1. Finance is the function in a business that acquires funds for the firm and manages those
funds within the firm.
2. Managing a firm’s resources so that it can meet its goals and objectives is the goal of
financial accounting.
3. A financial manager makes recommendations to top executives regarding strategies for
improving the financial strength of a firm.
4. The duties and responsibilities of a financial manager are virtually identical to the duties
and responsibilities of an accountant.
5. Financial managers use data prepared by accountants to develop strategies for improving
the financial performance of the firm.
6. There is actually a stronger relationship between finance and marketing than there is
between finance and accounting.
7. Financial managers examine the data prepared by accountants and make
recommendations to top management regarding strategies for improving the financial
performance of the company.
8. Financial management is more important for a large firm than it is for a small firm.
9. The chief financial officer (CFO) is responsible for accounting and financial functions.
10. The chief financial officer of a company is responsible for managing cash, accounts
receivable, and inventory.
11. While finance is a critical activity for profit-seeking organizations, by definition nonprofit
organizations are not required to fulfill the finance function.
12. A comptroller is responsible for the acquiring and managing of funds for an organization.
13. Inability to attract and retain qualified employees is one of the most common ways for a
firm to fail financially.
14. Financial managers are responsible for controlling cash flows.
15. Undercapitalization refers to the problem of insufficient start-up funds.
16. Investors and entrepreneurs should have an understanding of financial issues.
17. Financial managers are responsible for budgeting, auditing, and advising top management
on financial matters.
18. One of the most common ways for a firm to fail financially is poor control over cash flow.
19. Inadequate control of expenses represents a common financial problem that contributes
to business failure.
20. A comptroller is the chief accounting officer of an organization.
21. Tax payments are important to the finance manager because they represent a cash
inflow to a firm.
22. An internal auditor is responsible for paying the company’s bills and collecting overdue
payments from customers.
23. Financial managers are responsible for buying merchandise on credit and collecting
payment from accounts receivable.
24. Accountants truly represent the financial managers of a business.
25. Inadequate expense control typically occurs as a result of undercapitalization.
26. The importance of financial managers to firms with large cash inflows is greater than for
firms with smaller cash flows.
27. Financial managers are responsible for the management of accounts receivable and
accounts payable.
28. Tax management by financial managers involves the development of strategies to evade
tax liabilities.
29. Generally accepted accounting principles require that any assessment of a firm’s
financial statements be performed by independent outside auditors.
30. To be effective, an internal auditor must be critical of any improprieties or deficiencies
found in the financial activities of the firm.
31. 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.
32. 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.
33. 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.
34. The overall objective of financial planning is to optimize the firm’s profitability and make
the best use of its money.
35. The first step in financial planning is to develop a budget to better control costs.
36. One step in the financial planning process is to establish financial control procedures that
allow managers to monitor the organization’s performance.
37. The timing of a short-term forecast is more important than the forecast’s accuracy.
38. A firm’s short-term financial forecast provides a projected sales estimate.
39. The primary focus of a cash flow forecast is the firm’s revenue and costs for the current
operating period.
40. A firm’s most recent financial statements often serve as the basis for predicting future
sales, costs and expenses.
41. The long-term financial forecast plays a crucial part in the company’s long-term strategic
plan.
42. The long-term financial forecast gives top management some sense of the profit potential
of various strategic decisions.
43. A budget reflects management’s expectations for revenues and allocates the use of
specific resources throughout the firm.
44. Budgets are prepared after the financial forecasts are developed.
45. To be effective, budgets are prepared independently of organizational forecasts.
46. A capital budget highlights the expected funds provided by owner investments.
47. An operating budget analyzes the firm’s spending plans for long-lasting assets that require
large sums of money.
48. A capital budget highlights a firm’s spending plans for major assets, such as property,
buildings, and equipment.
49. A capital budget combines all of the other budgets into one detailed plan for monitoring
the operations of the firm.
50. The operating (master) budget identifies the funds (and the allocation of those funds)
required to operate a business at a projected level of revenue.
51. A cash budget helps managers anticipate borrowing, debt repayment, operating expenses,
and short-term investment opportunities.
52. The main objective of financial control is to establish priorities for the purchase of plant
and equipment.
53. By identifying variances from the financial plan, managers are able to focus on those
departments that require corrective action.
54. Financial control is a process where firms compare actual revenues and costs with
budgeted revenues and costs.