Question 1

While common stockholders have the right to receive dividends, holders of preferred stock elect the board of directors and approve or disapprove major corporate actions.

Accepted Answer

A) True 
 B)False

Question 2

Inventory requires considerable investment for most manufacturers, wholesalers, and retailers.This problem is complicated by the fact that most goods are manufactured four to nine months before they are actually sold to consumers.Manufacturers that engage in this type of speculative production often need short-term financing to do all except which of the following?

Accepted Answer

A)   buy materials
B)   pay wages
C)   pay rent
D)   buy equipment
E)   buy suppliesF) B) and D)
G) All of the above

Question 3

According to the risk-return ratio, conservative decisions actually result in more risk when compared to decisions that are often considered high-risk decisions.

Accepted Answer

A) True 
 B)False

Question 4

Bonds from a single issue that have staggered maturity dates are called serial bonds.

Accepted Answer

A) True 
 B)False

Question 5

Tidewater Distributors is successfully using short-term financing to buy inventory for resale.As sales climb, the managers realize 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

Accepted Answer

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 D)
G) A) and E)

Question 6

Baxter Equipment earned $300,000 last year.Its owners' equity totaled $2,500,000.Based on these amounts, what is the firm's return on owners' equity?

Accepted Answer

A)   1.2 percent
B)   8.33 percent
C)   12 percent
D)   122 percent
E)   It is impossible to calculate the return on owners' equity with this information.F) C) and E)
G) A) and E)

Question 7

Retained earnings are

Accepted Answer

A)   all the earnings of the corporation.
B)   profits before taxes.
C)   profits after taxes.
D)   undistributed profits.
E)   total owners' equity.F) A) and E)
G) B) and E)

Question 8

A term-loan agreement is a promissory note that requires a borrower to repay a loan in monthly, quarterly, semiannual, or annual installments.

Accepted Answer

A) True 
 B)False

Question 9

All of the following except which are uses of long-term financing?

Accepted Answer

A)   beginning a new business
B)   eliminating immediate cash-flow problems
C)   executing mergers and expansions
D)   developing and marketing new products
E)   replacing obsolete equipmentF) B) and D)
G) B) and E)

Question 10

What is the typical face value for most corporate bonds?

Accepted Answer

A)   $100
B)   $10,000
C)   $500
D)   $1,000
E)   ten times the par value of its stockF) A) and B)
G) A) and C)

Question 11

Over the years, Zebra Productions has been slow making payments to its bank.Now it is in need of financing.Based on past experience, the interest rate Zebra will pay is the

Accepted Answer

A)   interest rate determined by the SBA.
B)   finance rate determined by the Department of Commerce.
C)   prime rate.
D)   prime rate plus 4 percent.
E)   prime rate minus 2 percentage points.F) B) and C)
G) None of the above

Question 12

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

Accepted Answer

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

Question 13

Money obtained through various types of loans is called _____.

Accepted Answer

A)   cash flow
B)   factor proceeds
C)   dividends
D)   equity capital
E)   debt capitalF) A) and B)
G) B) and E)

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A)   Virtual reality Internet company
B)   laundromat
C)   local fast-food restaurant
D)   book retailer
E)   convenience storeF) B) and E)
G) B) and D)

Question 16

A factor is a financial firm that specializes in buying other firms' accounts receivables.

Accepted Answer

A) True 
 B)False

Question 17

Retained earnings are

Accepted Answer

A)   the same as net profit.
B)   interest earned on bond investments.
C)   nontaxable income.
D)   a form of equity financing.
E)   the portion of the profit paid to stockholders.F) B) and D)
G) C) and D)

Question 18

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

Accepted Answer

A)   graduate from a four-year university.
B)   have a strong background in accounting or mathematics.
C)   have fifteen years of experience.
D)   be driven by a motive to become very rich.
E)   start a career as a bank officer.F) B) and D)
G) A) and D)

Question 19

A term-loan agreement requires a borrower to repay the loan

Accepted Answer

A)   in monthly, quarterly, semiannual, or annual installments.
B)   at the end of the second year.
C)   at the end of the third year.
D)   at the end of the fourth year.
E)   at the end of the fifth to seventh year.F) C) and D)
G) A) and E)

Question 20

For a corporation such as AT&T, what are the two primary advantages of equity financing?

