Quiz 18: Financial Management

Finance is the function in a business that acquires funds for the firm and manages those funds within the firm.

Managing a firm's resources so that it can meet its goals and objectives is the goal of financial accounting.

A financial manager makes recommendations to top executives regarding strategies for improving the financial strength of a firm.

The duties and responsibilities of a financial manager are virtually identical to the duties and responsibilities of an accountant.

Financial managers use data prepared by accountants to develop strategies for improving the financial performance of the firm.

There is actually a stronger relationship between finance and marketing than there is between finance and accounting.

Financial managers examine the data prepared by accountants and make recommendations to top management regarding strategies for improving the financial performance of the company.

Financial management is more important for a large firm than it is for a small firm.

The chief financial officer (CFO) is responsible for accounting and financial functions.

The chief financial officer of a company is responsible for managing cash, accounts receivable, and inventory.

While finance is a critical activity for profit-seeking organizations, by definition nonprofit organizations are not required to fulfill the finance function.

A comptroller is responsible for the acquiring and managing of funds for an organization.

Inability to attract and retain qualified employees is one of the most common ways for a firm to fail financially.

Financial managers are responsible for controlling cash flows.

Undercapitalization refers to the problem of insufficient start-up funds.

Investors and entrepreneurs should have an understanding of financial issues.

Financial managers are responsible for budgeting, auditing, and advising top management on financial matters.

One of the most common ways for a firm to fail financially is poor control over cash flow.

Inadequate control of expenses represents a common financial problem that contributes to business failure.

A comptroller is the chief accounting officer of an organization.

Tax payments are important to the finance manager because they represent a cash inflow to a firm.

An internal auditor is responsible for paying the company's bills and collecting overdue payments from customers.

Financial managers are responsible for buying merchandise on credit and collecting payment from accounts receivable.

Accountants truly represent the financial managers of a business.

Inadequate expense control typically occurs as a result of undercapitalization.

The importance of financial managers to firms with large cash inflows is greater than for firms with smaller cash flows.

Financial managers are responsible for the management of accounts receivable and accounts payable.

Tax management by financial managers involves the development of strategies to evade tax liabilities.

Generally accepted accounting principles require that any assessment of a firm's financial statements be performed by independent outside auditors.

To be effective, an internal auditor must be critical of any improprieties or deficiencies found in the financial activities of the firm.

As a financial manager, Sabrina's responsibilities include the interpretation of financial statements provided by the firm's accountants and the preparation of recommendations to top management.

Mark manages credit and collections at Polly Parrot Pet Supplies, Inc. He is responsible for accounts receivable and accounts payable. These activities suggest that his job is in financial management.

Is there something in a name? April Gardner was told that she would grow up to be a master gardener. She didn't really believe that stuff, but now she finds herself in charge at a large city-owned botanical garden. She is requiring her staff to pursue continuing education. To put her money where her mouth is, she will enroll in a couple of accounting and finance courses at the local community college because this is an area where she is weak. This is a good plan, especially since she is the boss.

The overall objective of financial planning is to optimize the firm's profitability and make the best use of its money.

The first step in financial planning is to develop a budget to better control costs.

One step in the financial planning process is to establish financial control procedures that allow managers to monitor the organization's performance.

The timing of a short-term forecast is more important than the forecast's accuracy.

A firm's short-term financial forecast provides a projected sales estimate.

The primary focus of a cash flow forecast is the firm's revenue and costs for the current operating period.

A firm's most recent financial statements often serve as the basis for predicting future sales, costs and expenses.

The long-term financial forecast plays a crucial part in the company's long-term strategic plan.

The long-term financial forecast gives top management some sense of the profit potential of various strategic decisions.

A budget reflects management's expectations for revenues and allocates the use of specific resources throughout the firm.

Budgets are prepared after the financial forecasts are developed.

To be effective, budgets are prepared independently of organizational forecasts.

A capital budget highlights the expected funds provided by owner investments.

An operating budget analyzes the firm's spending plans for long-lasting assets that require large sums of money.

A capital budget highlights a firm's spending plans for major assets, such as property, buildings, and equipment.

A capital budget combines all of the other budgets into one detailed plan for monitoring the operations of the firm.

The operating (master) budget identifies the funds (and the allocation of those funds) required to operate a business at a projected level of revenue.

A cash budget helps managers anticipate borrowing, debt repayment, operating expenses, and short-term investment opportunities.

The main objective of financial control is to establish priorities for the purchase of plant and equipment.

By identifying variances from the financial plan, managers are able to focus on those departments that require corrective action.

Financial control is a process where firms compare actual revenues and costs with budgeted revenues and costs.

Since short-term financial forecasts predict expected future events, they should not be influenced by recent financial statements.

A budget's primary purpose is to provide managers with a financial summary of past operations.

Forecasting means determining how closely the actual revenue and expense results matched up with the predicted revenues and expenses.

Budgets assist managers in performing the functions of planning and control.

A company's capital budget helps management plan for cash shortages or surpluses.

Preferred Pet Care, Inc., plans to purchase a second mobile unit next year that will cost an estimated $55,000. The finance manager will include this projected purchase in the company's capital budget.

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.

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.

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 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.

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.

Big Bear Ski Lodge's cash budget for the month of March 2015 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 in the short term to cover for March's deficit.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Equity financing must be repaid.

Equity financing represents funds acquired from within the firm or through the sale of stock, representing ownership in the company.

Business organizations always use long-term financing for (both) short-term and long-term needs, but they never use short-term financing for (both) short-term and long-term needs.

Debt financing refers to funds acquired from the profitable operations of a firm or through the sale of ownership in the firm.

Expansion into new markets (either domestic or global) is sometimes financed with long-term funds.

Companies raising funds must choose either debt or equity sources, but not both.

Financial managers understand the time value of money. They try to maximize cash expenditures, as opposed to minimizing cash expenditures.

Based on the time value of money, $100 received a year from today is worth more than $100 received today.

Money has time value due to the fact that if invested, it has the potential to earn more money at some point in the future.

Efficient cash management requires firms to pay their bills as quickly as possible, and delay the collection of accounts receivable.

Successful businesses establish restrictive credit policies encouraging customers to pay cash.

