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Exam 16: Mastering Financial Management

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Question 101

Multiple Choice

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Mrs. Thomas 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

A) she may take a 30 percent discount if she pays the invoice within three days.
B) she must pay the entire amount in three days.
C) after three days, she must pay the new amount in ten days.
D) her line of credit is equivalent to three-tenths of the dollar value of her business.
E) she may take a 3 percent discount if she pays the invoice within ten days.

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Question 102

Multiple Choice

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When bonds issued at the same time mature on different dates, they are referred to as ____ bonds.

A) callable
B) serial
C) mortgage
D) debenture
E) convertible

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Question 103

Multiple Choice

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In the ____, Kia Corporation describes the basics of the bond issue, who the trustee is, when the bonds mature, and how the bonds will be paid off.

Retained earnings are

Florida-based Swim and Fin Products often experiences a time lag between the time goods are produced and the time that retailers pay for the finished products. In this situation, the Swim and Fin's financial problems are the result of speculative production.

A feature of corporate bonds is that they

A POS terminal is a computerized cash register located in a retail store and connected to a bank's computer.

For the majority of businesses, newly-proposed financial reforms by the U.S. House of Representatives and the Senate will likely increase the time and cost of obtaining financing.

When each new budget is based on the dollar amounts contained in the budget from the preceding year, a company is using ____ budgeting.

Describe corporate bonds. What affects the interest rate paid by a corporation?

McGines, Inc. Sam McGines, CEO of McGines, Inc., decided that upon his retirement, he would elect his son Derrick to become the new CEO. Sam thought it would be a good idea to have Derrick shadow him at work to understand the roles and responsibilities of a CEO. Derrick shadowed his father for months in order to learn every aspect of the business. Sam knew that the best way for Derrick 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 Sam felt that it was important for Derrick to understand the different types of financing. Derrick 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. Derrick also learned the process of obtaining bonds and the various types of long-term financing methods. Job shadowing was indeed a worthwhile experience for Derrick. -Refer to McGines, Inc. At one point, Derrick was not sure about which type of bond was backed only by the reputation of the issuing corporation. Which of the following would you suggest?

Morgan 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 financ -Refer to Morgan's Transition. During his job interview, Morgan 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?

Debbie 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.

One of the most important priorities for someone interested in careers in finance is honesty.

Equity capital generally provides the greatest part of a firm's financing.

Which of the following generally has no specific repayment period?

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

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

With regard to ongoing expenses, the most expensive type of long-term financing is the sale of common stock.

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