Question 1

A written pledge by a borrower to pay a certain sum of money to a creditor at a specified future date is called

Accepted Answer

A)   a promissory note.
B)   collateral.
C)   a factor account.
D)   a charge account.
E)   a term loan agreement.

Question 2

For a corporation, equity capital is obtained from

Accepted Answer

A)   bondholders.
B)   banks.
C)   stockholders.
D)   insurance companies.
E)   credit unions.

Question 3

Max Beauty Supply has ordered €5,000 worth of merchandise from Kelly's Beauty Supply, Inc.The invoice to Max has discount terms of 2/10, net/30.Max writes a check within ten days for

Accepted Answer

A)   €100.
B)   €1,000.
C)   €4,000.
D)   €4,900.
E)   €5,000.

Question 4

Long-term loans and the sale of corporate bonds are common sources of equity financing.

Accepted Answer

A) True 
 B)False

Question 5

A factor is a financial firm that specialises in buying other firms' accounts receivables.

Accepted Answer

A) True 
 B)False

Question 6

Most financial managers consider long-term financing to be money that will be used for longer than one year.

Accepted Answer

A) True 
 B)False

Question 7

The cost of borrowing money that is reserved for large corporations with excellent credit ratings is called the

Accepted Answer

A)   prime interest rate.
B)   bank discount.
C)   discount factor.
D)   add-on interest rate.
E)   compound interest rate.

Question 8

The NASDAQ is the largest and probably best-known securities exchange market in the world.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a characteristic of short-term financing?

Accepted Answer

A)   It must be repaid within three years.
B)   It is easier to obtain than long-term financing.
C)   There is less risk of nonpayment to the lender.
D)   The amounts are usually smaller than amounts obtained through long-term sources.
E)   There is a close working relationship between borrower and lender.

Question 10

The usual repayment period for long-term business loans is

Accepted Answer

A)   before the end of the first year.
B)   at the end of the first year.
C)   in two to three years.
D)   in three to seven years.
E)   at the end of ten years.

Question 11

While ordinary shareholders have the right to receive dividends, holders of preferred stock elect the board of directors and approve or disapprove major corporate actions.

Accepted Answer

A) True 
 B)False

Question 12

All of the following are uses of long-term financing except

Accepted Answer

A)   beginning a new business.
B)   eliminating immediate cash-flow problems.
C)   executing mergers and expansions.
D)   developing and marketing new products.
E)   replacing obsolete equipment.

Question 13

Financial leverage is the use of borrowed funds to increase the return on owners' equity.

Accepted Answer

A) True 
 B)False

Question 14

Bonds from a single issue that have staggered maturity dates are called serial bonds.

Accepted Answer

A) True 
 B)False

Question 15

The movement of money into and out of an organisation is called

Accepted Answer

A)   equity financing.
B)   a revolving credit agreement.
C)   factoring.
D)   cash flow.
E)   budgeting.

Question 16

Maria has been asked by top management to develop financial ____ that the company will achieve over the next one- to ten-year period.

Accepted Answer

A)   strategies
B)   directives
C)   Plans
D)   objectives
E)   Goals

Question 17

The most popular form of short-term financing is

Accepted Answer

A)   bank loans.
B)   trade credit.
C)   sale of bonds.
D)   sale of stock.
E)   loans from insurance companies.

Question 18

The quality of a firm's accounts receivables is the credit standing of the firm's customers, coupled with the customers' ability to repay their credit obligations.

Accepted Answer

A) True 
 B)False

Question 19

The assets most commonly used as collateral for short-term financing include

Accepted Answer

A)   cash and accounts receivable.
B)   accounts payable and notes payable.
C)   inventory and equipment.
D)   marketable securities and owners' equity.
E)   accounts receivable and inventory.

Question 20

In regards to cash flow, a firm should ideally have

Accepted Answer

A)   enough money coming into the firm to cover the expenses in that period.
B)   more cash flowing out than in since this represents growth.
C)   to use short-term financing only two to three times a year.
D)   a constant need for short-term financing.
E)   most of its cash going to its customers.

Exam 18: Financial Management

Bonds from a single issue that have staggered maturity dates are called serial bonds.

Correct AnswerverifiedShow Answer

A factor is a financial firm that specialises in buying other firms' accounts receivables.

Correct AnswerverifiedShow Answer

A written pledge by a borrower to pay a certain sum of money to a creditor at a specified future date is called

Correct AnswerverifiedShow Answer

Most financial managers consider long-term financing to be money that will be used for longer than one year.

Correct AnswerverifiedShow Answer

All of the following are uses of long-term financing except

Correct AnswerverifiedShow Answer

The usual repayment period for long-term business loans is

Correct AnswerverifiedShow Answer

In regards to cash flow, a firm should ideally have

Correct AnswerverifiedShow Answer

The NASDAQ is the largest and probably best-known securities exchange market in the world.

Correct AnswerverifiedShow Answer

While ordinary shareholders have the right to receive dividends, holders of preferred stock elect the board of directors and approve or disapprove major corporate actions.

Correct AnswerverifiedShow Answer

The quality of a firm's accounts receivables is the credit standing of the firm's customers, coupled with the customers' ability to repay their credit obligations.

Correct AnswerverifiedShow Answer

The cost of borrowing money that is reserved for large corporations with excellent credit ratings is called the

Correct AnswerverifiedShow Answer

The movement of money into and out of an organisation is called

Correct AnswerverifiedShow Answer

Long-term loans and the sale of corporate bonds are common sources of equity financing.

Correct AnswerverifiedShow Answer

For a corporation, equity capital is obtained from

Correct AnswerverifiedShow Answer

The most popular form of short-term financing is

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of short-term financing?

Correct AnswerverifiedShow Answer

The assets most commonly used as collateral for short-term financing include

Correct AnswerverifiedShow Answer

Max Beauty Supply has ordered €5,000 worth of merchandise from Kelly's Beauty Supply, Inc.The invoice to Max has discount terms of 2/10, net/30.Max writes a check within ten days for

Correct AnswerverifiedShow Answer

Maria has been asked by top management to develop financial ____ that the company will achieve over the next one- to ten-year period.

Correct AnswerverifiedShow Answer

Financial leverage is the use of borrowed funds to increase the return on owners' equity.

Correct AnswerverifiedShow Answer

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