Accepted Answer

A)   It never has to be paid back and flotation costs are low.
B)   There is no obligation to pay dividends or to repay the money obtained from the sale of stock.
C)   Interest payments are less than debt financing and principal does not have to be repaid.
D)   Ownership is spread among many individuals and no interest payments are required.
E)   Investors pay top dollar for stock issues and the corporation has higher ongoing expenses.F) C) and D)
G) C) and E)

Exam 16: Mastering Financial Management

Bonds from a single issue that have staggered maturity dates are called serial bonds.

Correct Answer
verified

Baxter Equipment earned $300,000 last year.Its owners' equity totaled $2,500,000.Based on these amounts, what is the firm's return on owners' equity?

Correct Answer
verified

Correct Answer
verified

A term-loan agreement requires a borrower to repay the loan

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

While common stockholders have the right to receive dividends, holders of preferred stock elect the board of directors and approve or disapprove major corporate actions.

Correct Answer
verified

Money obtained through various types of loans is called _____.

Correct Answer
verified

Over the years, Zebra Productions has been slow making payments to its bank.Now it is in need of financing.Based on past experience, the interest rate Zebra will pay is the

Correct Answer
verified

For a corporation such as AT&T, what are the two primary advantages of equity financing?

Correct Answer
verified

Retained earnings are

Correct Answer
verified

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

Correct Answer
verified

A term-loan agreement is a promissory note that requires a borrower to repay a loan in monthly, quarterly, semiannual, or annual installments.

Correct Answer
verified

What is the typical face value for most corporate bonds?

Correct Answer
verified

Tidewater Distributors is successfully using short-term financing to buy inventory for resale.As sales climb, the managers realize 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

Correct Answer
verified

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

Correct Answer
verified

A factor is a financial firm that specializes in buying other firms' accounts receivables.

Correct Answer
verified

Retained earnings are

Correct Answer
verified

All of the following except which are uses of long-term financing?

Correct Answer
verified

According to the risk-return ratio, conservative decisions actually result in more risk when compared to decisions that are often considered high-risk decisions.

Correct Answer
verified

Exam 16: Mastering Financial Management

Bonds from a single issue that have staggered maturity dates are called serial bonds.

Correct AnswerverifiedShow Answer

Baxter Equipment earned $300,000 last year.Its owners' equity totaled $2,500,000.Based on these amounts, what is the firm's return on owners' equity?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A term-loan agreement requires a borrower to repay the loan

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

While common stockholders have the right to receive dividends, holders of preferred stock elect the board of directors and approve or disapprove major corporate actions.

Correct AnswerverifiedShow Answer

Money obtained through various types of loans is called _____.

Correct AnswerverifiedShow Answer

Over the years, Zebra Productions has been slow making payments to its bank.Now it is in need of financing.Based on past experience, the interest rate Zebra will pay is the

Correct AnswerverifiedShow Answer

For a corporation such as AT&T, what are the two primary advantages of equity financing?

Correct AnswerverifiedShow Answer

Retained earnings are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A term-loan agreement is a promissory note that requires a borrower to repay a loan in monthly, quarterly, semiannual, or annual installments.

Correct AnswerverifiedShow Answer

What is the typical face value for most corporate bonds?

Correct AnswerverifiedShow Answer

Tidewater Distributors is successfully using short-term financing to buy inventory for resale.As sales climb, the managers realize 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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A factor is a financial firm that specializes in buying other firms' accounts receivables.

Correct AnswerverifiedShow Answer

Retained earnings are

Correct AnswerverifiedShow Answer

All of the following except which are uses of long-term financing?

Correct AnswerverifiedShow Answer

According to the risk-return ratio, conservative decisions actually result in more risk when compared to decisions that are often considered high-risk decisions.

Correct AnswerverifiedShow Answer

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