Offering cash discounts to customers who pay their bills by a certain date represents an effective technique to manage accounts receivable.

An effective strategy to manage cash flows requires retail businesses to eliminate their inventory.

A firm will choose to seek debt financing only for the purpose of paying for short-term operating needs.

Equity financing may involve the sale of stock (representing ownership) to new investors.

As a financial manager for a large manufacturing firm, Gail evaluates the purchase of expensive machinery and construction of new facilities. She is analyzing capital expenditure proposals.

Anna operates a florist shop specializing in weddings. While she knows that her competitors allow customers to buy on credit, she is concerned about the risk and expense of unpaid customer accounts. One strategy to reduce risk and collect sales revenue more quickly would be to accept bank-issued credit cards.

White Palace operates a chain of restaurants specializing in hamburgers. The corporation plans to expand to new communities. The acquisition of land and construction of new restaurants represent major capital expenditures.

After thoroughly studying the feasibility for expansion, Preferred Pet Care Inc., a mobile pet care company that operates in the greater Chicago area, plans to offer a similar service in the Indianapolis metropolitan area. This endeavor will require a large capital expenditure. Due to the nature of this project, the firm will consider only equity financing.

Allison Robards, owner of Backstreet Books, an eclectic bookstore near a large university, is seeking additional financing for books and CDs that she plans to buy and sell in the same fiscal year. Even though it will be a sizeable investment in inventory, Allison is seeking short-term financing.

Backstreet Books is seeking financing to fund the opening of two more locations in a major university town. There is no need to consider debt financing for this project. It will require a sizeable investment in equity funds.

Financial managers devote the majority of their time obtaining long-term financing to fund the firm's capital expenditures.

Small businesses rely heavily on long-term financing.

Much of a financial manager's day-to-day activities involve managing the short-term financial needs of the firm.

The most widely used source of short-term funding is trade credit.

Trade credit represents one of the most expensive forms of short-term financing.

Trade credit is the practice of buying goods now and paying for them later.

The terms "2/10, net 30" indicate that the seller is offering a 20% discount for early payment.

Trade credit means the seller will sell and deliver products and/or services to the buyer, with the understanding that the buyer will pay for these products and/or services at a later date.

Suppliers prefer to offer trade credit to customers with poor credit ratings or no credit history.

A promissory note is a written contract between a supplier and a business customer, with a promise that customer will pay supplier a specified amount by a certain date.

Family and friends represent problem-free sources of financing for most small businesses.

A revolving credit agreement is designed to reduce the risk of lending money.

Inventory financing represents the selling of accounts receivables as collateral for a loan.

A secured loan means the borrower has the security of knowing repayment is not due for several years.

An unsecured loan does not require a borrower to provide collateral to secure a loan.

A line of credit represents a guarantee from a bank to lend a firm a given amount of money.

A revolving credit agreement represents a line of credit that is guaranteed.

Commercial finance companies normally charge lower rates on short-term loans than those charged by commercial banks.

Factoring refers to the process of selling accounts receivable for cash.

Factoring refers to the process of selling inventory to generate short-term funds.

Factoring represents the least expensive way for a firm to raise short-term funds.

A tool that provides lots of convenience, credit cards are a source of a readily available line of credit for a small business because they provide convenience.

Commercial paper is unsecured short-term debt.

Financially stable firms are able to sell commercial paper to raise short-term funds.

Many sellers offer a 2% discount to a buyer that makes payment 20 days before the due date, (2/10, net 30). Firms that fail to take advantage of this early payment discount are giving up approximately 36%.

If a buyer is offered the terms of sale of "3/10, net 30" this means that the buyer can receive a 10 percent discount by making full payment within 30 days of the billing date.

A line of credit from a bank guarantees a firm that a specified amount of financing will be available when it is needed.

According to the box, Adapting to Change, it is impossible for small businesses to bring in venture capital from investors.

Bill is a financial manager for Great View Eye Care, a local chain of Milwaukee retail stores offering glasses and optical health care. The majority of Bill's day likely involves efforts to locate and secure long-term financing to fund Great View Eye Care's capital expenditures.

Rod was required to pledge his house and car as collateral for a loan he received from the First National Bank. The money from the loan was used to start his new business, which unfortunately failed within 6 months. The bank can now claim Rod's house and car to satisfy its claim.

As the chief financial officer (CFO) for a medium-sized service company, Shelley is concerned about the possibility of temporary cash shortages. Given the irregular cash flows from seasonal sales, she wants to ensure that her company's bank will provide adequate funds to cover any potential cash flow problem. The best strategy to ease Shelley's concern would be to arrange a revolving credit agreement with the bank.

Tri-State Concrete Construction Company relies on factoring to meet its short-term financing needs. This means that Tri-State borrows money from a finance company and pledges its accounts receivable as collateral.

Big Ticket Technologies holds commercial paper issued by Prude Insurance Corporation that matures in 180 days. However, shortly after Big Ticket purchased the commercial paper, Prude Insurance went out of business. The finance manager for Big Ticket is not worried because his loan to the corporation is secured by collateral that he can now claim.

Most companies require long-term capital to purchase fixed assets such as plant and equipment, to develop new products and services, or to finance an expansion.

Equity financing refers to the money a firm receives from the sale of bonds.

When using equity financing, firms incur a legal obligation to repay the amount of money invested.

A term-loan agreement requires the borrower to repay the loan in one lump sum at the end of the loan period.

The interest paid for debt financing is a tax-deductible expense for the firm.

According to the risk/return trade-off, the higher the risk, the lower the interest rate charged by the lender.

A share of stock represents a company-issued IOU including a promise to repay on a certain date.

A bond represents a long-term debt obligation of a corporation or government.

An unsecured corporate bond is known as a debenture bond.

A debenture bond is backed only by the reputation of the issuer.

The types of organizations which can issue bonds are privately and publicly held corporations, exclusively.

The indenture terms refer to the agreements of a bond issue, such as how much interest it promises to pay and when it promises to repay the issue.

Funds obtained from venture capitalists are considered equity financing.

Retained earnings represent a source of equity financing.

The first time a company offers to sell its stock to the general public is called an initial private label (IPL).

