Question 1

Chez Dove is an independent coffeehouse/bookstore that went bankrupt only eight months after opening due to an unexpected demand for cash to fix a leaking roof.Which of the following activities might have allowed the business to continue operation?

Accepted Answer

Chez Dove may have been able to continue operations if they had better cash management practices, such as having a cash reserve for unexpected expenses like a leaking roof. This could include regularly reviewing and adjusting their budget, monitoring cash flow, and creating a financial plan for emergencies. While better cash maintenance and targeting may also have been helpful, they would not have necessarily addressed the issue of the unexpected expense. Cash capitalization refers to the process of raising funds for a new or growing business and would not have directly impacted Chez Dove's ability to continue operations after the fact.

Question 2

The Four Seasons hotel chain has purchased an existing hotel in Mumbai.To forecast how much it needs to spend to bring the facilities in line with Four Seasons' other five-star hotels,it will use which of the following?

Accepted Answer

A capital budget is used to plan for long-term investments, such as purchasing or renovating assets like buildings or equipment. As the Four Seasons chain has acquired an existing hotel in Mumbai, it would need to use a capital budget to forecast the amount it needs to spend in order to bring the facilities in line with its other five-star hotels. An operating budget is used to plan for day-to-day expenses, a managerial budget is used to plan and coordinate resources for a particular department, and a tactical budget is used to allocate resources for short-term projects or goals.

Question 3

Short-term expenses used to support current production and selling expenses are known as which of the following?

Accepted Answer

Operating expenses are short-term expenses used to support current production and selling expenses, such as rent, utilities, wages, and advertising. Managerial expenses are costs associated with management and administration, while administrative expenses specifically refer to administrative and office-related costs. General expenses refer to any non-specific expense incurred by a business.

Question 4

What are short-term investments that are easily converted back to cash and are used by financial managers to achieve higher returns than those offered by chequing accounts?

Accepted Answer

Marketable securities are short-term investments that can easily be converted back to cash and typically offer higher returns than chequing accounts. Corporate securities and corporate equities may offer higher returns, but they are not as easily convertible to cash in the short-term. Management vehicles is not a commonly used term in finance and does not provide a specific answer.

Question 5

Chez Dove is an independent coffeehouse/bookstore.In order to predict how much coffee it would serve,how many Styrofoam cups it would need,and how much staff it will require during of July,the company would use which of the following type of budget?

Accepted Answer

An operating budget is used to plan for the day-to-day operations of a business, including the amount of product to be sold, the number of supplies needed, and the required staffing levels. This type of budget would be appropriate for Dove to use in order to predict how much coffee it would sell, how many Styrofoam cups it would need, and how much staffing it would require during the month of July. A cash budget focuses on the inflows and outflows of cash, a centralized budget is created by a central authority and imposed on subunits of the organization, and a strategic budget is developed for long-term planning purposes.

Question 6

Which of the following would be an example of a capital expenditure for a superstore that specializes in outdoor grills and other items needed for outside dining?

Accepted Answer

A parking lot would be a permanent, long-term investment in the physical infrastructure of the superstore, and would be considered a capital expenditure. The other options (cardboard sale signs, pens and markers, and a handheld calculator) are all examples of operational expenses, which are typically smaller, day-to-day expenses required to run a business.

Question 7

Financial managers often shift temporary funds from chequing accounts to which of the following to earn higher interest returns?

Accepted Answer

Financial managers often shift temporary funds from chequing accounts to marketable securities to earn higher interest returns. Marketable securities are short-term investments that can easily be bought or sold in the financial markets. They provide a higher rate of return than keeping funds in a chequing account, while still allowing for quick access to cash if needed. Administrative, commercial, and strategic securities are not typically used as temporary investments by financial managers.

Question 8

As the Toronto-based Four Seasons hotel chain remodels an existing hotel in Mumbai to bring it to the five-star hotel's exacting standards,it is building a magnificent revolving restaurant overlooking the Arabian Sea.The restaurant structure is an example of which of the following?

Accepted Answer

The construction of a new revolving restaurant is a capital expenditure since it involves an investment in a long-term asset that will generate revenue for the hotel over an extended period of time.

Question 9

Grainger Distribution Company sold Long Electronics 10 circuit breakers for $169.00 each.Long Electronics will be allowed 30 days to pay the bill.Grainger will carry the $1690.00 on its books as which of the following?

Accepted Answer

The $1690.00 owed by Long Electronics is an account receivable for Grainger because it represents a debt owed to Grainger by Long Electronics. It is not an account payable for Grainger because Grainger is not the one who owes the debt, and it is not a current or fixed liability because it is not an obligation that Grainger owes to anyone else.

