Question 1

The legal document detailing all the conditions relating to a bond issue is called a bond indenture.

Accepted Answer

A) True 
 B)False

Question 2

With regard to the ongoing expense of long-term corporate financing, which of the following would be the most expensive?

Accepted Answer

A)   long-term loans
B)   corporate bonds
C)   debenture bonds
D)   common stock
E)   trade creditF) B) and D)
G) All of the above

Question 3

A feature of corporate bonds is that they

Accepted Answer

A)   pay interest until maturity.
B)   carry voting rights.
C)   represent ownership in a firm.
D)   pay dividends.
E)   have residual claims to assets after common stock.F) All of the above
G) A) and C)

Question 4

The terms 2/10, net/30 are used with most promissory notes.

Accepted Answer

A) True 
 B)False

Question 5

Burberry Mills sold stock to an insurance company to raise needed financing for expansion and new product development.This type of transaction is referred to as a(n)  _____.

Accepted Answer

A)   equity deal
B)   private placement
C)   ownership transfer
D)   debt placement
E)   small business assistance packageF) A) and B)
G) B) and E)

Question 6

A factor will buy accounts receivable for

Accepted Answer

A)   more than their face value.
B)   less than their face value.
C)   their present value.
D)   their par value.
E)   the interest that can be collected from them.F) C) and D)
G) A) and C)

Question 7

The amounts owed to a firm by its customers are called _____.

Accepted Answer

A)   factors
B)   revolving credit agreements
C)   dividends
D)   accounts receivable
E)   commercial draftsF) A) and B)
G) B) and E)

Question 8

Debbie purchases a corporate bond from Safeway.She has the option of redeeming her bond for 55 shares of Safeway common stock at any time.This is a ____ bond.

Accepted Answer

A)   callable
B)   subordinated
C)   debenture
D)   mortgage
E)   convertibleF) A) and B)
G) B) and E)

Question 9

When a seller allows a buyer thirty to sixty days to pay for a purchase, the sales arrangement is called _____.

Accepted Answer

A)   a bank loan
B)   trade credit
C)   a promissory note
D)   equity financing
E)   None of the above is correct.F) A) and B)
G) C) and D)

Question 10

A corporation selling stock to the general public generally uses an investment banking firm.

Accepted Answer

A) True 
 B)False

Question 11

As a stockholder in the Giant Plants Company, you have the right to vote on all except which of the following issues?

Accepted Answer

A)   amendments to the corporate charter
B)   the price the firm charges for its products
C)   the sale of certain assets
D)   new issues of preferred stock or bonds
E)   changes in the amount of common stock issuedF) A) and D)
G) All of the above

Question 12

To raise money, Fawcett Productions sold its accounts receivable to a ____.In doing so, Fawcett received cash and shifted to the other company both the task of collecting and the risk of nonpayment.

Accepted Answer

A)   credit-reporting agency
B)   stockbroker
C)   factor
D)   real estate agent
E)   credit unionF) B) and D)
G) D) and E)

Question 13

Short-term financing is used to finance a merger or expansion.

Accepted Answer

A) True 
 B)False

Question 14

Reagan purchases a corporate bond from Mattel.On the bond it states that Reagan will receive her money back on February 15, 2022.This is the bond's ____ date.

Accepted Answer

A)   declaration
B)   maturity
C)   conversion
D)   redemption
E)   expirationF) A) and B)
G) A) and E)

Question 15

The managers at Bally Manufacturing decided to borrow money to finance a new production facility.The loan agreement they signed required that they pay 10 percent interest on the loan.Based on this information, which of the following statements is true?

Accepted Answer

A)   Bally doesn't have to pay the 10 percent if the firm isn't profitable.
B)   Bally can pay the 10 percent whenever its managers vote to pay it.
C)   The company will make more money if the firm earns less than a 10 percent return on its investment in the new plant.
D)   Bally is using financial leverage to increase profits as long as the firm earns more than the 10 percent it pays to borrow the money required to finance the new plant.
E)   Even if the new plant is extremely profitable, Bally should have found another way to finance the new plant.F) A) and E)
G) A) and B)

Question 16

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.