Corporations must comply with the Securities and Exchange Commission (SEC) requirements in order to sell their stock publicly.

Venture capital is money that is invested in new or emerging companies that are perceived as having great profit potential.

Venture capitalists expect lower than average returns on their investment since they are exposed to little risk.

Most companies have the ready cash available to make large purchases.

Acquiring funds through equity financing requires the firm to pay annual dividends.

Acquiring funds through debt financing actually decreases the overall risk of the firm.

Acquiring funds through debt financing enhances the firm's ability to increase profits.

Leverage refers to the use of borrowed funds to increase a firm's rate of return.

The cost of capital is the rate of return a firm must earn in order to meet the demands of its lenders and expectations of its equity holders.

Long-term loans are often more expensive than short-term loans.

Corporations that issue debenture bonds are required to provide collateral.

Corporations that issue stock to raise long-term funds accept the legal obligation to repay the amount borrowed.

Unlike bonds, stocks offer the advantage of tax-deductible interest payments.

One important consideration for a firm accepting funds from a venture capitalist is the ownership interest demanded by the venture capital firm.

According to the Reaching Beyond Our Borders box, some of the largest sovereign wealth funds are operated by Norway, Saudi Arabia, and Singapore.

As mentioned in the Reaching Beyond Our Borders box, sovereign wealth funds can easily purchase more than 10% of a U.S. company without investigation by the U.S. government.

Central Vermont Power issued $200 million of bonds to finance a major upgrade of one of its largest power plants. The issuance of these bonds indicates that Central Vermont utilizes equity capital to meet its long-term financing needs.

As a financial manager for a very profitable manufacturer of specialty steel, Kurt has been asked to investigate sources of long-term funds to finance the construction of a new facility. Kurt would prefer a funding source that does not require interest payments or involve major underwriting fees. Kurt will consider using retained earnings to fund the construction project.

Financial managers at Sasha Deal Electronics have always had a conservative attitude toward long-term financing. In particular, they are interested in keeping risk to a minimum. This philosophy suggests that managers at Sasha Deal consider the extensive use of leverage an attractive financial strategy.

An example of a firm using leverage to its advantage is a firm that borrows funds at 9% and invests those funds to earn 14%.

If a firm earns 10% return on funds they borrowed at 15% interest, the owners of the firm realize a benefit from using leverage.

________ examine the data prepared by ________ and then make recommendations to top management regarding strategies for improving the firm. A. Accountants; financial managers B) Accountants; bankers C) Financial managers; accountants D) Financial managers; bankers

_____________ is the function in business that is responsible for acquiring funds for the firm, and managing funds within the firm. A. Accounting B) Managerial accounting C) Finance D) Financial accounting

Which of the following correctly identifies areas of authority and responsibility for a chief financial officer (CFO)? A. Accounting and finance B) Marketing and finance C) Production and accounting D) Finance and research and development

No matter the size of the business, finance is a critical activity for: A. profit-seeking, but not for nonprofit organizations. B) profit-seeking and nonprofit organizations. C) nonprofit organizations, but not for profit-seeking businesses. D) accountants, but not for financial managers.

Undercapitalization refers to the problem of: A. insufficient start-up funds. B) inadequate control of expenses. C) inappropriate cash flows. D) undervalued capital stock.

Which of the following statements is most accurate? A. Accounting and finance are not related. B) Financial managers keep the books for a firm. C) Financial managers need to understand accounting. D) Nonprofit organizations must choose between accounting and finance.

Which of the following is a primary area of concern for financial managers? A. Undercapitalization B) Inability to recruit qualified workers C) Poor advertising messages D) Inadequate market control

Which business function involves credit management/collecting funds from customers? A. Accounting B) Production C) Marketing D) Finance

Which of the following statements about taxes is accurate? A. Taxes represent an inflow of cash to the firm. B) Profitable businesses usually pay taxes. C) Tax management falls within the responsibility of marketing managers. D) Taxes cannot be managed because of fluctuations in political policy.

A(n) __________ is responsible for verifying that the accounting procedures within a firm are consistent with established accounting principles. A. managerial accountant B) tax accountant C) bookkeeper D) internal auditor

Which of the following commonly results in the financial failure of a firm? A. Diversification B) Undercapitalization C) Control of expenses D) Management of cash flows

A(n) _____________ job includes forecasting, budgeting, cash flow analysis, cost control, taxes, and credit management. A. CPA's B) investment banker's C) financial manager's D) portfolio manager's

Which of the following companies is undercapitalized? A. 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 B) A new company struggling because it has insufficient start-up funds C) A medium-sized company that has decided to buy out a smaller competitor D) An electric utility that has recently experienced a significant increase in the cost of coal and labor

Susan started a cake decorating business that failed. She is convinced that she lacked the necessary funds to promote her business and get it off the ground. Susan experienced: A. inadequate financial control. B) undervalued inventory. C) undercapitalization. D) a cash flow issue.

Carlos is the manager of Oh! Canada Sporting Goods. During the past six months, his cash expenditures have exceeded his cash receipts. Oh! Canada is suffering from a(n) ________ problem. A. accounting B) undercapitalization C) cash flow D) exchange rate

Ariel, a recent graduate in finance from a well-known university, was hired by a large corporation to work in tax management. Ariel's goal is: A. to prepare the company's tax returns. B) to develop ways to increase taxes in order to enhance the bottom line. C) to minimize the firm's tax consequences. D) to be the firm's tax collector.

Robert intends to major in business. He has never had much interest in subjects with numbers. He would like to avoid taking any finance courses if possible. Robert should: A. avoid finance courses and focus on subjects that he enjoys. B) take a finance course to satisfy graduation requirements. C) realize that his success in business requires an understanding of financial issues. D) change majors and go into the arts.

Which of the following activities is most likely to be performed by a financial manager? A. design of a marketable product that satisfies an unmet need B) identification of specific target markets for a firm's goods C) preparation of the balance sheet and income statement for the firm D) analysis of the tax implications of various managerial decisions

When Preferred Pet Care Inc., a mobile veterinary care 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 receivable. B) manage accounts payable. C) develop tax strategies. D) audit the company ledgers.

