Business 1 - Introduction to Business » Spring 2020 » Chapter 18 Quiz

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Question #1
The interest paid on ________ represents a tax-deductible business expense.
A.   retained earnings
B.   bonds
C.   depreciated assets
D.   stock
Question #2
In order to assist in revenue realization, a(n) ________ allocates resources throughout the firm.
A.   income statement
B.   forecast
C.   budget
D.   balance sheet
Question #3
The managers of Comfort Clothing regularly compare actual profits with the firm's projected profits. When deviations occur, the managers use the feedback to take corrective action when necessary. The management of Comfort Clothing is exercising financial
A.   control.
B.   budgeting.
C.   derivatives.
D.   planning.
Question #4
Which of the following is a primary area of concern for financial managers?
A.   poor advertising messages
B.   inadequate market control
C.   undercapitalization
D.   inability to recruit qualified workers
Question #5
Julia started a cake decorating business last year. Unfortunately it failed quickly. She is convinced that she lacked the necessary funds to promote her business and get it off the ground. What did Julia experience?
A.   inadequate financial control
B.   undervalued inventory
C.   undercapitalization
D.   a cash flow issue
Question #6
The financial manager of Picture Perfect Graphics negotiated a ________ with her bank that allows Picture Perfect to borrow up to $75,000 without collateral. This arrangement eliminates the need to renegotiate the terms of the loan and complete new paperwork each time Picture Perfect borrows money. The preapproved short-term loan agreement is contingent upon the bank having the funds available.
A.   factor agreement
B.   line of credit
C.   cash flow conversion
D.   renewable income option
Question #7
________ is a form of short-term financing. Businesses buy merchandise from their suppliers, but are not required to pay for their purchases until some future date.
A.   Trade credit
B.   Factoring
C.   Secured credit
D.   Revolving credit
Question #8
Some suppliers hesitate to offer trade credit to firms with a poor credit history. In these cases, the supplier may insist that the customer sign a(n)
A.   indenture agreement.
B.   factoring agreement.
C.   line of credit.
D.   promissory note.
Question #9
A major concern for firms selling on credit is
A.   the large amount of assets tied up in accounts receivable.
B.   the resulting increase in the debt ratio for the firm.
C.   the inability to utilize factoring as a source of financing.
D.   the realization that many credit customers always pay their bills.
Question #10
Many small businesses rely on factoring as a source of short-term financing because
A.   loans provided by factors do not require collateral.
B.   small firms often find it difficult to qualify for bank loans.
C.   interest paid to a factor qualifies for a tax credit.
D.   factoring provides a much cheaper source of funds than bank loans.
Question #11
Which of these is a common source of long-term financing for a corporation?
A.   commercial paper
B.   trade credit
C.   a bond issue
D.   a revolving credit agreement
Question #12
When Portable Pet Care, a mobile veterinary company, first started operations, it extended three months of credit to customers. It soon began to experience a cash flow problem. A finance professional was hired to
A.   audit the company ledgers.
B.   develop tax strategies.
C.   manage accounts receivable.
D.   manage accounts payable.
Question #13
The overall objective of financial planning is to
A.   establish budgets for financial control.
B.   forecast the impact of technological trends.
C.   optimize the firm's profitability.
D.   prepare financial statements for managers.
Question #14
One of the primary factors that influences the interest rate a firm pays on long-term loans is the
A.   exchange rate of the euro to the U.S. dollar.
B.   current level of government regulations.
C.   general level of market interest rates.
D.   intensity of competition the firm faces with new products.
Question #15
Which of the following companies is undercapitalized?
A.   An electric utility that has recently experienced a significant increase in the cost of coal and labor.
B.   A medium-sized company that has decided to buy out a smaller competitor.
C.   A new company struggling because it has insufficient start-up funds.
D.   A large corporation that has been hit with a major lawsuit because one of its products has a design flaw that has led to serious injuries.
Question #16
The first step in the financial planning process is
A.   developing budgets.
B.   preparing financial statements.
C.   forecasting financial needs.
D.   establishing financial control.
Question #17
A(n) ________ job includes forecasting, budgeting, cash flow analysis, cost control, taxes, and credit management.
A.   CPA's
B.   portfolio manager's
C.   financial manager's
D.   investment banker's
Question #18
Businesses acquire long-term financing from two major sources,
A.   equity financing and trade credit.
B.   debt financing and equity financing.
C.   retained earnings and commercial paper.
D.   debt financing and government funds.
Question #19
Which of the following statements about taxes is accurate?
A.   Profitable businesses usually pay taxes.
B.   Taxes cannot be managed because of fluctuations in political policy.
C.   Taxes represent an inflow of cash to the firm.
D.   Tax management falls within the responsibility of marketing managers.
Question #20
A promissory note that requires the borrower to repay the loan in specified installments is called a(n)
A.   term loan agreement.
B.   revolving line of credit.
C.   repayment scheduling.
D.   amortization installment.

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