Question 1

After much searching,Mort located an old banking friend of his father's.The banker offered Mort up to $25,000 in unsecured funds,which Mort's firm could borrow any time within a year,as long as the bank has the money available.Mort was offered an):

Accepted Answer

The bank is offering Mort a line of credit, which is an agreement between a borrower and lender that allows the borrower to draw funds up to a certain limit at any time. The funds are unsecured, meaning they don't require collateral, and have a one-year term. This aligns with the terms outlined in the question.

Question 2

To raise the funds for the major improvements needed at the funeral home,Mort has talked to two investors about incorporating his business and selling them shares of stock in the company.Mort is considering the use of:

Accepted Answer

Mort is considering selling shares of stock in the company, which is a form of equity financing. This means that he is giving investors ownership in the company in exchange for the funds he needs. Debt financing, on the other hand, involves borrowing money that needs to be repaid with interest. Commercial paper and revolving credit are both forms of short-term borrowing, which do not apply in this scenario as Mort is looking for long-term investment options. Therefore, the best choice is equity financing.

Question 3

Identify and describe three types of short-term financing.

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Question 4

Mort approached the chief lending officer at First Virginia Bank about obtaining a $75,000 loan.The banker said she would approve the loan provided that the funeral home's building was pledged as collateral.The banker was offering an):

Accepted Answer

The banker is offering a loan with the funeral home's building pledged as collateral, which makes it a secured loan.

Question 5

Mort is seriously considering a major expansion in the size of his funeral home.The money spent on this type of project would be classified as an):

Accepted Answer

A major expansion in the size of the funeral home would be considered a capital expenditure, which refers to the money spent on acquiring or improving fixed assets that are expected to provide benefits for more than one year. This would include the purchase of property, buildings, and equipment, which would all be classified as fixed assets.

Question 6

Explain the role the operating budget,the capital budget,and the cash budget play in financial planning.

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Question 7

Mort Tishian feels it's necessary to predict revenues,costs,and expenses on a six-month basis."It's the only way you get an idea of what to expect," explains Mort.In order to obtain these predictions,Mort needs to develop an):

Accepted Answer

Mort needs to develop a short-term forecast in order to predict revenues, costs, and expenses on a six-month basis. A cash-basis accounting system would primarily focus on tracking cash inflows and outflows, rather than forecasting future financial performance. A capital budget would involve allocating funds for long-term investments, while an econometric model would be a complex statistical analysis tool used to forecast economic trends and relationships.

Question 8

Explain the term leverage.When is it more favorable for firms to use this strategy?

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Question 9

After seeing Mort's advertisement: "You Aren't Gettin' Any Younger! Start Planning for Heaven Today!" an)___________ firm decided the aging population was a good investment.Although they typically look at start-ups with great promise,they approached Mort with $6 million dollars for a major three-city expansion that included six new funeral homes,a crematory,and mausoleum.After researching the idea,Mort agreed to give-up 50% ownership of the business in order to secure these funds.His last thoughts as he began to sign the papers were: "Now,I'll be able to compete with the big guys!"

Accepted Answer

The investment firm offering $6 million for a major expansion is an example of venture capital. Mort is giving up 50% ownership of the business in exchange for these funds, which is a common arrangement in venture capital deals. Retained earnings refers to profits kept within a company rather than distributed to shareholders, and indentured and leveraged buyout do not accurately describe the situation.

Question 10

What is financial management? Identify the duties and responsibilities of financial managers.

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Question 11

What are two major forms of debt financing? Describe and differentiate between the two types.

Accepted Answer

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Question 12

Identify and describe the major steps involved in financial planning.

Accepted Answer

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Question 13

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

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Quiz 18: Financial Management

After much searching,Mort located an old banking friend of his father's.The banker offered Mort up to $25,000 in unsecured funds,which Mort's firm could borrow any time within a year,as long as the bank has the money available.Mort was offered an) :