Deck 16: Mastering Financial Management

Question 1

Speculative production is an example of a long-term financial need.

Answer 1

False

Question 2

A budget is a financial statement that projects income and/or expenditures over a specified future period.

Answer 2

True

Question 3

Trade credit is the least popular form of short-term financing.

Answer 3

False

Question 4

Debt capital is money obtained from the sale of shares of ownership in a business.

Question 5

Typically, long-term loans are normally repaid in three to seven years.

Question 6

A __________ budget estimates a firm's expenditures for major assets.

A) cash
B) capital
C) long-term needs
D) traditional
E) zero-base

Question 7

The prime interest rate is the

A) highest rate charged by a commercial bank.
B) average rate charged by a commercial bank.
C) lowest rate charged by a commercial bank.
D) rate charged by the Federal Reserve Bank for business loans.
E) rate charged by the SEC for business loans.

Question 8

The most basic form of corporate ownership is

A) long-term equity loans.
B) SEC-qualified stock.
C) preferred stock.
D) common stock.
E) corporate bonds.

Question 9

Which of the following would be paid first?

A) Dividends paid on common stock
B) Dividends paid on preferred stock
C) Interest on corporate bonds
D) Bonuses paid to stockholders
E) Contributions to retained earnings

Question 10

The use of borrowed funds to increase the return on owners' equity is

A) equity capital.
B) Fed financing.
C) common stock financing.
D) financial suicide.
E) financial leverage.

Question 11

Financial planning begins with establishing a set of valid goals and objectives.

Question 12

Debt capital is financing provided by the owner or owners of the business.

Question 13

Commercial paper is a short-term promissory note issued by a small business.

Question 14

When compared to other forms of short-term financing, factoring is relatively inexpensive.

Question 15

An IPO occurs when a corporation sells common stock to the general public for the first time.

Question 16

A budgeting approach in which every expense in every budget must be justified is referred to as __________ budgeting.

A) zero-base
B) financial-based
C) traditional
D) TQM
E) efficient-market

Question 17

The most popular and inexpensive form of short-term financing is

A) factoring.
B) promissory notes.
C) commercial paper.
D) unsecured bank notes.
E) trade credit.

Question 18

Selling stock

A) is a form of financing that must be repaid at maturity.
B) requires the payment of interest every three months.
C) is a form of equity financing.
D) is a form of debt financing.
E) is a form of financing that has low flotation costs.

Question 19

Which of the following would be allowed to elect a corporation's board of directors?

A) Corporate management
B) Common stockholders
C) Corporate bondholders
D) Long-term lenders
E) Suppliers

Question 20

A __________ is a bond backed only by the reputation of the issuing corporation.

A) registered bond
B) convertible bond
C) mortgage bond
D) debenture bond
E) serial bond