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Exam 18: Financial Management

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Question 71

Multiple Choice

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If money is reserved each year to guarantee that a bond will be paid off at maturity, the money will be held in a ____ fund.

A) capitalisation
B) Sinking
C) compounding
D) retirement
E) redemption

F) All of the above
G) B) and D)

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Question 72

Multiple Choice

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Which of the following might be considered the most drastic step in securing funding, often a last resort for a corporation?

A) Using sales revenue
B) Equity capital funding
C) Short-term borrowing from a bank
D) Debt capital funding
E) Sale of assets

F) B) and C)
G) A) and B)

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Question 73

Multiple Choice

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Although Hargrove Co.makes enough money to pay for everything it needs, it still chooses to have some debt and pay a larger portion of retained earnings back to the stockholders.What is likely the best explanation for this decision?

Poor financial management is one of the major reasons why firms file for bankruptcy.

Corporate profits reinvested in the business are called retained earnings.

To be successful while pursuing a career in finance, an employee must

Dillon Wholesale Foods allows retailers to purchase merchandise using trade credit.For Dillon, this type of transaction

The primary sources of funds available to a business include all of the following except

In the ____, Kia Corporation describes the basics of the bond issue, who the trustee is, when the bonds mature, and how the bonds will be paid off.

The denominations for corporate bonds range from €1,000 to €50,000.

Each of the following causes a cash flow problem except

The representative for bond owners is called a(n)

Kirsten purchased a new dining room table and china cabinet from Discount Furniture, which offered a one-year special with no interest or financing charges.When Kirsten makes her purchase, Discount Furniture checks her credit and seeks approval for her.Upon approval, Kirsten is informed her that she will make payments to Regional Finance Company.This arrangement is an example of

McGines, Inc. Sam McGines, CEO of McGines, Inc., decided that upon his retirement, he would elect his son Derrick to become the new CEO.Sam thought it would be a good idea to have Derrick shadow him at work to understand the roles and responsibilities of a CEO.Derrick shadowed his father for months in order to learn every aspect of the business.Sam knew that the best way for Derrick to learn was to actually perform some of the tasks he did on a daily basis, rather than simply describe them.The company generally focused on short-term financing, and Sam felt that it was important for Derrick to understand the different types of financing.Derrick learned about the type of bonds that the company usually offered to raise capital.These bonds allow the purchasers of the bond to keep them until maturity.Derrick also learned the process of obtaining bonds and the various types of long-term financing methods.Job shadowing was indeed a worthwhile experience for Derrick. -Refer to McGines, Inc.If a client asks, Derrick should be able to identify that ____ is the type of stock the owner may exchange for a specified number of shares of ordinary share.

The distribution of a corporation's earnings to the stockholders is called paying a dividend.

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

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.Morgan's business classes taught him that the financial manager should do which of the following?

Inventories and accounts receivable are the assets most commonly used as collateral for short-term financing.

When compared with selling stocks to the public, a private placement has

Money that will be used for one year or less is called