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Exam 19: Mastering Financial Management

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Question 41

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Tom Jackson, president of Jackson Manufacturing, suspects that the managers of two departments have been padding their budgets for the last three years. To eliminate this problem, Tom would

A) fire the managers.
B) hire an efficiency expert.
C) hire a new accountant.
D) use zero-base budgeting.
E) use traditional budgeting.

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Question 42

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Poor financial management is one of the major reasons why firms file for bankruptcy.

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Question 43

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In what situations would you seek short-term financing? In what situations would you seek long-term financing?

Your small business has been very successful and has amassed a large amount of accounts receivable from reputable firms, but you find yourself short of ready cash to replace inventory. How could a factor help you?

With regard to the ongoing expense of long-term corporate financing, which of the following would be the most expensive?

What is the main difference between unsecured short-term financing and secured short-term financing? Which method is better from the viewpoint of the borrower?

A term-loan agreement is a promissory note that requires a borrower to repay a loan in monthly, quarterly, semiannual, or annual installments.

Morgan's Transition Morgan is currently a manager of a small financial planning firm. He is seeking a new career with a large corporation in the banking industry. He recently applied for the financial manager opening at G & T Bank. He is concerned that the transition from his small firm to a large corporation will be difficult. To better prepare himself for this change, he has decided to enroll in a few business classes to strengthen his understanding of corporate finance. The business classes have proven to be a valuable tool for learning the critical skills needed to fully understand a financial plan, equity financing, and debt financing. Morgan now believes he has strengthened his competitive advantage in his quest for the job. -Refer to Morgan's Transition. During his job interview, Morgan was asked to talk about money received from the owners or from the sale of shares of ownership in a business. Which of the following would best describe these funds?

Jackson Ski Equipment receives an invoice for $10,000 worth of merchandise from one of its suppliers. The invoice has discount terms of 2/10, net/60. Twenty days later, Jackson Ski Equipment writes a check for ____ to pay the invoice.

Most mature corporations distribute ____ of their after-tax profits as dividends to stockholders.

McGines, Inc. Sam McGines, CEO of McGines, Inc., decided that upon his retirement, he would elect his son Derrick to become the new CEO. Sam thought it would be a good idea to have Derrick shadow him at work to understand the roles and responsibilities of a CEO. Derrick shadowed his father for months in order to learn every aspect of the business. Sam knew that the best way for Derrick to learn was to actually perform some of the tasks he did on a daily basis, rather than simply describe them. The company generally focused on short-term financing, and Sam felt that it was important for Derrick to understand the different types of financing. Derrick learned about the type of bonds that the company usually offered to raise capital. These bonds allow the purchasers of the bond to keep them until maturity. Derrick also learned the process of obtaining bonds and the various types of long-term financing methods. Job shadowing was indeed a worthwhile experience for Derrick. -Refer to McGines, Inc. If Derrick were to offer advice to a client about obtaining a loan, which of the following would be the first step?

All of the activities concerned with obtaining money and using it effectively are called

In order to catch problems before they get out of hand, a business firm should compare its financial performance against various budgets.

Tidewater Distributors is successfully using short-term financing to buy inventory for resale. As sales climb, the managers realize that they must decide what to do with the money. Since you are the financial manager, they ask for your advice. You advise them to first

The most popular form of short-term financing is

When a small-business owner applies for a loan, the bank officer will

Venture capital firms invest in

In order to repay some corporate bonds, a firm may be required to deposit a specified sum of money each year until the bond's maturity in a sinking fund.

During the recent economic crisis, the number of business bankruptcies actually declined..

One of the concerns that large corporations have when they use equity financing is the need to repay the principal plus the interest at a future date.