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Exam 18: Financial Management

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Question 31

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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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Question 32

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

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Question 33

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Commercial paper is unsecured short-term debt.

Corporations that issue debenture bonds are required to provide collateral.

With plans to build a $50 million theme park,Extreme Entertainment,Inc.intends to finance this project through the sale of additional shares of ownership in their firm.Selling new shares of stock represents ___________ financing.

A _________ forecast predicts the revenues,costs,and expenses a firm will incur for a period longer than one year.

Drew's work in the finance department of his firm consists of checking accounting records and financial statements to verify that proper procedures are followed.Drew serves his company as a(n) :

Identify and describe three types of short-term financing.

What is equity financing? Identify and describe the major sources of equity financing.

Budgets assist managers in performing the functions of planning and control.

Based on the time value of money,$100 received a year from today is worth more than $100 received today.

Investors and entrepreneurs should have an understanding of financial issues.

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

Many small businesses rely on factoring as a source of short-term financing because:

Finance managers need funds for capital purchases,but seldom for the day to day operations.

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

Which of these statements about corporate bonds is correct?

Big Ticket Technologies holds commercial paper issued by Prude Insurance Corporation that matures in 180 days.However,shortly after Big Ticket purchased the commercial paper,Prude Insurance went out of business.The finance manager for Big Ticket is not worried because his loan to the corporation is secured by collateral that he can now claim.

While finance is a critical activity for profit-seeking organizations,by definition nonprofit organizations are not required to fulfill the finance function.

A firm's short-term financial forecast provides a projected sales estimate.