Question 1

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) B) and C)
G) B) and D)

Question 2

When a firm makes the decision to borrow money, it is a clear sign that the firm is in financial trouble.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Shawn starts a business called ValueCentral.com, the concept takes off, and the company has an IPO and goes public. The company is growing very rapidly and trying to keep up with customer demand. What type of dividend is this company likely to pay its stockholders?

Accepted Answer

A)  A large dividend due to high earnings
B)  An average size dividend
C)  Very small or no dividend
D)  All profits to be paid as dividends
E)  As no stock is involved, dividends irrelevantF) All of the above
G) C) and E)

Question 5

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

Accepted Answer

A)  unsecured short-term financing.
B)  long-term lending.
C)  factoring.
D)  secured short-term financing.
E)  a promissory note.Morgan's TransitionF) A) and C)
G) None of the above

Question 6

For a department store such as Macy's, the most likely need for short-term financing will be for

Accepted Answer

A)  inventory.
B)  employee wages.
C)  extending credit policies.
D)  new locations.
E)  additional cash registers.F) B) and D)
G) A) and E)

Question 7

Use of a warehouse receipt in short-term financing indicates that

Accepted Answer

A)  a loan has been secured by inventory.
B)  a loan has been obtained to purchase raw materials.
C)  a shipper or freight company has bought merchandise from a company.
D)  fur coats are being stored in a retail location.
E)  the lender is taking precautions because the loan is unsecured.F) D) and E)
G) A) and B)

Question 8

In order to repay some corporate bonds, a firm may be required to deposit a specified sum of money each year until the bond's maturity in a sinking fund.

Accepted Answer

A) True 
 B)False

Question 9

​When stock and other corporate securities are sold directly to insurance companies, pension funds, or large institutional investors it is said that a(n)  ____ has been made.

Accepted Answer

A)  ​private placement
B)  ​initial public offering
C)  ​discrete sale
D)  ​private transactionE) C) and D)
F) B) and C)

Question 10

What right do most common stockholders have that most preferred stockholders do not have?

Accepted Answer

A)  First claim to company distributions
B)  Voting rights
C)  Ability to sell stock in the open market
D)  Dividend guarantees
E)  Authority over daily business decisionsF) All of the above
G) C) and E)

Question 11

A promissory note is a written pledge by a borrower to pay a certain sum of money to a creditor at a specified future date.

Accepted Answer

A) True 
 B)False

Question 12

When compared to common stockholders, preferred stockholders have a priority claim on corporate assets.

Accepted Answer

A) True 
 B)False

Question 13

Assume that the First State Bank of Chicago requires a 20 percent compensating balance on short-term loans. If you borrow $50,000, at least ____ of the loan amount must be kept on deposit at the bank.

Accepted Answer

A)  $4,000
B)  $10,000
C)  $1,000
D)  $20,000
E)  $50,000F) A) and C)
G) B) and C)

Question 14

The most expensive form of short-term financing is factoring of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 15

Sara Lee Corporation is a large conglomerate of businesses participating in a variety of industries. A few years ago, Sara Lee was considering the purchase of Bryan Foods. If Bryan Foods represented a tremendous opportunity to make the company more successful, Sara Lee may, as a last resort, have considered

Accepted Answer

A)  seeking short-term financing.
B)  using trade credit to pay for Bryan Foods.
C)  using future sales revenues for the purchase of Bryan Foods.
D)  sharing the idea with competitors as a possible joint venture.
E)  selling assets from another division to pay for Bryan Foods.F) D) and E)
G) A) and B)

Question 16

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) A) and D)
G) None of the above

Question 17

Harlen Manufacturing is hesitant to extend trade credit to Brendan Drake. Instead, Brendan agrees to sign a promissory note. Harlen prefers this note because

Accepted Answer

A)  it specifies when the goods will be delivered.
B)  the money will still be paid if Brendan declares bankruptcy.
C)  it is a legally binding and enforceable agreement.
D)  it is a form of commercial paper.
E)  it will receive the money from Brendan much sooner.F) A) and D)
G) A) and E)

Question 18

Long-term loans and the sale of corporate bonds are common sources of equity financing.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

The ____ ratio is based on the principle that a high-risk investment should generate higher financial returns for a business and more conservative decisions often generate lesser returns.

