued credit cards.
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A. review the credit history of new customers.
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Which of the following shows a firm's spending plans on fixed assets such as large equipment? A. Capital budget B. Operating budget C. Cash budget D. Surplus budget
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A. Capital budget
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Carolina Financial Services is considering the purchase and installation of an 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.
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A. capital budget.
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__________ provide financing to new or emerging companies with high profit potential. In return, these organizations expect a share of ownership in the company. A. Commercial banks B. Venture capital firms C. Federal Reserve banks D. Investment bankers
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B. Venture capital firms
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Which business function involves credit management/collecting funds from customers? A. Accounting B. Production C. Marketing D. Finance
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D. Finance
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Which of the following statements about taxes is accurate? A. Taxes represent an inflow of cash to the firm. B. Profitable businesses usually pay taxes. C. Tax management falls within the responsibility of marketing managers. D. Taxes cannot be managed because of fluctuations in political policy.
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B. Profitable businesses usually pay taxes.
