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.   depreciated assets
B.   stock
C.   bonds
D.   retained earnings
Question #2
In order to assist in revenue realization, a(n) ________ allocates resources throughout the firm.
A.   budget
B.   forecast
C.   income statement
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.   budgeting.
B.   planning.
C.   control.
D.   derivatives.
Question #4
Which of the following is a primary area of concern for financial managers?
A.   poor advertising messages
B.   inability to recruit qualified workers
C.   undercapitalization
D.   inadequate market control
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.   undercapitalization
C.   a cash flow issue
D.   undervalued inventory
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.   line of credit
B.   renewable income option
C.   cash flow conversion
D.   factor agreement
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.   Factoring
B.   Revolving credit
C.   Trade credit
D.   Secured 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.   line of credit.
B.   promissory note.
C.   indenture agreement.
D.   factoring agreement.
Question #9
A major concern for firms selling on credit is
A.   the resulting increase in the debt ratio for the firm.
B.   the large amount of assets tied up in accounts receivable.
C.   the realization that many credit customers always pay their bills.
D.   the inability to utilize factoring as a source of financing.
Question #10
Many small businesses rely on factoring as a source of short-term financing because
A.   small firms often find it difficult to qualify for bank loans.
B.   loans provided by factors do not require collateral.
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.   trade credit
B.   commercial paper
C.   a revolving credit agreement
D.   a bond issue
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.   manage accounts payable.
B.   manage accounts receivable.
C.   audit the company ledgers.
D.   develop tax strategies.
Question #13
The overall objective of financial planning is to
A.   establish budgets for financial control.
B.   prepare financial statements for managers.
C.   optimize the firm's profitability.
D.   forecast the impact of technological trends.
Question #14
One of the primary factors that influences the interest rate a firm pays on long-term loans is the
A.   intensity of competition the firm faces with new products.
B.   current level of government regulations.
C.   general level of market interest rates.
D.   exchange rate of the euro to the U.S. dollar.
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.   establishing financial control.
C.   forecasting financial needs.
D.   preparing financial statements.
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.   investment banker's
D.   financial manager's
Question #18
Businesses acquire long-term financing from two major sources,
A.   debt financing and equity financing.
B.   debt financing and government funds.
C.   retained earnings and commercial paper.
D.   equity financing and trade credit.
Question #19
Which of the following statements about taxes is accurate?
A.   Taxes represent an inflow of cash to the firm.
B.   Tax management falls within the responsibility of marketing managers.
C.   Taxes cannot be managed because of fluctuations in political policy.
D.   Profitable businesses usually pay taxes.
Question #20
A promissory note that requires the borrower to repay the loan in specified installments is called a(n)
A.   repayment scheduling.
B.   amortization installment.
C.   revolving line of credit.
D.   term loan agreement.

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