Accepted Answer

A)  return on owners' equity
B)  risk-return
C)  earnings
D)  investment-to-equity
E)  quick returnF) A) and B)
G) A) and D)

Exam 16: Mastering Financial Management

When compared to common stockholders, preferred stockholders have a priority claim on corporate assets.

Correct Answer
verified

Long-term loans and the sale of corporate bonds are common sources of equity financing.

Correct Answer
verified

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

Correct Answer
verified

What right do most common stockholders have that most preferred stockholders do not have?

Correct Answer
verified

When a firm makes the decision to borrow money, it is a clear sign that the firm is in financial trouble.

Correct Answer
verified

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 Answer
verified

Shawn starts a business called ValueCentral.com, the concept takes off, and the company has an IPO and goes public. The company is growing very rapidly and trying to keep up with customer demand. What type of dividend is this company likely to pay its stockholders?

Correct Answer
verified

A promissory note is a written pledge by a borrower to pay a certain sum of money to a creditor at a specified future date.

Correct Answer
verified

The most expensive form of short-term financing is factoring of accounts receivable.

Correct Answer
verified

In order to repay some corporate bonds, a firm may be required to deposit a specified sum of money each year until the bond's maturity in a sinking fund.

Correct Answer
verified

Assume that the First State Bank of Chicago requires a 20 percent compensating balance on short-term loans. If you borrow $50,000, at least ____ of the loan amount must be kept on deposit at the bank.

Correct Answer
verified

For a department store such as Macy's, the most likely need for short-term financing will be for

Correct Answer
verified

Correct Answer
verified

When stock and other corporate securities are sold directly to insurance companies, pension funds, or large institutional investors it is said that a(n) ____ has been made.

Correct Answer
verified

Harlen Manufacturing is hesitant to extend trade credit to Brendan Drake. Instead, Brendan agrees to sign a promissory note. Harlen prefers this note because

Correct Answer
verified

Use of a warehouse receipt in short-term financing indicates that

Correct Answer
verified

The ____ ratio is based on the principle that a high-risk investment should generate higher financial returns for a business and more conservative decisions often generate lesser returns.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Exam 16: Mastering Financial Management

When compared to common stockholders, preferred stockholders have a priority claim on corporate assets.

Correct AnswerverifiedShow Answer

Long-term loans and the sale of corporate bonds are common sources of equity financing.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What right do most common stockholders have that most preferred stockholders do not have?

Correct AnswerverifiedShow Answer

When a firm makes the decision to borrow money, it is a clear sign that the firm is in financial trouble.

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

Shawn starts a business called ValueCentral.com, the concept takes off, and the company has an IPO and goes public. The company is growing very rapidly and trying to keep up with customer demand. What type of dividend is this company likely to pay its stockholders?

Correct AnswerverifiedShow Answer

A promissory note is a written pledge by a borrower to pay a certain sum of money to a creditor at a specified future date.

Correct AnswerverifiedShow Answer

The most expensive form of short-term financing is factoring of accounts receivable.

Correct AnswerverifiedShow Answer

In order to repay some corporate bonds, a firm may be required to deposit a specified sum of money each year until the bond's maturity in a sinking fund.

Correct AnswerverifiedShow Answer

Assume that the First State Bank of Chicago requires a 20 percent compensating balance on short-term loans. If you borrow $50,000, at least ____ of the loan amount must be kept on deposit at the bank.

Correct AnswerverifiedShow Answer

For a department store such as Macy's, the most likely need for short-term financing will be for

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

​When stock and other corporate securities are sold directly to insurance companies, pension funds, or large institutional investors it is said that a(n) ____ has been made.

Correct AnswerverifiedShow Answer

Harlen Manufacturing is hesitant to extend trade credit to Brendan Drake. Instead, Brendan agrees to sign a promissory note. Harlen prefers this note because

Correct AnswerverifiedShow Answer

Use of a warehouse receipt in short-term financing indicates that

Correct AnswerverifiedShow Answer

The ____ ratio is based on the principle that a high-risk investment should generate higher financial returns for a business and more conservative decisions often generate lesser returns.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

When stock and other corporate securities are sold directly to insurance companies, pension funds, or large institutional investors it is said that a(n) ____ has been made.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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