The overall objective of financial planning is to: A. forecast the impact of technological trends. B) prepare financial statements for managers. C) optimize the firm's profitability. D) establish budgets for financial control.

The first step in the financial planning process is: A. forecasting financial needs. B) preparing financial statements. C) developing budgets. D) establishing financial control.

A _________ forecast predicts the revenues, costs, and expenses a firm will incur for a period of one year or less. A. near-horizon B) short-term C) capital expenditures D) tactical

A _________ forecast predicts the future cash inflows and outflows in future periods. A. money based B) short-term C) cash flow D) long-term

A _________ forecast predicts the revenues, costs, and expenses a firm will incur for a period longer than one year. A. cash flow B) short-term C) capital expenditures D) long-term

In order to assist in revenue realization, a(n) ________ allocates resources throughout the firm. A. forecast B) balance sheet C) budget D) income statement

Which of the following shows a firm's spending plans on fixed assets such as large equipment? A. Capital budget B) Operating budget C) Cash budget D) Surplus budget

The budget that estimates a firm's projected cash inflows and outflows, as well as cash shortages or surpluses during a given time period is called the ________ budget. A. capital B) operating C) cash D) monetary

___________ refers to the process that identifies variances by comparing actual revenues and expenses to projected revenues and expenses. A. Factor analysis B) Forecasting C) Financial planning D) Financial control

An effective budget requires: A. a successful advertising campaign. B) accurate forecasts. C) management approval. D) stakeholder consensus.

If a company wants to predict how much money it can make this coming year, it would benefit from developing a: A. master budget. B) consolidated income statement. C) short-term forecast. D) statement of cash flows.

Which of the following would be most helpful for a company looking to know the income potential during the next five years? A. cash flow forecast B) long-term forecast C) short-term forecast D) capital budget forecast

Carolina Financial Services is considering the purchase and installation of an expensive computer network. This is the type of expenditure that would be included in a(n): A. capital budget. B) cash budget. C) operating budget. D) asset budget.

The managers of Dakota Clothing regularly compare their 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 Dakota Clothing is exercising financial: A. derivatives. B) control. C) planning. D) budgeting.

As a management consultant, Lamont knows that regardless of how good his firm's product might be, the business has little chance of success without a(n): A. financial plan. B) outside consultant. C) auditor. D) warranty.

Akiko realizes the importance of developing a ________ for her interior design business. Akiko understands the importance of appropriately allocating resources in order to achieve the goals of her firm. A. market prediction B) financial forecast C) budget D) cash flow analysis

As a finance manager at AllSports Communication, Charlie worries about the firm's borrowing requirements for the upcoming year. He knows the benefit of estimating AllSports' cash disbursements and short-term investment expectations. Facing these concerns, a(n) ________ would provide Charlie with valuable information by providing a good estimation of whether the firm will need to do short-term borrowing. A. operating budget B) cash budget C) capital budget D) line item budget

The finance manager at AllSports Communication has asked his assistant, Ben, to prepare the ________ budget. Ben will gather as much information as possible by utilizing the firm's other budgets and any documents that summarize proposed financial activities. A. master B) cash C) capital D) line item

One of the challenges of effective financial management is: A. to have sufficient cash on hand without compromising the firm's investment potential. B) ensuring the satisfaction of each of the stakeholder groups. C) working within the strict regulations of the Financial Accounting Standards Board (FASB). D) providing the financial data in a timely manner for management consultants to improve decision making.

The concept time value of money indicates: A. the value of a dollar decreases over time as prices increase. B) the prices of goods and services will fluctuate over time due to inflation and higher costs of production. C) monetary systems tend to become more sophisticated over time. D) a dollar received today is worth more than a dollar received a year from today.

Money has a time value because: A. inflation increases the value of money over time. B) money earns interest over time. C) monetary systems are more automated than in the past. D) a dollar received today is worth more than a dollar received yesterday.

The rationale behind offering customers credit is: A. permitting customers to pay with credit cards or on credit makes it easier for them to buy, and it also attracts new customers. B) offering customer's credit helps with the firm's cash flow position. C) offering customer's credit helps match revenues with expenses for the same time period. D) permitting customers to pay with credit cards or on credit forces a company to rely less on accounts receivables and more on accounts payables.

A major concern for firms selling on credit is: A. the realization that many credit customers always pay their bills. B) the large amount of assets tied up in accounts receivable. C) the resulting increase in the debt ratio for the firm. D) the inability to utilize factoring as a source of financing.

To reduce the time and expense of collecting their accounts receivable, some firms: A. extend credit to new customers. B) offer extended payment plans to existing customers. C) adopt a just-in-time inventory policy. D) accept bank credit cards.

A just-in-time inventory system allows a firm to: A. extend credit to new customers. B) provide sufficient inventory for most contingencies. C) reduce their investment in inventory. D) reduce capital expenditures.

Acquiring funds through borrowing represents: A. debt financing. B) venture capital. C) speculative capital. D) equity financing.

If a firm sells shares of stock, it is financing with ________. A. debt B) liabilities C) spectator capital D) equity

If a company secures a three-year bank loan, this is considered __________. A. short-term financing B) asset funding C) liability funding D) long-term financing

If a company secures a one-year bank loan this is considered _______. A. short-term financing B) asset funding C) liability funding D) long-term financing

The effective management of accounts receivable requires financial managers to: A. review the credit history of new customers. B) provide prompt cash payments to suppliers. C) allow customers more time in paying their past due accounts. D) refuse bank-issued credit cards.

Which of the following would normally involve long-term financing? A. Workers' salaries B) Unanticipated emergencies C) Purchase of modern equipment D) Expanding current inventory

The Making Ethical Decisions box "Good Finance or Bad Medicine" has an important message for managers who make financial decisions. Which of the following statements summarizes this message? A. Managers must balance good economic decisions with socially forward thinking. B) Financial decisions must be based on what insurance companies are willing to pay. C) Checking academic credentials of recently graduated doctors is imperative due to the cost of lawssuits that patients may file if they learn that they were served by a surgeon without a license. D) The support of a good law firm is worth every penny a hospital might pay. The finance manager should always budget for a legal team.

