BUS 101 CHAPTER 10-13 EXAM QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026
Financial Management - Answers corporate finance, internal finance or business finance
Financial Institutions - Answers employed by firms that specialize in financial products, such as
banking, insurance and leasing
Investments - Answers careers related to the securities markets and the investment activities of
individuals, firms and other organizations
Risk return trade-off - Answers Individuals prefer more certain financial earnings than less certain
outcomes; risker the decision, the higher possible return if all goes well
Time value of money - Answers investors demand a premium one exchange for waiting to get their
money later, and borrowers are willing to pay an additional amount to postpone making the payment
until later
Cash flow not profits - Answers timing of cash inflows and outflows may be such that the bills need to
be paid before the sales revenue has been collected from customers
Valuation of assets - Answers value of an asset in an organization is its ability to generate positive
cash flow over time
diversification - Answers rather than investing everything in one company or one industry, financial
professionals have shown that spreading your funds across a variety of investment opportunities can
earn higher returns in the long run because the risk is diversified
chief financial officer (CFO) - Answers senior position within the organizational structure that usually
reports directly to the chief executive officer (CEO)
3 steps of the planning process - Answers forecast, budget, control
forecasts - Answers generate a prediction of the upcoming financial needs of the firm
cash flow forecast - Answers prediction of the amount of money that is expected to be coming into
the company and the amount of money that the company expects to have to pay out
short-term cash flow forecasts - Answers based on expectations of net cash flows within the next 12
months
long-term cash flow forecasts - Answers based on expectations of net cash flows for one year or more
budgets - Answers roadmap to guide the activities of the firm
operating budgets - Answers focused on the expected revenue and expenses related to the firm's
predicted sales forecasts
capital budgets - Answers aid in decisions related to the purchase of long-term assets that usually
involve high-dollar expenditures
cash flow budgets - Answers show cash flow surpluses and shortfalls over shorter time periods such
as one to three months into the future based on the current planned operating and financing
activities of the firm
master budgets - Answers bring all the information from other budgets together and serve as a
master financial plan for the firm over a given planning horizon
controls - Answers compare how the firm is performing relative to the budget plan
accounts receivable - Answers monies that are owed to a firm
accounts payable - Answers monies that a firm needs to pay others
trade credit - Answers when a seller allows the purchaser to pay of the product at some point in the
near future yet take delivery of the product or service immediately
letters of credit - Answers guarantees that banks issue on behalf of the customer wherein if the buyer
doesn't pay on time, the bank will pay and then collect from the buyer
purchasing manager - Answers plans, directs and coordinates activities related to acquiring the
materials, products and services that are needed for a firm to operate
buyers and procurement officers - Answers work with potential suppliers to evaluate the prices of
various inputs to production relative to the value that alternatives provide
stockout - Answers not having a product a customer wants
inventory - Answers can be either an assortment of finished goods that a firm has available for
immediate delivery to customers, or it can also be a supply of units a firm uses to support its
operations
principle - Answers initial amount a firm borrows from a lender, and some amount of interest
interest - Answers an amount of money, usually a percentage of the principle amount borrowed, that
is paid to the lender as compensation for providing the funds
collateral - Answers lenders might require borrowing firms to pledge assets as this
, secured loans - Answers collateral may be seized and sold by the lender to pay off the debit if a
borrower does not repay this
unsecured loans - Answers no assets of the firm need to be pledged as collateral
factoring - Answers involves selling their accounts receivables to a specialized lender (at a discount)
that is then responsible for collecting on those accounts
commercial paper - Answers short-term, unsecured promissory notes that are issued in
demonizations one excess of $100,000
corporate bonds - Answers are a form of debit in which the borrowing firm agrees to pay the
purchaser of the bond a specified amount of money according to some specified schedule of payment
in the future
retained earnings - Answers one of the most common sources of equity financing use day firms
dividends - Answers disbursing earnings of stock
venture capital - Answers start- up firms may seek funds from wealthy investors one exchange for
some percentage of ownership in the company
overall guiding principle of a financial manager - Answers CFO makes decisions regarding the
