Question 1

The greatest part of a firm's financing is provided by

Accepted Answer

The answer of The greatest part of a firm's financing...

Question 2

Melissa feels confident about obtaining short-term financing for her art gallery because, like many companies, she has a(n)

Accepted Answer

The close working relationship with a lender is the most relevant factor for obtaining short-term financing. A good relationship with a lender can increase the likelihood of approval and may result in better terms and rates for the borrower. The other options are not necessarily present or relevant for short-term financing.

Question 3

Which of the following is not a characteristic of short-term financing?

Accepted Answer

While short-term financing is typically considered to have maturities of one year or less, it is not necessarily restricted to a three-year repayment period.

Question 4

Sanchez Company sells its garden hoses to Gary's Lawn and Garden Centre but does not require Gary's to pay for them right away.If this is a standard trade-credit agreement, Gary's will have to pay for the garden hoses in

Accepted Answer

Standard trade-credit agreements typically require payment within 30 to 60 days.

Question 5

Money obtained through various types of loans is called

Accepted Answer

Money obtained through loans is referred to as debt capital.

Question 6

Jackson Ski Equipment receives an invoice for €10,000 worth of merchandise from one of its suppliers.The invoice has discount terms of 2/10, net/60.Twenty days later, Jackson Ski Equipment writes a check for ____ to pay the invoice.

Accepted Answer

Since Jackson Ski Equipment pays the invoice 20 days later, they miss the 2% discount period which is within 10 days. Therefore, they pay the full invoice amount of $10,000.

Question 7

Max Beauty Supply has ordered €5,000 worth of merchandise from Kelly's Beauty Supply, Inc.The invoice to Max has discount terms of 2/10, net/30.Max writes a check within ten days for

Accepted Answer

The discount terms of 2/10 mean that Max can deduct 2% from the total amount of the invoice (€5,000) if the payment is made within 10 days. So the amount of the discount is €5,000 x 2% = €100. The net amount to be paid after the discount is €5,000 - €100 = €4,900. Therefore, the best choice is option D (€4,900).

Question 8

Beard Auction receives an invoice from one of its European suppliers for antiques.The amount of the invoice is €40,000 with terms of 3/10, net/60.If the invoice is paid on day 20, Beard is entitled to a ____ cash discount and will write the check for ____.

Accepted Answer

The terms 3/10, net/60 mean that a 3% discount is available if the invoice is paid within 10 days; otherwise, the full amount is due within 60 days. Since the invoice is paid on day 20, Beard Auction does not qualify for the discount and must pay the full amount of $40,000.

Question 9

Financial managers should

Accepted Answer

Financial managers should establish a means of monitoring financial performance on an interim basis. This will help them identify any minor budgeting problems early on and make necessary adjustments before they become major problems. Ignoring minor problems or simply hoping for the best is not a good strategy, while hiring a person to go over interim budgets or firing/demoting individual managers for not achieving budgeting goals may not be necessary in all situations.

Question 10

When a seller allows a buyer thirty to sixty days to pay for a purchase, the sales arrangement is called

Accepted Answer

Trade credit refers to the arrangement where a seller allows a buyer to purchase goods or services on credit and pay later within a specified period, usually 30 to 60 days. This is a common practice in many businesses where buyers may not have immediate cash to pay for their purchases. A promissory note is a legal document that represents a promise to pay a debt at a specified future date, while equity financing involves selling ownership in a business to raise capital. A bank loan is a type of financing that involves borrowing money from a financial institution and paying it back with interest over time. None of these options accurately describes the sales arrangement in which a buyer is allowed 30 to 60 days to pay, except for trade credit.

Question 11

Ms.Thomas has received an invoice from the manufacturer for which she distributes products.The invoice states credit terms of 3/10, net/30.Puzzled by this, she calls on you to explain.You indicate that the notation 3/10 means that

Accepted Answer

The notation 3/10, net/30 means that Ms. Thomas can take a 3% discount on the invoice amount if she pays within 10 days. Otherwise, the full invoice amount is due in 30 days.

Question 12

Sara Lee Corporation is a large conglomerate of businesses participating in a variety of industries.A few years ago, Sara Lee was considering the purchase of Bryan Foods.If Bryan Foods represented a tremendous opportunity to make the company more successful, Sara Lee may, as a last resort, have considered

Accepted Answer

Selling assets from another division is the best choice as it would provide long-term funding for the acquisition of Bryan Foods without affecting the current financial position of the company. The sale of assets would enable Sara Lee to retain control over its operations and profitability while also expanding its business. Seeking short-term financing or using trade credit may not provide adequate funding for the acquisition, and using future sales revenues could put the company at risk if the sales projections are not met. Sharing the idea with competitors could be detrimental to Sara Lee's competitiveness in the market.

Question 13

Short-term financing not backed by collateral is called

Accepted Answer

Unsecured financing refers to short-term financing that is not backed by collateral. It is an example of borrowing money without pledging assets as security. Options A, C, D, and E are incorrect as they either refer to different types of financing or are not a suitable answer for the given question.

Question 14

Dillon Wholesale Foods allows retailers to purchase merchandise using trade credit.For Dillon, this type of transaction

Accepted Answer

Trade credit is a common practice where retailers are allowed to purchase goods and pay for them within a specified period, typically 30 to 60 days, rather than paying upfront.

Question 15

The primary sources of funds available to a business include all of the following except

Accepted Answer

The answer of The primary sources of funds available to...

Question 16

Which of the following might be considered the most drastic step in securing funding, often a last resort for a corporation?

Accepted Answer

The sale of assets is often considered the most drastic step in securing funding because it involves a company selling off important assets such as property or equipment to generate cash. This is typically a last resort for a corporation because it means losing ownership and control over those assets, and could potentially harm the company's long-term growth prospects. Options A and C involve using existing resources or short-term loans, while Option B and D involve raising capital through external sources, but without sacrificing ownership or assets.

Question 17

Money received from the sale of shares of ownership in a business is called

Accepted Answer

Money received from the sale of shares of ownership in a business is called equity capital. This is because it represents an ownership stake in the company, rather than a debt obligation or revenue from sales.

Question 18

Jacob and Molly decide to start a new cake-decorating business.They each contribute €10,000 to get the business off the ground.This money is considered

Accepted Answer

The money contributed by Jacob and Molly is considered equity capital because it represents their ownership stake in the business.

Question 19

The most popular form of short-term financing is

Accepted Answer

Trade credit is the most popular form of short-term financing, as it allows businesses to obtain goods or services from suppliers and pay for them later. This form of financing is often easier and quicker to obtain than bank loans, and does not require the selling of bonds or stocks. Loans from insurance companies are less common than trade credit.

Question 20

A tool that managers use to estimate major expenditures for assets, expansion of facilities, and mergers and acquisitions is called a(n)

Accepted Answer

A capital budget is a tool used by managers to estimate major expenditures for assets, expansion of facilities, and mergers and acquisitions. It helps to allocate resources and plan for future investments based on the estimated costs and expected returns.

Quiz 18: Financial Management