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Exam 17: Financial Management Appendix C Managing Risk

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Question 111

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Most small businesses are unable to secure long-term financing.

A) True
B) False

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Question 112

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Farmers Savings Co.agreed to extend Eckert's Orchards $200,000 of unsecured short-term funds,contingent upon the bank having the funds available.This arrangement represents a:

A) trade voucher.
B) pledge agreement.
C) line of credit.
D) factoring agreement.

E) C) and D)
F) None of the above

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Question 113

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The overall objective of financial planning is to optimize the firm's profit and make the best use of its money.

Short-term financing refers to borrowed funds that will be repaid in a year or less.

White Palace operates a chain of restaurants specializing in hamburgers.The firm plans to expand to new communities.The acquisition of land and construction of new restaurants represent capital expenditures.

When using equity financing,firms incur a legal obligation to repay the amount of money invested.

Which of the following organizations would be most likely to acquire short-term funding by issuing commercial paper?

Businesses often require customers with poor credit ratings to sign a promissory note as a condition for obtaining credit.

Trade credit is the practice of buying goods now and paying for them later.

The time value of a dollar reflects the interest that could be earned by investing that dollar.

A(n) ______allocates dollars to various costs and expenses needed to operate a business at an estimated level of sales revenue.

The timing of a short-term forecast is more important than the forecast's accuracy.

Companies raising funds must choose either debt or equity sources,but not both.

Susan is convinced that her new business failed because she lacked the necessary funds to do the things that it takes to get a new business up and running.Her problem apparently was:

Akiko realizes the importance of developing a ______for her interior design business. Akiko knows of no better way of establishing revenue expectations and allocating resources in order to achieve the goals of her firm.

The budget that estimates a firm's projected cash inflows and outflows,and helps managers anticipate borrowing needs,debt repayment,operating expenses and short-term investments is called the______ budget.

Financial managers identify three steps to financial planning.Which of the following is not one of the three key steps to financial planning?

Equity financing refers to the money a firm receives from the sale of bonds.

Which of the following activities is most likely to be performed by a financial manager?

Small businesses rely heavily on long-term financing.