allocation and use of the firm's financial assets and is involved in most of the firm's strategic decisions;
make decisions that regenerate the maximum profitability for the firm
Debt - Answers Repayment: principle and interest payable upon some agreed schedule
Ownership and Control: no ownership given up but perhaps some restrictions as a condition of
borrowing
Tax treatment: interest is tax deductible
Equity - Answers Repayment: Investment is not required to be repaid by firm; firm may choose to pay
dividends
Ownership and Control: Investors have an ownership stake in the company and have voting rights
Tax Treatment: Dividends are not tax deductible
shareholder wealth maximization (SWM) - Answers It is a superior goal compared to profit
maximization as it takes broader arena into consideration
function of marketing - Answers to satisfy customers by providing the goods and services they want
at the time in the place where they want them
consumers - Answers customers purchasing products for their own personal use or their families' use
business buyers - Answers customers purchasing products for an organization
5 step process customers make buying decisions - Answers 1. problem recognition
2. information search
3. evaluation of alternatives
4. purchase decision
5. post-purchase evaluation
cognitive dissonance - Answers a feeling of uncertainty about whether or not they made the right
choice
extended problem solving - Answers the purchase decision carries a high level of risk and is one that
the consumer is willing to invest both time and effort
routine response behavior - Answers consumer frequently purchase products without giving much
thought to an either product or the purchase situation
limited problem solving - Answers consumers are familiar with the product, but prefer to compare
brands and stores before making a purchase
business to business (B2B) - Answers translation occurs when a business sells products to another
business
business to consumer (B2C) - Answers business sells to consumers
4 types of business buyers - Answers 1. producers
2. resellers
3. government
4. insitutions
producers - Answers businesses that manufacture goods or provide services
resellers (B2B) - Answers add value to the products by providing transportation, storage, financing
and a variety of other value-added activities, and in turn add a mark-up percentage, which increases
the selling price of products and provides margin (profits) for the resellers
outsourcing - Answers purchasing of business services by instiutions or any other business buyer
3 types of business buying decisions - Answers 1. new task buy, modified rebuy, and straight rebuy
Financial Management - Answers corporate finance, internal finance or business finance
Financial Institutions - Answers employed by firms that specialize in financial products, such as
banking, insurance and leasing
Investments - Answers careers related to the securities markets and the investment activities of
individuals, firms and other organizations
Risk return trade-off - Answers Individuals prefer more certain financial earnings than less certain
outcomes; risker the decision, the higher possible return if all goes well
Time value of money - Answers investors demand a premium one exchange for waiting to get their
money later, and borrowers are willing to pay an additional amount to postpone making the payment
until later
Cash flow not profits - Answers timing of cash inflows and outflows may be such that the bills need to
be paid before the sales revenue has been collected from customers
Valuation of assets - Answers value of an asset in an organization is its ability to generate positive
cash flow over time
diversification - Answers rather than investing everything in one company or one industry, financial
professionals have shown that spreading your funds across a variety of investment opportunities can
earn higher returns in the long run because the risk is diversified
chief financial officer (CFO) - Answers senior position within the organizational structure that usually
reports directly to the chief executive officer (CEO)
3 steps of the planning process - Answers forecast, budget, control
forecasts - Answers generate a prediction of the upcoming financial needs of the firm
cash flow forecast - Answers prediction of the amount of money that is expected to be coming into
the company and the amount of money that the company expects to have to pay out
short-term cash flow forecasts - Answers based on expectations of net cash flows within the next 12
months
long-term cash flow forecasts - Answers based on expectations of net cash flows for one year or more
budgets - Answers roadmap to guide the activities of the firm
operating budgets - Answers focused on the expected revenue and expenses related to the firm's
predicted sales forecasts
capital budgets - Answers aid in decisions related to the purchase of long-term assets that usually
involve high-dollar expenditures
cash flow budgets - Answers show cash flow surpluses and shortfalls over shorter time periods such
as one to three months into the future based on the current planned operating and financing
activities of the firm
master budgets - Answers bring all the information from other budgets together and serve as a
