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Exam 16: Mastering Financial Management

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Question 61

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) capitalization
B) sinking
C) compounding
D) retirement
E) redemption

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

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Question 62

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Rollins,Inc. Mat Rollins,CEO of Rollins,Inc.,decided that upon his retirement,he would elect his son Chris to become the new CEO.Mat thought it would be a good idea to have Chris shadow him at work to understand the roles and responsibilities of a CEO.Chris shadowed his father for months in order to learn every aspect of the business.Mat knew that the best way for Chris 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 Mat felt that it was important for Chris to understand the different types of financing.Chris 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.Chris also learned the process of obtaining bonds and the various types of long-term financing methods.Job shadowing was indeed a worthwhile experience for Chris. -Refer to Rollins,Inc.From his work experience,Chris should have learned that ____ has a repayment period of thirty to sixty days.

A) factoring
B) a promissory note
C) commercial paper
D) trade credit
E) a secured loan

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

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Question 63

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​Common stockholders have the right to ___,but preferred stockholders do not have this right.

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)

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

During the recent economic crisis,many companies found that it was

The least expensive form of short-term financing is

Selling a firm's unneeded assets is a reasonable last resort when neither equity capital nor debt capital can be found to meet a firm's need for capital.

Surf 'N' Sun Shop sells ski boats and other boating accessories.It receives most of its inventory about three months in advance of the summer season,but it is not able to pay for the inventory up front.Instead,its suppliers allow Surf 'N' Sun to use its inventory as collateral.This type of agreement is called

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

Mrs.Matthews has received an invoice from the manufacturer for which she distributes products.The invoice states credit terms of 3/10,net/30.Puzzled by this,she calls on you to explain.You indicate that the notation 3/10 means that

Thomas Ski Equipment receives an invoice for $10,000 worth of merchandise from one of its suppliers.The invoice has discount terms of 2/10,net/60.Twenty days later,Thomas Ski Equipment writes a check for ____ to pay the invoice.

The movement of money into and out of an organization is called

The Nasdaq is the largest and probably best-known securities exchange market in the world.

Assume you are a small retailer selling women's fashions.What actions can you take to build a credit relationship with a manufacturer or wholesaler to ensure that you can use trade credit to purchase needed inventory for your store?

A loan that is approved before the money is actually needed is called a

Borrowed money that will be used for more than one year is called

Grape Vineyards,LLC,is an old winery in Napa Valley.It has been suffering problems with its cash flow and will need financing to make it through the fall grape crush.It has considered several ways to increase sales including giving tours,selling tickets to watch the crush,and selling its existing bottled wine inventory through more outlets,but these activities will be insufficient to raise the funds needed for the next three months to cover payroll,machinery and equipment expenses,advertising,and operating expenses.It has several thousand dollars in accounts receivable that it is working diligently to collect and has revamped its accounts receivable practices to remove lags between billing and payment.It has already sold the wine in its inventory.The white wine that will be produced this year will not be ready for bottling for four months and the red wines will not be ready for two years.What will the company do to be able to pay bills for the next three months?

Marietta Hotels used a twenty-five-year,$50 million bond issue to finance its expansion.In its plan to ensure that funds would be available to redeem the bonds at maturity,it arranged that none of the bonds would mature during the first fifteen years.Therefore,10 percent of the bonds mature each year until all the bonds are retired at the end of the twenty-fifth year.This is an example of the ____ method of repayment.

A factor will buy accounts receivable for