With plans to build a $50 million theme park, Extreme Entertainment, Inc., intends to finance this project through the sale of additional shares of ownership in their firm. Selling new shares of stock represents ___________ financing. A. retained B) debt C) initial offering D) equity

The owner of Mountain Cycle Shop worries that cash flows this winter may be insufficient to meet his current operating expenses. While he anticipates a surplus of cash inflows as warm weather approaches, he needs funds now to meet his immediate obligations. He can best resolve his cash flow concerns by obtaining ________ financing. A. intermediate B) contingency C) short-term D) long-term

Lancer Wholesale Company wants to improve cash flow. Which of the following strategies would be most likely to help Lancer achieve this objective? A. Relaxing its credit policy for new customers B) Offering cash discounts to buyers who pay their accounts promptly C) Accepting IOUs from customers who buy in large quantities D) Offering extended payment plans to qualified buyers

Which of the following presents an effective technique to improve cash management? A. Speed up cash payments and slow down cash collections B) Speed up cash collections and slow down cash payments C) Speed up both collections and payments of cash D) Slow down both the payment and collections of cash

If you are at the Phoenix Sky Harbor International Airport, you will no longer get a pat-down if you go through the metal detector. The airport now has full body screening ports that scan the entire body and readily detect weapons or explosive devices that someone may want to take on board a plane. These expensive devices represent: A. long-term assets B) short-term assets C) intangible assets D) interest-bearing assets

Green Builder's Supply, Inc., does not offer customers a cash discount for early payment of their accounts receivable. As a result, most customers wait to pay their bill on the last day before late penalties are charged. These customers apparently understand the: A. time value of money. B) benefits of tax-deductible expenses. C) financial community's perception of equity financing. D) government's regulations of the chemical industry.

Which of the following represents a capital expenditure? A. issuing paychecks to workers B) paying for advertising on a local radio station C) purchasing raw materials to be used in the production of a firm's product D) purchasing a building to be used for office space

By selling shares of ownership in their company, California Scientific acquires the funds needed to finance their research and development projects. California Scientific provides for their long-term funding needs through ________ financing. A. debt B) equity C) retained D) asset

The CFO of a satellite radio company was trying to work his magic today as he solicited another telecommunications/entertainment company to invest in his company in order to prevent bankruptcy. Having refinanced the company less than a year ago, the satellite radio finance manager had a $75 million note coming due today. The current financing arrangement represents: A. a long-term sale of stock to private investors. B) short-term debt financing. C) the issuance of long-term bonds. D) a leveraged buy-out.

Which of the following statements represents good advice prior to making capital expenditures? A. Capital expenditures represent borrowed funds that must be repaid in one year or less. It is important to seek the advice of your accountant prior to committing. B) Capital expenditures represent investment in inventories and expendable assets that the firm will use in one year or less. It is important to maintain the appropriate level of monthly cash flow to pay for these expenditures. C) Most firms do not value capital expenditures on their balance sheets, so it is important to stay abreast of the market value of these assets at all times, in case you want to sell them. D) Capital expenditures are major investments, meaning they require large sums of funds. Companies should weigh all possible options before committing available resources to projects that take significant amounts of funds and extended time.

When Liberty Industries renegotiated their loan agreement, they borrowed an additional $2 million. The new loan requires Liberty to repay the new amount in nine months. Liberty's activity represents ________ financing. A. equity B) debt C) revitalized D) secured

Finance managers spend the majority of their time managing _____. A. cash flow. B) long-term financial needs. C) short-term financial needs. D) equity financing.

Which of the following represents a source of short-term funding? A. Retained earnings B) Commercial paper C) Common stock D) Corporate bonds

The most widely used source of short-term funding is: A. trade credit. B) a line of credit. C) factoring. D) commercial finance companies.

________ 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. Secured credit B) Trade credit C) Revolving credit D) Factoring

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) promissory note. C) line of credit. D) factoring agreement.

A loan backed by collateral represents a(n): A. bond trust. B) debenture bond. C) pledging factor. D) secured loan.

Typically, only highly regarded customers with financial stability receive ___________. A. secured loans. B) bank premiums. C) unsecured loans. D) commercial paper.

Lending institutions may offer a borrower a percentage of the value of the borrower's accounts receivable so the borrowing firm can continue to operate while it waits to collect on its credit sales. This process is called __________. A. establishing a line of credit. B) inventory valuation. C) pledging. D) revolving credit.

A firm negotiates a(n) _________ with its bank. This arrangement gives the firm access to a specified amount of unsecured short-term funds, provided the bank has the funds available. A. asset drawing account B) capital drawing agreement C) reserve account D) line of credit

A ________ refers to a line of credit that is guaranteed by the bank. A. collateral trust fund B) revolving credit agreement C) contract credit agreement D) commercial credit agreement

___________ offer short-term secured loans to high-risk borrowers. These loans usually require collateral. A. Commercial finance companies B) Reserve banks C) Credit brokers D) Investment bankers

Selling accounts receivable to obtain short-term funds is called: A. pledging. B) factoring. C) equity financing. D) debt financing.

Since commercial finance companies offer loans to higher-risk customers than commercial banks, the interest rates they charge are usually ________ than rates charged by banks. A. higher B) lower C) more predictable D) subject to lower taxes

_________ offers financially stable corporations a technique to raise short-term funds by issuing unsecured promissory notes to the general public with the promise of repayment within 270 days. A. Trade credit B) A line of credit C) Factoring D) Commercial paper

Although best used as a last resort, many small businesses find it convenient to use __________ as a short-term source of financing. Although this form short-term debt comes with high interest rates, it provides a quick line of credit for many firms, including start-up companies who may not be able to secure bank loans. A. factoring B) credit cards C) commercial paper D) promissory notes

Many small businesses rely on factoring as a source of short-term financing because: A. factoring provides a much cheaper source of funds than bank loans. B) interest paid to a factor qualifies for a tax credit. C) small firms often find it difficult to qualify for bank loans. D) loans provided by factors do not require collateral.