master financial plan for the firm over a given planning horizon
controls - Answers compare how the firm is performing relative to the budget plan
accounts receivable - Answers monies that are owed to a firm
accounts payable - Answers monies that a firm needs to pay others
trade credit - Answers when a seller allows the purchaser to pay of the product at some point in the
near future yet take delivery of the product or service immediately
letters of credit - Answers guarantees that banks issue on behalf of the customer wherein if the buyer
doesn't pay on time, the bank will pay and then collect from the buyer
purchasing manager - Answers plans, directs and coordinates activities related to acquiring the
materials, products and services that are needed for a firm to operate
buyers and procurement officers - Answers work with potential suppliers to evaluate the prices of
various inputs to production relative to the value that alternatives provide
stockout - Answers not having a product a customer wants
inventory - Answers can be either an assortment of finished goods that a firm has available for
immediate delivery to customers, or it can also be a supply of units a firm uses to support its
operations
principle - Answers initial amount a firm borrows from a lender, and some amount of interest
interest - Answers an amount of money, usually a percentage of the principle amount borrowed, that
is paid to the lender as compensation for providing the funds
collateral - Answers lenders might require borrowing firms to pledge assets as this
, secured loans - Answers collateral may be seized and sold by the lender to pay off the debit if a
borrower does not repay this
unsecured loans - Answers no assets of the firm need to be pledged as collateral
factoring - Answers involves selling their accounts receivables to a specialized lender (at a discount)
that is then responsible for collecting on those accounts
commercial paper - Answers short-term, unsecured promissory notes that are issued in
demonizations one excess of $100,000
corporate bonds - Answers are a form of debit in which the borrowing firm agrees to pay the
purchaser of the bond a specified amount of money according to some specified schedule of payment
in the future
retained earnings - Answers one of the most common sources of equity financing use day firms
dividends - Answers disbursing earnings of stock
venture capital - Answers start- up firms may seek funds from wealthy investors one exchange for
some percentage of ownership in the company
overall guiding principle of a financial manager - Answers CFO makes decisions regarding the
allocation and use of the firm's financial assets and is involved in most of the firm's strategic decisions;
make decisions that regenerate the maximum profitability for the firm
Debt - Answers Repayment: principle and interest payable upon some agreed schedule
Ownership and Control: no ownership given up but perhaps some restrictions as a condition of
borrowing
Tax treatment: interest is tax deductible
Equity - Answers Repayment: Investment is not required to be repaid by firm; firm may choose to pay
dividends
Ownership and Control: Investors have an ownership stake in the company and have voting rights
Tax Treatment: Dividends are not tax deductible
shareholder wealth maximization (SWM) - Answers It is a superior goal compared to profit
maximization as it takes broader arena into consideration
function of marketing - Answers to satisfy customers by providing the goods and services they want
at the time in the place where they want them
consumers - Answers customers purchasing products for their own personal use or their families' use
business buyers - Answers customers purchasing products for an organization
5 step process customers make buying decisions - Answers 1. problem recognition
2. information search
3. evaluation of alternatives
4. purchase decision
5. post-purchase evaluation
cognitive dissonance - Answers a feeling of uncertainty about whether or not they made the right
choice
extended problem solving - Answers the purchase decision carries a high level of risk and is one that
the consumer is willing to invest both time and effort
routine response behavior - Answers consumer frequently purchase products without giving much
thought to an either product or the purchase situation
limited problem solving - Answers consumers are familiar with the product, but prefer to compare
brands and stores before making a purchase
business to business (B2B) - Answers translation occurs when a business sells products to another
business
business to consumer (B2C) - Answers business sells to consumers
4 types of business buyers - Answers 1. producers
2. resellers
3. government
4. insitutions
producers - Answers businesses that manufacture goods or provide services
resellers (B2B) - Answers add value to the products by providing transportation, storage, financing
and a variety of other value-added activities, and in turn add a mark-up percentage, which increases
the selling price of products and provides margin (profits) for the resellers
outsourcing - Answers purchasing of business services by instiutions or any other business buyer
3 types of business buying decisions - Answers 1. new task buy, modified rebuy, and straight rebuy
