GEB Chapter 18 test

c) is offered a 3% discount if it pays during the first 5 days. The entire bill is due in 30 days

Backstreet Books, Inc., an eclectic book and music store near a large college campus, is a reseller. The operation buys books almost every day. Deliveries are constantly part of the day-to-day operation of the firm. The transportation company that delivers to Backstreet Books provides this service on trade credit terms of 3/5, net 30. This means the firm ________. a) will receive a 5% discount if they pay within the first three days, but the entire bill is due in 30 days b) will pay 30% of the charge on delivery and the rest within 5 days c) is offered a 3% discount if it pays during the first 5 days. The entire bill is due in 30 days d) will receive 10% discount on the first 5% of the order. The entire bill is due in 30 days

b) identify variances from the financial plan and take corrective actions.

Financial controls are designed to help managers to: a) manage the day-to-day cash needs of a business. b) identify variances from the financial plan and take corrective actions. c) predict cash inflows in future periods past one year. d) develop the appropriate budgets for all functional departments.

c) operating (master)

Guillermo is currently in the process of projecting how much his firm will have to spend on supplies, travel, rent, advertising, and salaries for the coming financial year. Guillermo is working on the: a) capital budget. b) advertising budget. c) operating (master) budget. d) cash budget.

c: planning for spending funds on long-term assets such as plant and equipment

Jackie Jones is a finance manager for Pretty Poseys, a wholesale florist. As finance manager, which of the following would be one of Jackie's responsibilities? a) Preparing tax returns b) Preparing financial statements c) Planning for spending funds on long-term assets, such as plant and equipment d) Production planning and resource development

Debt financing: a) refers to funds raised through various forms of borrowing. b) refers to funds raised through selling ownership in the firm. c) requires that the firm pay interest from after-tax profit. d) is always more expensive than selling equity.

a

Financial managers examine the financial data prepared by ________ and make recommendations to top executives about strategies for improving the financial strength of a firm. a) accountants b) managers c) stock brokers d) financial analysts

a

The financial manager for Bellandro Bay Brewery is working with the firm's marketing department to bring out a new line of pumpkin ale. The new product development and subsequent production will require a long-term investment of funds by the company. Which of the following sources of financing would be representative of such a long-term funding requirement? a) Issuance of bonds b) Commercial paper c) Line of credit d) Factoring

a

The time value of money means that: a) it is better to have money in your pocket now, than later. b) it is better to make big purchases now, rather than wait until later. c) a monetary system will devalue it's money over time. d) the value of money will fall over time.

a

What is the major problem with selling on credit? a) A sizeable portion of a firm's assets could be tied up in accounts receivable. b) You can't legally set a date when customers must pay their bills. c) Selling on credit makes a firm look too eager for business. d) It makes production scheduling more difficult.

a

Internal audits are important because: a) the firm needs to keep a constant look out for employees and suppliers who may be committing fraud. b) internal audits help to make accounting statements more reliable. c) the firm uses the audits to determine desired profits for the following year. d) they aid in the development of the firm's financial statements.

b

One of the consequences of the recent financial crisis was ________. a) increased confidence in the financial services markets b) more government scrutiny and regulations c) the dismissal of compliance officers as an integral part of the financial services industry d) the knowledge that too much government regulation can disrupt the ethical direction that financial managers follow

b

Rachael Straub works in finance for a small microbrewery. This week Rachael is working on a budget for the next 12 months. She has been doing research to determine prices for the new equipment they will need in the next 12 months to stay competitive in this market. Which of the steps in financial planning is Rachael involved in? a) Establishing financial controls and tax policy. b) Forecasting short-term financial needs. c) Developing financial statements for outside investors. d) Developing budgets to meet financial needs.

b

The Credit Card Responsibility Accountability and Disclosure Act of 2009 did very little to protect ________ from increases in credit-card interest rates and fees. a) lobbyists b) small businesses c) individual consumers d) government accounts

b

Commercial finance companies accept more risk than banks, and the interest rates they charge are usually ________ than commercial banks. a) about the same b) more variable c) higher d) lower

c

Idle Time Gaming, Inc., knows that its stockholders expect a return on their investment. The expected return that stockholders anticipate translates into the company's ________. Essentially, this is the amount that the investment funds are costing the firm. a) leverage b) return on debt c) cost of capital d) return on sales

c

Issuing stock as a source of funding is referred to as ________. a) short-term financing b) venture capital c) equity financing d) bond trading

c

One advantage in using retained earnings as a long-term source of funds is ________. a) there is no advantage because retained earnings are only used for short-term financing b) retained earnings are funds that fundamentally belong to bondholders, and as such, their use does not dilute ownership c) firms avoid having to make dividend payments to stockholders, or interest payments to bondholders d) firms pay a higher interest rate for the use of these funds, which benefits the business in the long-run

c

Which of the following is a long-term debt obligation of a corporation or government? a) promissory note b) stock c) bond d) equity

c

Which of the following is a major reason why businesses fail financially? a) Expense controls are too rigid. b) Poor use of marketing mix. c) Undercapitalization. d) Stock is undervalued.

c

Accepting bank credit cards represents one way to decrease: a) equity financing. b) the expense of collecting accounts payable. c) capital expenditures. d) the expense of collecting accounts receivable.

d

Companies must have a carefully constructed inventory policy in order to: a) increase demand for their products. b) reduce the need for long-term funds. c) be able of accept credit cards. d) manage available funds and maximize profitability.

d

If your job is to compare actual expenses incurred by your company with financial projections previously created, you are performing the task of ________. a) the accounting cycle b) financial ratio analysis c) managerial control d) financial control

d

Marco's Italian Gardens, an authentic Italian restaurant in suburban Chicago, worked with a local bank for a ________. This unsecured source of funds was available for Marco to tap into if he needed immediate funds for the business. He liked the fact that he had a cushion and only used it if he fell short of funds. a)revolving credit agreement b) promissory note c) sponsored trade credit d) line of credit

d

Short-term forecasts are based on: a) sales revenues and future tax policies. b) predictions of future performance of the firm's new products. c) capital expenditures for the next five years. d) expected sales revenues and expenses for the coming year.

d

Taxes represent ________. a) accounts receivable liability b) equity liability c) cash inflow d) cash outflow

d