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Exam 16: Mastering Financial Management

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Question 41

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Michelle Robinson is thinking about two different decisions.One decision is quite risky,while the other decision is more conservative.To help her make the right decision,she decides to calculate the

A) quick ratio.
B) management analysis.
C) money factor.
D) risk-return ratio.
E) entrepreneurial ratio.

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Question 42

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A written order for a bank to pay a third party a stated amount of money on a specific date is referred to as a

A) letter of credit.
B) banker's acceptance.
C) check.
D) line of credit.
E) dividend.

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Question 43

Multiple Choice

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A marketplace where member brokers meet to buy and sell securities is known as

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

Jennifer has an idea for starting a new business.Although she is only a high school graduate,she is certain the business will succeed because she can target high school and college graduates and then the general public.Her idea is for an employment agency that focuses on individuals with excellent computer and writing skills that will work for companies writing blog and web-page materials from home.She knows several individuals she can approach for employment and has several classmates in mind for their employees.She puts together a business plan,researches office locations,existing employment agency procedures and hiring practices,and forms of business.She meets with a banker and asks about financing for the start-up and is turned down.The banker suggests she seek crowdfunding.Knowing crowdfunding will not generate the funds she will need,she approaches her parents and asks for a loan.Her parents agree to loan her $10,000,but require her to sign a written pledge to repay the $10,000 plus interest in one year.What was the written pledge she signed?

Trade credit is the most popular form of short-term financing available for most businesses.

Suppose IBM decided to issue commercial paper in denominations of $5,000 to raise a large sum of money.Since the commercial paper is secured only by IBM's reputation,

Some equity capital generally is used to start a

Ramirez Company sells its garden hoses to Kim's Lawn and Garden Center but does not require Kim's to pay for them right away.If this is a standard trade-credit agreement,Kim's will have to pay for the garden hoses in

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

Priscilla 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.

NMO Inc.will use ___ by borrowing funds to increase the return on the owners' equity.

The steps in effective financial planning are

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.

Erick's Transition Erick is currently a manager of a small financial planning firm.He is seeking a new career with a large corporation in the banking industry.He recently applied for the financial manager opening at G & T Bank.He is concerned that the transition from his small firm to a large corporation will be difficult.To better prepare himself for this change,he has decided to enroll in a few business classes to strengthen his understanding of corporate finance.The business classes have proven to be a valuable tool for learning the critical skills needed to fully understand a financial plan,equity financing,and debt financing.Erick now believes he has strengthened his competitive advantage in his quest for the job. -Refer to Erick's Transition.During his job interview,Erick was asked to talk about money received from the owners or from the sale of shares of ownership in a business.Which of the following would best describe these funds?

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

Often high-risk decisions generate larger returns while conservative decisions generate lesser returns.From a financial management standpoint does this make sense?

Venture capital is money invested in small firms that have the potential to become very successful.

When a small-business owner applies for a loan,the bank officer will

A cash budget estimates a firm's expenditures for major assets like replacement of obsolete equipment and mergers and acquisitions.