Question 1

Finance managers need funds for capital purchases,but seldom for the day-to-day operations.

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Question 2

Acquiring and storing inventory represents a sizable expenditure for many businesses.

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Question 3

The concept of the time value of money is based on the interest-earning power of money.

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Question 4

Sound financial management involves determining the most appropriate sources of funds to meet short-term and long-term needs of an organization.

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Question 5

As a financial manager of a small firm,Jerry needs to determine how much his company will have to borrow in the coming months,and when the borrowed funds will be needed.The preparation of the cash budget will help.

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Question 6

To improve cash flow and profitability,effective managers attempt to minimize the firm's investment in inventory.

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Question 7

Effective financial managers evaluate customers' ability to pay for merchandise purchased on credit.

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Question 8

While firms finance their long-term needs with debt financing,their short-term needs are served by equity financing.

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Question 9

Short-term financing refers to borrowed funds that must be repaid in a year or less.

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Question 10

Big Bear Ski Lodge owners know that the lifts on the north slope will need replacing in the next two years.Three months prior to replacement,they will include the expenditure in their cash budget.

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Question 11

Karen,a financial manager with Bigbux Incorporated,regularly compares actual revenues and expenses against their projected values.After identifying areas with significant deviations from planned values,she investigates to find the cause of these variances.Karen's activities represent the steps involved in the preparation of Bigbux's capital budget.

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Question 12

Preferred Pet Care,Inc. ,a mobile pet care company is planning for the future.The company owners two seasoned veterinarians)have brought together the vice president of marketing and the director of information systems to talk about how their expansion campaign: "We come to you!" The talks are in the preliminary stages,so there is no need to concern the finance team at this time because cash flow is currently not a problem.

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Question 13

Accepting credit cards,such as MasterCard or Visa,enables a firm to decrease the expense of extending credit to customers.

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Question 14

Big Bear Ski Lodge's cash budget for the month of March,2012,shows a negative amount.Due to the fact that the months of January and February were quite lucrative and showed positive amounts,the finance manager will not borrow any money on the short-term to cover for March's deficit.

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Question 15

When his firm is owed money,the financial manager tries to collect as early as possible.

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Question 16

The cost to a retailer of accepting credit cards is generally greater than the benefits provided.

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Question 17

One very important responsibility of the finance department in both large and small businesses involves acquiring needed funds to operate the business.

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Question 18

With added competition,firms prefer not to offer the availability of credit sales to their customers.

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Question 19

Financial managers generally oppose credit sales because of the impact on cash flows.

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Question 20

Capital expenditures are major investments in long-term assets such as property and equipment.

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Quiz 18: Financial Management