Question 1

Determining long-term investments and planning the expenditure of funds are part of

Accepted Answer

Determining long-term investments and planning the expenditure of funds are key aspects of financial management, which involves managing a company's finances to achieve its financial goals.

Question 2

Kiri's job is to pay suppliers and determine how much money is left for investment. Which task of financial managers is Kiri performing?

Accepted Answer

Kiri's job involves overseeing bill payment, as paying suppliers and determining leftover money for investment directly relates to managing outgoing payments and financial planning.

Question 3

The end goal of financial management is

Accepted Answer

The end goal of financial management is profitability, as it ensures that a company is making more money than it spends, which is essential for its survival and growth.

Question 4

Marsha is really good at managing her company's money in an optimum way. Marsha demonstrates the financial management principle of

Accepted Answer

Efficiency in financial management refers to the optimal use of resources to achieve the desired financial outcomes, which aligns with Marsha's ability to manage her company's money in an optimum way.

Question 5

A(n) ________ is a firm's strategy for reaching its financial goals.

Accepted Answer

A financial plan is a firm's strategy for reaching its financial goals.

Question 6

A financial plan has three parts: forecasting, budgeting, and

Accepted Answer

Financial controls are a key part of a financial plan, as they help in monitoring and controlling financial activities to ensure that the plan is adhered to and financial goals are met.

Question 7

A ________ forecast is a prediction about how money will come into and go out of a firm in the near future, usually the next 1-3 months, and are based on anticipated sales and expenses.

Accepted Answer

A cash flow forecast specifically predicts the inflow and outflow of money in a firm over a short period, typically 1-3 months, based on expected sales and expenses.

Question 8

A ________ forecast is a prediction about how money will come into and go out of a firm during the next 4 to 12 months.

Accepted Answer

The answer of A ________ forecast is a prediction about...

Question 9

When Parul's children started college, she realized she needed to make money quickly, so she decided to increase production and distribution of the company's most popular product line. To do so, Parul borrowed money from the bank to cover the company's additional operating costs. Which reason why companies need to obtain financing is demonstrated in this example?

Accepted Answer

This example demonstrates the need for funds to manage everyday business activities, as Parul needed to cover additional operating costs to increase production and distribution.

Question 10

When Michael started his construction company, he needed to purchase some very expensive excavating equipment, but he didn't have the cash on hand to do so. He borrowed from the bank to cover this ________ expenditure.

Accepted Answer

Capital expenditure refers to funds used by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment. In this context, Michael is investing in expensive excavating equipment, which is a long-term investment in the company's operational infrastructure, fitting the definition of a capital expenditure.

Question 11

Short-term financing by which a firm buys a product, then receives a bill from the supplier, and pays it in 30 to 90 days, is

Accepted Answer

Trade credit is a type of short-term financing where a company purchases goods or services and pays the supplier at a later date, typically within 30 to 90 days, without the need for an explicit loan agreement or collateral.

Question 12

When We Love Dogs ordered its dog food from a supplier, it agreed to pay the supplier within 60 days. This is the ________, or conditions the seller gives the buyer when offering short-term credit.

Accepted Answer

The correct term is "terms of trade," which refers to the conditions under which trade or transactions between parties are conducted, including payment terms.

Question 13

The length of time for which the seller extends credit to the buyer is known as the

Accepted Answer

The net period refers to the duration for which the seller extends credit to the buyer, typically specified in terms of net days within which the buyer is expected to make payment for the goods or services received.

Question 14

The most familiar form of trade credit is ________, a written contract prepared by the buyer who agrees to pay the seller a certain amount by a certain time.

Accepted Answer

A promissory note is a written agreement where the buyer promises to pay the seller a specific sum of money at a predetermined date, making it the most familiar form of trade credit in this context.

Question 15

The price you pay for the use of money over a certain period of time is called the

Accepted Answer

The interest rate is the cost of borrowing money, expressed as a percentage of the total amount loaned, which is paid over a specified period of time.

Question 16

In a ________, a bank specifies how much it is willing to lend the borrower during a specified period of time, although the bank does not guarantee the loan.

Accepted Answer

A line of credit is an arrangement between a financial institution and a customer that establishes a maximum loan balance that the lender permits the borrower to access or maintain. The borrower can access funds from the line of credit at any time, as long as they do not exceed the maximum set in the agreement, and they meet any other requirements of the bank or financial institution, such as making timely minimum payments. It does not guarantee the loan but specifies the maximum amount the borrower can access.

Question 17

A ________ is credit extended by a bank for a specific purpose, such as for constructing a new store or stocking up on new inventory for the season.

Accepted Answer

A transaction loan is a type of credit extended by a bank for a specific purpose, such as constructing a new store or stocking up on inventory.

Question 18

When a firm uses its accounts receivable as collateral, or security, to obtain a short-term loan, as from a commercial bank, it is called

Accepted Answer

Pledging accounts receivable involves using the receivables as collateral for a loan, without selling them. This is different from factoring, where receivables are sold to a third party.

Question 19

As substitutes for bank loans, ________ consists of unsecured, short-term promissory notes over $100,000 issued by large banks, corporations, insurance companies, pension funds, public utilities, and state and local governments.

Accepted Answer

Commercial paper refers to unsecured, short-term promissory notes, typically issued by large entities like corporations and governments, as a way to raise funds without securing a traditional bank loan.

Question 20

A technology start-up received money from a venture capital company. What type of financing is this?

Accepted Answer

Venture capital is a form of private equity financing where investors provide capital to startups showing high growth potential in exchange for equity, or partial ownership, in the company. This is different from debt financing, where money is borrowed and has to be paid back with interest.

Quiz 3: Fundamentals of Economics and Types of Markets