Which of the following organizations would be most likely to acquire short-term funding by issuing commercial paper? A. A well-known, financially stable corporation B) A small business that is unable to qualify for loans from commercial banks C) A firm with a significant percentage of current assets held as accounts receivable D) A company that prefers equity financing to obtain short-term funds

As a result of cash flow shortages, Millard's Department Stores has fallen behind in payments to suppliers. Some suppliers are withholding shipments to Millard's until they receive payments on overdue accounts. To meet their immediate needs, Millard's Department Stores should utilize: A. vulture capital. B) long-term financing. C) contingency capital. D) short-term financing.

Maryland Nursery offers customers credit terms of 3/15 net 30. This gives customers a: A. 15 percent discount if they pay in three days. B) 3 percent discount if they pay in thirty days. C) 3 percent discount if they pay in fifteen days. D) 15 percent discount if they pay in thirty days.

To secure financing for a planned expansion, Ohio Electronics borrowed $400,000 from King Finance. The ________ loan agreement requires that Ohio Electronics provide the title to their factory as collateral. A. recapitalization B) secured C) pledged D) minority

Farmers Savings and Loan agreed to extend Eckert's Orchards $200,000 of unsecured short-term funds, contingent upon the bank having the funds available. This arrangement represents a: A. line of credit. B) pledge agreement. C) factoring agreement. D) trade voucher.

Energy-wise Builders, Inc., a leader in residential housing, recently negotiated a financing arrangement with First Pennsylvania Bank. The short-term funding agreement guarantees a specified amount of funds would be made available upon Energy-wise's request. This arrangement represents a: A. line of credit. B) pledging agreement. C) revolving credit agreement. D) contingency reserve.

Virginia Supply offers their customers trade credit with terms 2/15 net 30. This implies that: A. Virginia's customers have very little incentive to pay within the discount period. B) paying within 30 days will let a customer deduct 15% off the invoice price. C) most customers will pay their bill within 2 days in order to take the maximum discount. D) the annual financing cost of failing to pay within 15 days is about 48%.

The financial manager of Carolina Graphics negotiated a ________ with her bank that allows Carolina to borrow up to $50,000 without collateral. This arrangement eliminates the need to renegotiate the terms of the loan and complete new paperwork each time Carolina borrows money. The preapproved short-term loan agreement is contingent upon the bank having the funds available. A. line of credit B) factor agreement C) cash flow conversion D) renewable income option

Vitale Jewelers obtains needed short-term funds by selling its accounts receivable to the Friendly Finance Company. Friendly Finance usually pays Vitale about 80% of the value of the receivables. Vitale Jewelers utilizes ________ as a means of raising short-term funds. A. trade credit B) revolving credit agreements C) factoring D) receivable draft agreements

Long-term financing would normally be used to purchase: A. supplies. B) inventory. C) buildings. D) highly liquid assets.

Businesses match their long-term capital needs to: A. the firm's debt to equity ratio. B) the ratio of long-term vs. short-term capital available. C) trade credit discounts. D) their long-term goals and objectives.

Businesses acquire long-term financing from two major sources: A. debt financing and government funds. B) equity financing and trade credit. C) retained earnings and commercial paper. D) debt financing and equity financing.

When using ________ financing, the company incurs a legal obligation to repay the amount borrowed. A. debt B) equity C) retained earnings D) commitment

A promissory note that requires the borrower to repay the loan in specified installments is called a(n): A. repayment scheduling. B) term loan agreement. C) amortization installment. D) revolving line of credit.

A less-established company, or a company with a high debt to equity ratio, would be considered a riskier investment to the lender. Which of the following principles attests to this axiom? A. Direct relationship principle B) Compensating balance concept C) Risk/return trade-off D) Cost-benefit analysis

A _________ represents a long-term debt obligation issued by a corporation or a government. A. share of stock B) commercial note C) certificate of deposit D) bond

The terms of the agreement in a bond issue are referred to as the: A. articles of the issue. B) terms of indebtedness. C) bond specifications. D) indenture terms.

Which of these is backed only by the reputation of the issuer? A. Venture capital B) Secured bonds C) Debenture bonds D) Long-term financing

Which of the following provides the buyer with collateral? A. Common stock B) Secured bond C) Unsecured bond D) Debenture bonds

Through equity financing, stockholders become _________ of the firm. A. creditors B) employees C) suppliers D) owners

__________ represent a favorable source of meeting long-term financing needs because there are no interest payments, dividends, or underwriting fees required when using this source. A. Secured bonds B) Debentures C) Warrants D) Retained earnings

__________ provide financing to new or emerging companies with high profit potential. In return, these organizations expect a share of ownership in the company. A. Commercial banks B) Venture capital firms C) Federal Reserve banks D) Investment bankers

__________ refers to the strategy of using borrowed funds to increase the rate of return for stockholders. A. Leverage B) Retained earnings C) Factoring D) Pledging

The rate of return a company must earn to meet the demands of its lenders and expectations of its equity holders is called: A. opportunity rate. B) retained earning. C) cost of capital. D) acquisition cost.

The interest paid on ________ represents a tax-deductible business expense. A. bonds B) stock C) retained earnings D) depreciated assets

Which of these is a common source of long-term financing for a corporation? A. a revolving credit agreement B) commercial paper C) a bond issue D) trade credit

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.

Venture capital firms look to invest their funds in firms that __________. A. operate in established, mature industries. B) present financial statements indicating stronger than average cash flows. C) are new with great profit potential. D) require extra funding to avoid financial difficulties.

Which of these statements about corporate bonds is correct? A. Bonds provide equity financing. B) Issuing new bonds dilutes the existing ownership in the firm. C) Interest paid to bondholders represents a tax-deductible business expense. D) Debenture bonds require assets pledged as collateral.

Successful use of financial leverage requires a firm to: A. negotiate with lenders to establish a line of credit. B) establish and operate a venture capital organization to minimize the use of equity financing. C) register with the local government commission that administers market leverage. D) earn a higher return on its investments than the interest rate it pays to acquire funds.

To maximize the benefits of using financial leverage, a firm should: A. strive to minimize their cost of capital. B) avoid securing funds through long-term debt financing. C) limit their investments to projects with minimum risk levels. D) incorporate in states with relatively low tax rates.

