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Exam 18: Financial Management

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Question 1

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How many times can a corporation's stock be sold in the primary market?

A) Once
B) Twice
C) A maximum of three times
D) Once per year
E) Unlimited

F) D) and E)
G) C) and D)

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Question 2

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Tidewater Distributors is successfully using short-term financing to buy inventory for resale.As sales climb, the managers realise that they must decide what to do with the money.Since you are the financial manager, they ask for your advice.You advise them to first

A) repay the short-term obligations out of the sales revenue.
B) use the money to buy a yacht for the managers.
C) increase all employees' wages.
D) enroll all the salespeople in a sales training course.
E) borrow more money.

F) A) and E)
G) All of the above

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Question 3

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Trustee bonds refer to corporate bonds that are secured by various assets of the issuing firm.

Morgan's Transition Morgan is currently a manager of a small financial planning firm.He is seeking a new career with a large corporation in the banking industry.He recently applied for the financial manager opening at G & T Bank.He is concerned that the transition from his small firm to a large corporation will be difficult.To better prepare himself for this change, he has decided to enroll in a few business classes to strengthen his understanding of corporate finance.The business classes have proven to be a valuable tool for learning the critical skills needed to fully understand a financial plan, equity financing, and debt financing.Morgan now believes he has strengthened his competitive advantage in his quest for the job. -Refer to Morgan's Transition.When Morgan has to counsel clients on short-term versus long-term financing needs, which of the following should he identify as a short-term financing need?

Commercial paper usually is issued

Which of the following firms is most likely to receive venture capital?

During 2011, Bedford Technology sold ordinary share for the first time to whoever wanted to buy it.This was the ____ for Bedford.

Commercial paper short-term financing is usually available only to large firms.

The most basic form of ownership in a corporation is

To raise capital, Financial Fusion sold

Florida-based Swim and Fin Products often experiences a time lag between the time goods are produced and the time that retailers pay for the finished products.In this situation, Swim and Fin's financial problems are the result of speculative production.

One of the concerns that large corporations have when they use equity financing is the need to repay the principal plus the interest at a future date.

A firm with questionable credit should expect to pay the prime interest rate minus 2 percent.

Downing, Inc., issues bonds to purchase new machinery for its factories.These bonds are secured by the machinery purchased with the proceeds of the bond issue.These are ____ bonds.

All of the activities concerned with obtaining money and using it effectively are called

A factor will buy accounts receivable for

Suppose IBM decided to issue commercial paper in denominations of €5,000 to raise a large sum of money.Since the commercial paper is secured only by IBM's reputation,

A tool that managers use to estimate major expenditures for assets, expansion of facilities, and mergers and acquisitions is called a(n)

Sally Overall is thinking about two different decisions.One decision is quite risky, while the other decision is more conservative.To help her make the right decision, she decides to calculate the

Debt capital is borrowed money that does not have to be repaid.