Accepted Answer

A)   debenture
B)   mortgage
C)   convertible
D)   indenture
E)   sinking fundF) A) and B)
G) A) and E)

Question 17

The typical amount charged by an investment banking firm for helping a corporation sell stock is

Accepted Answer

A)   under 1 percent.
B)   between 2 and 3 percent.
C)   between 4 and 10 percent.
D)   between 2 and 20 percent.
E)   always 15 percent or more.F) C) and D)
G) A) and C)

Question 18

Maria has been asked by the top management to develop financial ____ that the company will achieve over the next one- to ten-year period.

Accepted Answer

A)   strategies
B)   directives
C)   plans
D)   objectives
E)   goalsF) B) and C)
G) A) and D)

Question 19

The interest rate and repayment terms for term loans often are based on such factors as the reasons for borrowing, the borrowing firm's credit rating, and the value of collateral.

Accepted Answer

A) True 
 B)False

Question 20

____ is (are)  the earnings of a corporation that are distributed to the stockholders.

Accepted Answer

A)   Interest
B)   Dividends
C)   Retained earnings
D)   Discounts
E)   PremiumsF) A) and B)
G) A) and C)

Exam 16: Mastering Financial Management

Reagan purchases a corporate bond from Mattel.On the bond it states that Reagan will receive her money back on February 15, 2022.This is the bond's ____ date.

Correct AnswerverifiedShow Answer

With regard to the ongoing expense of long-term corporate financing, which of the following would be the most expensive?

Correct AnswerverifiedShow Answer

The amounts owed to a firm by its customers are called _____.

Correct AnswerverifiedShow Answer

As a stockholder in the Giant Plants Company, you have the right to vote on all except which of the following issues?

Correct AnswerverifiedShow Answer

The typical amount charged by an investment banking firm for helping a corporation sell stock is

Correct AnswerverifiedShow Answer

Burberry Mills sold stock to an insurance company to raise needed financing for expansion and new product development.This type of transaction is referred to as a(n) _____.

Correct AnswerverifiedShow Answer

A corporation selling stock to the general public generally uses an investment banking firm.

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

____ is (are) the earnings of a corporation that are distributed to the stockholders.

Correct AnswerverifiedShow Answer

A feature of corporate bonds is that they

Correct AnswerverifiedShow Answer

The managers at Bally Manufacturing decided to borrow money to finance a new production facility.The loan agreement they signed required that they pay 10 percent interest on the loan.Based on this information, which of the following statements is true?

Correct AnswerverifiedShow Answer

The interest rate and repayment terms for term loans often are based on such factors as the reasons for borrowing, the borrowing firm's credit rating, and the value of collateral.

Correct AnswerverifiedShow Answer

A factor will buy accounts receivable for

Correct AnswerverifiedShow Answer

Debbie purchases a corporate bond from Safeway.She has the option of redeeming her bond for 55 shares of Safeway common stock at any time.This is a ____ bond.

Correct AnswerverifiedShow Answer

To raise money, Fawcett Productions sold its accounts receivable to a ____.In doing so, Fawcett received cash and shifted to the other company both the task of collecting and the risk of nonpayment.

Correct AnswerverifiedShow Answer

The terms 2/10, net/30 are used with most promissory notes.

Correct AnswerverifiedShow Answer

When a seller allows a buyer thirty to sixty days to pay for a purchase, the sales arrangement is called _____.

Correct AnswerverifiedShow Answer

The legal document detailing all the conditions relating to a bond issue is called a bond indenture.

Correct AnswerverifiedShow Answer

Maria has been asked by the top management to develop financial ____ that the company will achieve over the next one- to ten-year period.

Correct AnswerverifiedShow Answer

Short-term financing is used to finance a merger or expansion.

Correct AnswerverifiedShow Answer

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