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Exam 18: Financial Management

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Question 151

Multiple Choice

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Julia started a cake decorating business last year. Unfortunately it failed quickly. She is convinced that she lacked the necessary funds to promote her business and get it off the ground. What did Julia experience?

A) inadequate financial control
B) undervalued inventory
C) undercapitalization
D) a cash flow issue

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

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Question 152

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Family and friends represent problem-free sources of financing for most small businesses.

A) True
B) False

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Question 153

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One step in the financial planning process is to establish financial control procedures that allow managers to monitor the organization's performance.

If a company secures a three-year bank loan, this is considered

Financial managers at Epic Electronics have always had a conservative attitude toward long-term financing. In particular, they are interested in keeping risk to a minimum. This philosophy suggests that managers at Epic consider the extensive use of leverage an attractive financial strategy.

Acquiring and storing inventory represents a sizable expenditure for many businesses.

Financial managers understand the time value of money. They try to maximize cash expenditures, as opposed to minimizing cash expenditures.

Generally accepted accounting principles require that any assessment of a firm's financial statements be performed by independent outside auditors.

The long-term financial forecast plays a crucial part in the company's long-term strategic plan.

Through equity financing, stockholders become ________ of the firm.

After enjoying increased sales of and profits from several popular products, Braggs & Stritton plans to expand their production facilities. The firm, a well-known producer of lawn care products, prefers financing this project with a funding source that avoids interest and dividend payments as well as underwriting costs. Which of the following best meets the needs of Braggs & Stritton?

Expansion into new markets (either domestic or global) is sometimes financed with long-term funds.

As mentioned in the Spotlight on Small Business box, Kobe Bryant is pivoting into being a venture capitalist.

Debt financing refers to funds acquired from the profitable operations of a firm or through the sale of ownership in the firm.

Which business function involves credit management/collecting funds from customers?

Budgets are prepared after the financial forecasts are developed.

Finance managers spend the majority of their time managing