Question 10

Toronto Pneumatic Tools has changed its credit terms to encourage its buyers to pay their accounts receivable more quickly.Which of the following represents the policy that the financial manager has changed?

Accepted Answer

The financial manager has changed the credit terms, which means they have adjusted the terms and conditions of credit sales, including the payment period, interest rate, and penalties for late payment, to encourage buyers to pay their accounts receivable more quickly.

Question 11

Which of the following are specific repayment conditions as to how long customers have to pay bills and the amount of cash discount allowed?

Accepted Answer

Credit terms are specific repayment conditions, including how long customers have to pay bills and the amount of cash discount allowed. Revolving accounts are a type of credit account where the balance can be carried over from month to month. Credit credentials refer to the information and qualifications necessary to obtain credit. Liability procedures are the policies and protocols for handling claims or legal issues related to a business's liabilities.

Question 12

Linda's Kitchen is a bakery.Flour,sugar,eggs,milk,and chocolate would be included in which of the following type of expenses?

Accepted Answer

Flour, sugar, eggs, milk, and chocolate are ingredients used in the production of baked goods at Linda's Kitchen. Therefore, they would be categorized as operating expenses, which are expenses directly related to the production and sale of goods or services.

Question 13

Funds invested in long-lived assets,such as land,buildings,machinery,and equipment,are called which of the following?

Accepted Answer

Funds invested in long-lived assets, such as land, buildings, machinery, and equipment, are called capital expenditures. This is because these investments are made with the intention of generating profit over a long period of time and contribute to the business’s long-term growth and success. Operating expenses, production costs, and manufacturing expenses are all related to the day-to-day operations of the business and do not involve long-term investments in assets.

Question 14

Which of the following is a short-term unsecured debt issued by a financially strong corporation?

Accepted Answer

Commercial paper is a short-term unsecured debt issued by financially strong corporations to raise funds quickly. Treasury bills are issued by the government, certificates of deposit are issued by banks, and money market deposits are accounts that earn interest on funds deposited with a bank or financial institution.

Question 15

Which of the following are forecasts for outlays for fixed assets,usually covering a period of several years?

Accepted Answer

Capital budgets are forecasts for outlays for fixed assets, usually covering a period of several years. Tactical budgets are short-term budgets focused on specific goals or objectives. Operating budgets are budgets for day-to-day expenses and revenues. Monetary-policy budgets do not exist in the context of budgeting.

Question 16

The three most popular types of marketable securities are Treasury bills,certificates of deposit,and which of the following?

Accepted Answer

The answer of The three most popular types of marketable...

Question 17

Budgets that combine sales forecasts with estimates of production costs and operating expenses to forecast profits are known as which of the following?

Accepted Answer

Operating budgets typically incorporate sales forecasts, production costs, and operating expenses to project profits. Centralized budgets refer to budgets that are controlled by a central department and may not necessarily include sales and expense projections. Strategic budgets focus on long-term planning and may not be as detailed as operating budgets. Cash budgets forecast cash flow, but may not necessarily include sales and expense projections.

Question 18

Making sure that enough cash is on hand to pay bills as they come due and to meet unexpected expenses is called which of the following?

Accepted Answer

Cash management is the process of ensuring that a company has enough cash on hand to meet its financial obligations, such as paying bills or fulfilling payroll requirements. This includes managing cash inflows (such as payments from customers) and outflows (such as payments to vendors). Cash targeting and cash maintenance are not commonly used terms in finance, and cash capitalization refers to using cash to fund long-term investments or growth opportunities.

Question 19

Which of the following is the process of selecting the capital expenditures that offer the best returns and meet the goal of maximizing the firm's value?

Accepted Answer

Capital budgeting is the process of selecting the capital investments that offer the best returns and meet the firm's goal of maximizing value. It involves analyzing potential projects, estimating costs and cash flows, and evaluating the risk and return of each investment. Capital evaluation, capital allocation, and budget analysis may be components of the capital budgeting process, but they do not encompass the entire process.

Question 20

Commercial paper is best described by which of the following?

Accepted Answer

Commercial paper is a type of unsecured, short-term debt instrument that serves as an IOU from one company to another or from a company to an investor. It is typically issued by corporations with high credit ratings and is used to finance short-term credit needs such as inventory purchases, payroll, or other operating expenses. It is not the same thing as accounts receivable recorded in the ledger, is not typically issued by stakeholders, and is unsecured, so it is not a type of secured debt.

Quiz 16: Managing the Firm’s Finances