As John considers approaching a venture capital firm to provide funding for his new software firm, he should realize that a venture capital firm will: A. offer no more than 20 percent of the funding he needs. B) charge a higher interest rate than a commercial bank. C) expect the company to provide a steady dividend income. D) probably want an ownership interest in the business.

By purchasing stock in Entertainment Today, Veronica has become a(n) ________ the company. A. creditor of B) owner of C) general partner of D) venture capitalist in

After earning $30 million in net income, Rolatrim Industries distributed $5 million in dividends to their stockholders. The board of directors of the firm decided to invest the remaining $25 million back into the business. This $25 million reinvestment of profits represents: A. a trust fund. B) retained earnings. C) preferred capital. D) mutual funds.

After enjoying increased sales of and profits from several popular products, Braggs & Stritton plans to expand their production facilities. The firm, a well-known producer of lawn care products, prefers financing this project with a funding source that avoids interest and dividend payments as well as underwriting costs. Which of the following best meets the needs of Braggs & Stritton? A. Venture capital B) Debenture bonds C) Common stock D) Retained earnings

Chunky Chicken, Inc., announced yesterday that it plans to issue $100 million in debenture bonds to fund the expansion of its fast food chain of restaurants. In financial terms, this means: A. the corporation will borrow $100 million worth of long-term financing. The bond issue will not carry any collateral. B) the corporation will issue $100 million worth of equity financing. The bond issue will be backed by the property and buildings purchased with the funds. C) the corporation will borrow $100 million worth of long-term financing. The issue will be backed by the property and buildings purchased with the funds. D) the corporation will issue $100 million worth of interest-free bonds. Financiers will be paid from the revenues created by the individual franchises.

Arborview Plant Science Company has invented a drought resistant grass seed that only needs watering three times each year. In order to expand distribution worldwide, the company whose product produces lush green foliage needs a large amount of funding-fast! The handful of seed scientists that own the company decide to offer shares of stock to general investors. This first-time offering is a(n): A. Stock Equity Commission (SEC). B) Stock Fund Offering (SFO). C) Broad-Based Offering (BBO). D) Initial Public Offering (IPO).

Arborview Plant Science Company has invented a drought resistant grass seed that only needs watering three times each year. In order to expand distribution worldwide, the company whose product produces lush green foliage needs serious funding. The handful of seed scientists that own the company are seeking ____________, but understand that they will relinquish a sizeable share of ownership in order to obtain the funds. A. debenture capital B) international line of credit C) leverage D) venture capital

Which of the following situations represents a successful use of financial leverage? A. A firm issues new shares of stock and uses the proceeds from the sale to retire its outstanding debt. B) A firm borrows money at 8% and earns an 11% return on its investment of these funds. C) A firm attracts the interest of two venture capitalists, and plays one against the other to gain the best deal. D) A retail firm purchases merchandise at $10 and sells it for $15.

What is financial management? Identify the duties and responsibilities of financial managers.

Identify and describe the major steps involved in financial planning.

Explain the role the operating budget, the capital budget, and the cash budget play in financial planning.

Identify and describe three types of short-term financing.

What is equity financing? Identify and describe the major sources of equity financing.

What are two major forms of debt financing? Describe and differentiate between the two types.

Explain the term leverage. When is it more favorable for firms to use this strategy?

Mini-Case Tishian's Funeral Home has been in business for over 80 years. Throughout its history, the firm has been a family-run operation. Today, the business is managed by Mort Tishian, a grandson of the founder. Unfortunately, Mort Tishian's tenure has been plagued with problems neither his father nor grandfather before him experienced. The reason is simple: the funeral business is undergoing rapid change. Small, family-owned funeral homes are losing ground to a new type of competitor, a large national network service that resembles a franchise system. More and more families "in their time of need" are choosing the new, highly promoted competitors instead of the traditional small family-operated funeral homes. This trend has required a response from organizations like Tishian's Funeral Home. Bigger and better facilities are needed to remain competitive. All of this puts more pressure on the family owners to be more active in the financial side of the business. Mort summed it up best when he said, "Grandpa told people, 'You pay me when you can, I ain't goin' nowheres.'" His creditors did the same with him. Today, it's a different game. Cash flow is key, and obtaining funds is no simple task. Additionally, creditors want their money now, not later. Banks are also more demanding. "Heck, Grandpa knew all the bankers he dealt with personally. I see new faces every time I go to the bank. If things don't get better, I suspect after eighty years of service, Tishian's Funeral Home will have its own funeral." -Mort Tishian feels it's necessary to predict revenues, costs, and expenses on a six-month basis. "It's the only way you get an idea of what to expect," explains Mort. In order to obtain these predictions, Mort needs to develop a(n): A. cash-basis accounting system. B) short-term forecast. C) capital budget. D) econometric model.

Mini-Case Tishian's Funeral Home has been in business for over 80 years. Throughout its history, the firm has been a family-run operation. Today, the business is managed by Mort Tishian, a grandson of the founder. Unfortunately, Mort Tishian's tenure has been plagued with problems neither his father nor grandfather before him experienced. The reason is simple: the funeral business is undergoing rapid change. Small, family-owned funeral homes are losing ground to a new type of competitor, a large national network service that resembles a franchise system. More and more families "in their time of need" are choosing the new, highly promoted competitors instead of the traditional small family-operated funeral homes. This trend has required a response from organizations like Tishian's Funeral Home. Bigger and better facilities are needed to remain competitive. All of this puts more pressure on the family owners to be more active in the financial side of the business. Mort summed it up best when he said, "Grandpa told people, 'You pay me when you can, I ain't goin' nowheres.'" His creditors did the same with him. Today, it's a different game. Cash flow is key, and obtaining funds is no simple task. Additionally, creditors want their money now, not later. Banks are also more demanding. "Heck, Grandpa knew all the bankers he dealt with personally. I see new faces every time I go to the bank. If things don't get better, I suspect after eighty years of service, Tishian's Funeral Home will have its own funeral." -Mort is seriously considering a major expansion in the size of his funeral home. The money spent on this type of project would be classified as a(n): A. capital expenditure. B) equity expenditure. C) off-budget expense. D) depreciation charge.

