Financial Management Multiple Choice Questions and Answers, Exams of Advanced Education

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UNIT 4 STUDY GUIDE 2024

Colin was a manager for EST Corporation, and the company wanted to expand into a new region. Colin analyzed data to determine how much money the company could make from the expansion within two years. Which responsibility of financial management below did Colin demonstrate? Evaluated immediate cash flow issues from different departments Evaluated short term financing options for the expansion Prepared the income statement for external users to review Evaluated trends in the market the company would enter - Evaluated trends in the market the company would enter Which of the following is the basis for financial management? Develop accounting documentation for a business Fund potential investment opportunities for a business Determine the current and future needs of a business Minimize risks taken by a business - Determine the current and future needs of a business A financial institution and a business establish an arrangement that defines a maximum loan balance the institution allows the business to maintain. What banking service is this an example of? Letter of credit Line of credit Revolving credit Certificate of deposit - Line of credit Which of the following does a high debt to owner's equity ratio signal? The company is able to pay off current debts. The company assumes too much risk. The company relies too much on debt. The company is not credit worthy. - The company relies too much on debt. Which of the following happens when the supply of money is high? The value of money goes down. Banks are less willing to lend money. Investors are less willing to purchase stocks. The economy is considered to be unhealthy. - The value of money goes down.

Which of the following best describes the Federal Reserve? It provides loans to different organizations. It takes deposits from consumers. It backs insurance policies that protect businesses. It serves as a bank for the government. - It serves as a bank for the government. Green Opt Inc. needed long term funding for a major expansion into the European market. The company was financially strong with an excellent credit rating and had no need to provide collateral to obtain funding. It also had time to develop the best funding option to meet its expansion needs. Which type of financing option below will Green Opt Inc. likely use? Mortgage bond Debenture bond Trade credit Long term loan - Debenture bond Which of the following best illustrates risk retention? A company installs fire detection devices in all of its office buildings. A company makes a contractual agreement with another company to share the liability on a new project. A company creates a reserve fund to handle possible financial problems that could occur. A company decides not to participate in a venture that has high risks. - A company creates a reserve fund to handle possible financial problems that could occur. Speculative risks and pure risks have which of the following in common? Both can result in a gain to a business. Both can be managed using risk avoidance. Both can be managed using risk transfer. Both can result in a loss for a business. - Both can result in a loss for a business. Jenna and the partners in her firm met with an entrepreneur who owned a company that needed funding. Jenna led her team in closely evaluating the company's financial documents to determine if the project would be too risky to invest in. Jenna's group was interested in helping a company grow rather than just getting it started. Which of the types of investor below is described in this scenario? Lending institution Venture capitalist Angel investor Personal investor - Venture capitalist

Which of the following is an example of a liability listed on a balance sheet? Debt to be paid within the next year Depreciation amount for a piece of equipment Long term value of land owned by the company Monetary value of the company's brand - Debt to be paid within the next year Which of the types of financial institution below is set up by a local government and allows borrowers and depositors to be members? Mutual savings bank Commercial bank Savings and loan association Credit union - Mutual savings bank Which of the following scenarios illustrates a capital gain? Warren was paid $.25 a share in cash at the end of the first quarter from the earnings the company posted. Warren bought 100 shares of stock for $10 per share. He sold the stock three months later for $12 per share. Warren was paid an extra 15 shares in the company stock at the end of the second quarter based on the earnings the company posted. Warren bought 100 shares of stock for $10 per share. He sold the stock three months later for $8 per share. - Warren bought 100 shares of stock for $10 per share. He sold the stock three months later for $12 per share. Financial accounting is different from managerial accounting in which of the following ways? Financial accounting provides financial information to people outside of an organization. Financial accounting sets the performance goals for every division within a business. Financial accounting involves creating financial documents for people to use within an organization. Financial accounting is used by an organization to make financial plans for the future. - Financial accounting provides financial information to people outside of an organization. Which of the following is true about retained earnings? Higher retained earnings means investors receive lower dividends. Higher retained earnings means investors receive higher dividends. Lower retained earnings makes a company more attractive to investors. Lower retained earnings cause a decrease in the stock price. - Higher retained earnings means investors receive lower dividends. Which of the following is true regarding reserve requirements?

Higher reserve requirements mean banks have less money to lend. Lower reserve requirements mean banks must hold more money in cash or deposit. Lower reserve requirements mean consumers have more difficulty borrowing money. Higher reserve requirements mean banks have more money to lend. - Higher reserve requirements mean banks have less money to lend. Which of the types of short term loans below requires the borrower to pay a specific amount of money to the lender on a specific date? Debenture bond Trade credit Mortgage bond Promissory note - Promissory note Which of the following correctly describes short term financing? Is more risky for the amount of money Is harder to get than long term financing Is less risky for the amount of time Is repaid within a year and a half - Is less risky for the amount of time Which of the types of companies below is more likely to use secured short term financing? A company with an excellent credit history A company with a poor credit rating A company that provides services rather than products A company that has little collateral to provide to obtain a loan - A company with a poor credit rating Which of the following is true, regarding the risk return relationship? An aggressive investment is less likely to involve a lot of risk. An aggressive investment is likely to have the highest return. A conservative investment is more likely to have the highest return. A conservative investment is the riskiest type of investment. - An aggressive investment is likely to have the highest return.