Deck 17: Financial Management

Question 1

Undercapitalization refers to the problem of insufficient start-up funds.

Answer 1

True

Question 2

Tax payments represent a cash inflow to a firm.

Answer 2

False

Question 3

)One activity of the accounting function is to collect payments from overdue customer accounts.

Answer 3

False

Question 4

Finance is the function in a business that acquires,manages,and plans for the expenditure of funds.

Question 5

Investors and entrepreneurs should have an understanding of financial issues.

Question 6

Managing a firm's resources so that it can meet its goals and objectives is the goal of financial accounting.

Question 7

Financial managers are responsible for controlling cash flows.

Question 8

Inability to attract and retain qualified employees is one of the most common ways for a firm to fail financially.

Question 9

Financial managers use data prepared by accountants to develop strategies for improving the financial strength of the firm.

Question 10

A financial manager is responsible for obtaining the necessary money to enable a firm to achieve its goals and objectives.

Question 11

Everyone in business should study finance and accounting.

Question 12

The business functions of accounting and finance are often in conflict with each other.

Question 13

)A comptroller is responsible for the acquiring and managing of funds for an organization.

Question 14

)The financial manager of a company is responsible for managing cash,budgets,accounts receivable,and managing taxes.

Question 15

There is actually a stronger relationship between finance and marketing than there is between finance and accounting.

Question 16

Financial managers examine the data prepared by accountants and make recommendations to top management regarding strategies for improving the financial well-being of the company.

Question 17

Inadequate control of expenses represents a common financial problem that contributes to business failures.

Question 18

The duties and responsibilities of a financial manager are virtually identical to the duties and responsibilities of an accountant.

Question 19

Financial management is more important for a large firm than it is for a small firm.

Question 20

Financial managers are responsible for the design and implementation of an organization's marketing function.

Question 21

)Production scheduling represents one of the responsibilities of financial managers.

Question 22

Inadequate expense control typically occurs as a result of undercapitalization.

Question 23

)Financial managers are responsible for accounts receivable and accounts payable management.

Question 24

Karen,a financial manager with Bigbux Incorporated,regularly compares actual revenues and expenses against their projected values.After identifying areas with significant deviations from planned values,she investigates to find the cause of these variances.Karen's activities represent the steps involved in the preparation of Bigbux's capital budget.

Question 25

Financial managers are involved in tax management and budgeting.

Question 26

The first step in financial planning is to develop a budget to better control costs.

Question 27

The importance of financial managers to firms with large inflows is greater than for firms with smaller cash flows.

Question 28

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

Question 29

As a financial manager,Sabrina's responsibilities include the interpretation of financial statements provided by the firm's accountants and the preparation of recommendations to top management.

Question 30

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

Question 31

Tax management involves the development of strategies to evade tax liabilities.

Question 32

A firm's short-term financial forecast provides an estimate of sales.

Question 33

As a financial manager of a small firm,Jerry needs to determine how much his company will have to borrow in the coming months,and when the borrowed funds will be needed.The preparation of a cash budget will help.

Question 34

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

Question 35

The primary focus of a cash flow forecast is the firm's revenue and costs for the current operating period.

Question 36

Maple Leaf Innovations is planning to purchase a sophisticated supercomputer in the next year that will cost over $43,000,000.This purchase would be included in Maple Leaf's capital budget.

Question 37

A company's capital budget helps management plan for cash shortages or surpluses.

Question 38

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

Question 39

A firm's most recent financial statements often serve as the basis for predicting future sales,costs and expenses.

Question 40

)Creating a budget is the first step in a firm's financial planning and forecasting.

Question 41

The capital budget is the most detailed and most used budget a firm prepares.

Question 42

A budget reflects management's expectations for revenues and required resources.

Question 43

To be effective,budgets are prepared independently of organizational forecasts.

Question 44

The main objective of financial control is to establish priorities for the purchase of plant and equipment.

Question 45

A capital budget highlights a firm's spending plans of long-lasting assets,such as property,buildings,and equipment.

Question 46

A cash flow forecast provides managers with an estimate of the profit potential of different strategic plans.

Question 47

A cash budget helps managers anticipate borrowing,debt repayment,operating expenses,and short-term investment opportunities.

Question 48

Financial managers often recommend that firms pay their bills as late as possible and try to collect what they are owed as soon as possible.

Question 49

Financial control is a process where firms compare actual revenues and costs with budgeted revenues and costs.

Question 50

The concept of the time value of money is based on the interest earning power of money.

Question 51

Financial managers generally oppose credit sales because of the impact on cash flows.

Question 52

Acquiring sufficient funds to meet the operational needs of an organization represents a responsibility of financial management.

Question 53

Budgets are prepared after the financial forecasts are developed.

Question 54

A capital budget combines all of the other budgets into one detailed plan used to monitor the operations of the firm.

Question 55

An operating budget analyzes the firm's spending plans for long-lasting assets that require large sums of money.

Question 56

By identifying variances from the financial plan,managers are able to focus on those departments that require corrective action.

Question 57

The operating (master)budget identifies the allocation of funds required to operate a business at a projected level of revenue.

Question 58

)The last step in the financial planning process is to establish financial controls.

Question 59

A capital budget highlights the expected funds to be provided by owner investments.

Question 60

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

Question 61

Effective financial managers evaluate customers' ability to pay for merchandise purchased on credit.

Question 62

To improve cash flow and profitability,effective managers attempt to minimize the firm's investment in inventory.

Question 63

Business organizations exclusively use long-term financing for their short-term and long-term needs.

Question 64

An effective strategy to manage cash flows requires retail businesses to eliminate their inventory.

Question 65

Equity financing represents money acquired from the operations of the firm or through the sale of ownership in the company.

Question 66

Anna operates a florist shop specializing in weddings.While she knows that her competitors allow customers to buy on credit,she is concerned about the risk and expense of unpaid customer accounts.One strategy to reduce risk and collect sales revenue more quickly would be to accept bank-issued credit cards.

Question 67

While firms finance their long-term needs with debt financing,their short-term needs are provided by equity financing.

Question 68

Equity financing must be repaid.

Question 69

Efficient cash management requires firms to pay their bills as quickly as possible,and delay the collection of accounts receivable.

Question 70

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

Question 71

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

Question 72

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

Question 73

Firms can acquire funds through borrowing,selling ownership,or retaining earnings.

Question 74

Capital expenditures are major investments in long-term assets such as equipment,and trademarks.

Question 75

The costs to a retailer of accepting credit cards are generally greater than the benefits provided.

Question 76

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

Question 77

Effective financial managers carefully review customer credit histories to decrease inventory costs.

Question 78

Sound financial management involves determining the most appropriate sources of funds to meet the short-term and long-term needs of an organization.

Question 79

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

Question 80

Successful businesses establish restrictive credit policies encouraging customers to pay cash.