Financial Management

281. If there is one talent essential to the financial manager, it is:

  1. the ability to plan ahead and make necessary adjustments before actual events occur
  2. the ability to accurately determine the firm's earnings
  3. the ability to prepare the firm's financial statements
  4. the ability to effectively factor the firm's receivables
Correct answer: (A)
the ability to plan ahead and make necessary adjustments before actual events occur

282. In a cash budget, net cash flow for the month is defined as:

  1. revenues minus cost of goods sold
  2. monthly receipts minus monthly payments
  3. earning before taxes minus income taxes
  4. operating profit minus interest expense and income taxes
Correct answer: (B)
monthly receipts minus monthly payments

283. To determine production requirements, which of the following would be appropriate?

  1. Beginning inventory-ending inventory.
  2. Sales + beginning inventory-ending inventory.
  3. Sales - ending inventory
  4. Projected sales + desired ending inventory - beginning inventory.
Correct answer: (D)
Projected sales + desired ending inventory - beginning inventory.

284. Degree of operating leverage may be defined as:

  1. the extent to which the firm utilizes debt in its financing plan
  2. the percent change in operating income/percent change in unit volume
  3. the percent change in operating income/percent change in sales
  4. the percent change in net income/percent change in unit volume
Correct answer: (B)
the percent change in operating income/percent change in unit volume

285. The degree of financial leverage for the conservative firm:

  1. is higher than the DFL for the highly leveraged firm
  2. is the same as the DFL for the highly leveraged firm
  3. is lower than the DFL for the highly leveraged firm
  4. cannot be compared to the DFL for the highly leveraged firm
Correct answer: (C)
is lower than the DFL for the highly leveraged firm

286. Working capital management is mainly concerned with:

  1. the placement of the firm's debt and equity issues
  2. the financing and management of the firm's current assets
  3. inventory management
  4. management of the firm's capital assets
Correct answer: (B)
the financing and management of the firm's current assets

287. Level production methods tend to:

  1. use manpower and equipment efficiently at a lower cost
  2. be more difficult to manage than those matching sales and productions
  3. result in a more stable value for current assets
  4. eliminate seasonal bulges or reductions in current assets
Correct answer: (A)
use manpower and equipment efficiently at a lower cost

288. The belief that current assets should always be financed by current liabilities:

  1. is sound financial practice and should always be followed
  2. doesn't necessarily hold true
  3. is grounded in the belief that a permanent building of current assets occurs
  4. will often result in bankruptcy for the firm
Correct answer: (B)
doesn't necessarily hold true

289. Before establishing a collection center or lockbox system, the firm must:

  1. obtain regulatory approval
  2. establish that the benefits outweigh the substantial costs
  3. survey its customers to determine if they are agreeable
  4. set up an electronic funds transfer (EFT) system
Correct answer: (B)
establish that the benefits outweigh the substantial costs

290. The primary focus of the Bank of Canada's short-term money policy is now

  1. the overnight rate
  2. the treasury bill rate
  3. the prime rate
  4. the bank rate
Correct answer: (A)
the overnight rate
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