Mini-Case Tishian's Funeral Home has been in business for over 80 years. Throughout its history, the firm has been a family-run operation. Today, the business is managed by Mort Tishian, a grandson of the founder. Unfortunately, Mort Tishian's tenure has been plagued with problems neither his father nor grandfather before him experienced. The reason is simple: the funeral business is undergoing rapid change. Small, family-owned funeral homes are losing ground to a new type of competitor, a large national network service that resembles a franchise system. More and more families "in their time of need" are choosing the new, highly promoted competitors instead of the traditional small family-operated funeral homes. This trend has required a response from organizations like Tishian's Funeral Home. Bigger and better facilities are needed to remain competitive. All of this puts more pressure on the family owners to be more active in the financial side of the business. Mort summed it up best when he said, "Grandpa told people, 'You pay me when you can, I ain't goin' nowheres.'" His creditors did the same with him. Today, it's a different game. Cash flow is key, and obtaining funds is no simple task. Additionally, creditors want their money now, not later. Banks are also more demanding. "Heck, Grandpa knew all the bankers he dealt with personally. I see new faces every time I go to the bank. If things don't get better, I suspect after eighty years of service, Tishian's Funeral Home will have its own funeral." -To raise the funds for the major improvements needed at the funeral home, Mort has talked to two investors about incorporating his business and selling them shares of stock in the company. Mort is considering the use of: A. debt financing. B) commercial paper. C) equity financing. D) revolving credit.

Mini-Case Tishian's Funeral Home has been in business for over 80 years. Throughout its history, the firm has been a family-run operation. Today, the business is managed by Mort Tishian, a grandson of the founder. Unfortunately, Mort Tishian's tenure has been plagued with problems neither his father nor grandfather before him experienced. The reason is simple: the funeral business is undergoing rapid change. Small, family-owned funeral homes are losing ground to a new type of competitor, a large national network service that resembles a franchise system. More and more families "in their time of need" are choosing the new, highly promoted competitors instead of the traditional small family-operated funeral homes. This trend has required a response from organizations like Tishian's Funeral Home. Bigger and better facilities are needed to remain competitive. All of this puts more pressure on the family owners to be more active in the financial side of the business. Mort summed it up best when he said, "Grandpa told people, 'You pay me when you can, I ain't goin' nowheres.'" His creditors did the same with him. Today, it's a different game. Cash flow is key, and obtaining funds is no simple task. Additionally, creditors want their money now, not later. Banks are also more demanding. "Heck, Grandpa knew all the bankers he dealt with personally. I see new faces every time I go to the bank. If things don't get better, I suspect after eighty years of service, Tishian's Funeral Home will have its own funeral." -Mort approached the chief lending officer at First Virginia Bank about obtaining a $75,000 loan. The banker said she would approve the loan provided that the funeral home's building was pledged as collateral. The banker was offering a(n): A. trade credit agreement. B) institutional loan. C) secured loan. D) revolving credit agreement.

Mini-Case Tishian's Funeral Home has been in business for over 80 years. Throughout its history, the firm has been a family-run operation. Today, the business is managed by Mort Tishian, a grandson of the founder. Unfortunately, Mort Tishian's tenure has been plagued with problems neither his father nor grandfather before him experienced. The reason is simple: the funeral business is undergoing rapid change. Small, family-owned funeral homes are losing ground to a new type of competitor, a large national network service that resembles a franchise system. More and more families "in their time of need" are choosing the new, highly promoted competitors instead of the traditional small family-operated funeral homes. This trend has required a response from organizations like Tishian's Funeral Home. Bigger and better facilities are needed to remain competitive. All of this puts more pressure on the family owners to be more active in the financial side of the business. Mort summed it up best when he said, "Grandpa told people, 'You pay me when you can, I ain't goin' nowheres.'" His creditors did the same with him. Today, it's a different game. Cash flow is key, and obtaining funds is no simple task. Additionally, creditors want their money now, not later. Banks are also more demanding. "Heck, Grandpa knew all the bankers he dealt with personally. I see new faces every time I go to the bank. If things don't get better, I suspect after eighty years of service, Tishian's Funeral Home will have its own funeral." -After much searching, Mort located an old banking friend of his father's. The banker offered Mort up to $25,000 in unsecured funds, which Mort's firm could borrow any time within a year, as long as the bank has the money available. Mort was offered a(n): A. revolving credit agreement. B) asset guarantee pledge. C) pledging agreement. D) line of credit.

Mini-Case Tishian's Funeral Home has been in business for over 80 years. Throughout its history, the firm has been a family-run operation. Today, the business is managed by Mort Tishian, a grandson of the founder. Unfortunately, Mort Tishian's tenure has been plagued with problems neither his father nor grandfather before him experienced. The reason is simple: the funeral business is undergoing rapid change. Small, family-owned funeral homes are losing ground to a new type of competitor, a large national network service that resembles a franchise system. More and more families "in their time of need" are choosing the new, highly promoted competitors instead of the traditional small family-operated funeral homes. This trend has required a response from organizations like Tishian's Funeral Home. Bigger and better facilities are needed to remain competitive. All of this puts more pressure on the family owners to be more active in the financial side of the business. Mort summed it up best when he said, "Grandpa told people, 'You pay me when you can, I ain't goin' nowheres.'" His creditors did the same with him. Today, it's a different game. Cash flow is key, and obtaining funds is no simple task. Additionally, creditors want their money now, not later. Banks are also more demanding. "Heck, Grandpa knew all the bankers he dealt with personally. I see new faces every time I go to the bank. If things don't get better, I suspect after eighty years of service, Tishian's Funeral Home will have its own funeral." -After seeing Mort's advertisement: "You Aren't Gettin' Any Younger! Start Planning for Heaven Today!" a(n) ___________ firm decided the aging population was a good investment. Although they typically look at start-ups with great promise, they approached Mort with $6 million dollars for his new idea of a major three-city expansion that included six new funeral homes, a crematory, and mausoleum. After researching the offer, Mort agreed to give up 50% ownership of the business in order to secure these funds. His last thoughts as he began to sign the papers were: "Now, I'll be able to compete with the big guys!" A. retained earnings B) indentured C) venture capital D) leveraged buyout