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Exam 18: Financial Management

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Question 31

True/False

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

A) True
B) False

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Question 32

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

A) True
B) False

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Question 33

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

A ________ forecast predicts the revenues, costs, and expenses a firm will incur for a period longer than one year.

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

Businesses match their long-term capital needs to

Which of the following companies is undercapitalized?

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!"

Which of the following would be most helpful for a company looking to know the income potential during the next five years?

Many small businesses rely on factoring as a source of short-term financing because

A comptroller is the chief accounting officer of an organization.

A major concern for firms selling on credit is

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

A loan backed by collateral represents a(n)

After earning $50 million in net income, Marshall Manufacturing distributed $15 million in dividends to their stockholders. Marshall's board of directors decided to invest the remaining $35 million back into the business. This $35 million reinvestment of profits represents

________ 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.

Funds obtained from venture capitalists are considered equity financing.

Typically, only highly regarded customers with financial stability receive

Rock Solid Concrete Company 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