Financial Management
281. If there is one talent essential to the financial manager, it is:
- the ability to plan ahead and make necessary adjustments before actual events occur
- the ability to accurately determine the firm's earnings
- the ability to prepare the firm's financial statements
- 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:
- revenues minus cost of goods sold
- monthly receipts minus monthly payments
- earning before taxes minus income taxes
- 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?
- Beginning inventory-ending inventory.
- Sales + beginning inventory-ending inventory.
- Sales - ending inventory
- 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:
- the extent to which the firm utilizes debt in its financing plan
- the percent change in operating income/percent change in unit volume
- the percent change in operating income/percent change in sales
- 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:
- is higher than the DFL for the highly leveraged firm
- is the same as the DFL for the highly leveraged firm
- is lower than the DFL for the highly leveraged firm
- 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:
- the placement of the firm's debt and equity issues
- the financing and management of the firm's current assets
- inventory management
- 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:
- use manpower and equipment efficiently at a lower cost
- be more difficult to manage than those matching sales and productions
- result in a more stable value for current assets
- 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:
- is sound financial practice and should always be followed
- doesn't necessarily hold true
- is grounded in the belief that a permanent building of current assets occurs
- 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:
- obtain regulatory approval
- establish that the benefits outweigh the substantial costs
- survey its customers to determine if they are agreeable
- 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
- the overnight rate
- the treasury bill rate
- the prime rate
- the bank rate
Correct answer: (A)
the overnight rate