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Exam 19: Recognizing the Basics of Financial Management

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Question 31

Multiple Choice

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Rami has a long-standing relationship with his banker. When his company needs a short-term loan, he is able to obtain a loan at prime rate and does not have to put up any collateral for the loan. What type of financing has Rami obtained?

A) unsecured loan
B) secured loan
C) promissory note
D) trade credit

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verified

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Question 32

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In which type of sales arrangement does a seller allow a buyer 30 to 60 days to pay for a purchase?

A) a bank loan
B) trade credit
C) a promissory note
D) factoring

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Question 33

Multiple Choice

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Each of the following causes a cash flow problem EXCEPT which one?

Jennifer runs a ski store in Banff, Alberta. She buys all her skis for the season in the fall but doesn't receive any money until she sells the skis, which is usually a few months later. The suppliers of the skis will extend the time she needs to pay for the skis to 90 days. What is the term to describe what her suppliers are offering Jennifer?

Which of the following are funds received from the sale of shares of ownership in a business?

Karissa's lawn care business has become more successful than she had ever imagined, and she finds it necessary to hire an employee who will be responsible for ensuring that the company has sufficient funds to operate, managing those funds effectively, and securing additional funds if and when needed. As such, Karissa's new employee will be responsible for which of the following?

A disadvantage of which type of financing is that external forces like economic conditions affect the level of interest rates?

Lockheed Martin purchased raw materials to produce Black Hawk helicopters. Their payment term is 30 days. Which of the following has Lockheed utilized?

Which of the following does Todd create when he develops a plan for obtaining and using the money necessary for his company to implement its goals?

Which of the following are funds obtained through loans or the issuance of corporate bonds?

With respect to cash flow, a firm ideally should have which of the following?

All Star Sporting Goods seeks short-term financing to complete much-needed repairs on its retail store. All Star decides to offer up its inventory as collateral in return for a $20,000 from the bank. Which of the following does this exemplify?

Tidewater Distributors has an arrangement with its bank in which it has access to a fixed amount of funds to use as needed, and the company has to make monthly payments along with interest based on the outstanding amount of the loan. What type of financing does Tidewater Distributors use?

Kevin received unsecured financing from a bank for his plumbing business. This means that Kevin did NOT have to provide the bank with which of the following?

Which of the following involves borrowed funds that will be repaid within one year or less?

All of the following would be considered proper financial management during both good and bad times EXCEPT which one?

When a company issues an IPO to raise capital, shares of its stock are sold in which of the following markets?

An amusement park operates daily from Victoria Day to Labour Day. In addition, the park is open Fridays, Saturdays, and Sundays throughout May and September. The park finds that the revenue produced from weekend-only operations in May and September is not enough to cover the expenses they incur in those months. Which of the following circumstances requires the amusement park to seek outside financing to cover its short-term cash shortages?

What does Taye mean when he says that the software company he and his college roommate started is going to "go public"?

For a corporation such as Bell Canada, what are the two primary advantages of equity financing?