Question 1

After treasury bills, the largest outstanding short-term security is:

Accepted Answer

A)  commercial paper. 
B)  bankers' acceptances. 
C)  bearer deposit notes. 
D)  certificates of deposit. 
A)  commercial paper. 
B)  bankers' acceptances. 
C)  bearer deposit notes. 
D)  certificates of deposit.

Question 2

Small businesses frequently find commercial paper a useful means of obtaining funds when it is not possible to raise funds by other means.

Accepted Answer

A) True 
 B)False

Question 3

Bank term loans:

Accepted Answer

A)  usually carry fixed interest rates. 
B)  are very short-term in nature. 
C)  are offered to superior credit applicants. 
D)  are risky for the borrower due to interest rate fluctuation. 
A)  usually carry fixed interest rates. 
B)  are very short-term in nature. 
C)  are offered to superior credit applicants. 
D)  are risky for the borrower due to interest rate fluctuation.

Question 4

Analog Computers needs to borrow $800,000 from the Midland Bank. The bank requires a 15% compensating balance. How much money will Analog need to borrow in order to end up with $800,000 spendable cash?

Accepted Answer

A)  $920,000. 
B)  $1,058,264. 
C)  $941,177. 
D)  $800,000. 
A)  $920,000. 
B)  $1,058,264. 
C)  $941,177. 
D)  $800,000.

Question 5

Business Book Publishing needs to borrow $700,000 in order to finance its new inventory. Two banks in town offered different loan terms: Marine Bank offered a 10% loan with a 15% compensatory balance to be paid back in quarterly payments. McLean National Bank offered Business Book Publishing a 12% loan to be paid back semi-annually. Which loan terms should Business Book Publishing take?

Accepted Answer

The answer of Business Book Publishing needs to borrow $700,000...

Question 6

The financial futures market:

Accepted Answer

A)  is a place in Chicago or Toronto where future stocks are traded. 
B)  allows for the trading of a financial instruments at a future point in time. 
C)  is of particular value to small investors in managing their portfolios. 
D)  increases the cost of hedging. 
A)  is a place in Chicago or Toronto where future stocks are traded. 
B)  allows for the trading of a financial instruments at a future point in time. 
C)  is of particular value to small investors in managing their portfolios. 
D)  increases the cost of hedging.

Question 7

Commercial paper is an unsecured short-term IOU from a large financially secure company.

Accepted Answer

A) True 
 B)False

Question 8

The Magic Pumpkin Limousine Company wants to purchase a car telephone system for one of its automobiles. The telephone vendor has offered to finance the $1,500 purchase over one year in 12 installments, with a total of $140 in interest to be paid on the loan. Magic

Accepted Answer

Pumpkin's bank has offered to finance th

Question 9

Holland Construction Co. has an outstanding 180-day bank loan of $400,000 at an annual interest rate of 9.5%. The company is required to maintain a 15% compensating balance in its chequing account. What is the annual interest cost on the loan? Assume the company would not normally maintain this average amount.

Accepted Answer

A)  11.18% 
B)  9.5% 
C)  15.00% 
D)  20.00% 
A)  11.18% 
B)  9.5% 
C)  15.00% 
D)  20.00%

Question 10

Other things being equal, an increase in the number of days that a commercial bank loan is outstanding will mean:

Accepted Answer

A)  a reduction in the banks risk. 
B)  an increase in the administration costs. 
C)  an increase in the dollar amount of the interest. 
D)  a reduction in the principal amount borrowed. 
A)  a reduction in the banks risk. 
B)  an increase in the administration costs. 
C)  an increase in the dollar amount of the interest. 
D)  a reduction in the principal amount borrowed.

Question 11

The London Interbank Offered Rate (LIBOR):

Accepted Answer

A)  does not compete with the prime rate domestically for international firms. 
B)  often is lower than the domestic prime rate. 
C)  is the loan rate offered by London banks to its best customers. 
D)  is a stable international rate. 
A)  does not compete with the prime rate domestically for international firms. 
B)  often is lower than the domestic prime rate. 
C)  is the loan rate offered by London banks to its best customers. 
D)  is a stable international rate.

Question 12

A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 3.5/9, net 25. What change might be expected on the balance sheets of its customers?

Accepted Answer

A)  Decreased receivables and increased bank loans. 
B)  Increased receivables and increased bank loans. 
C)  Decreased payables and increased bank loans. 
D)  Increased payables and increased bank loans. 
A)  Decreased receivables and increased bank loans. 
B)  Increased receivables and increased bank loans. 
C)  Decreased payables and increased bank loans. 
D)  Increased payables and increased bank loans.

Question 13

The London Interbank Offered Rate (LIBOR):

Accepted Answer

A)  competes with the prime rate domestically for international firms. 
B)  often is higher than the domestic prime rate. 
C)  is the loan rate offered by chartered banks to its best customers. 
D)  is the rate used when banks lend to each other. 
A)  competes with the prime rate domestically for international firms. 
B)  often is higher than the domestic prime rate. 
C)  is the loan rate offered by chartered banks to its best customers. 
D)  is the rate used when banks lend to each other.

Question 14

In financing accounts receivable, pledging uses receivables _______ while factoring uses receivables _________.

Accepted Answer

A)  as collateral; to purchase 
B)  as collateral; to sell 
C)  to sell; as collateral 
D)  to sell; to purchase 
A)  as collateral; to purchase 
B)  as collateral; to sell 
C)  to sell; as collateral 
D)  to sell; to purchase

Question 15

An instalment loan uses a series of equal payments to retire a loan.

Accepted Answer

A) True 
 B)False

Question 16

A discounted loan features subtraction of the calculated interest payment in advance.

Accepted Answer

A) True 
 B)False

Question 17

Firms can almost always increase the amount of time they take to pay for purchases without incurring problems.

Accepted Answer

A) True 
 B)False

Question 18

Financial institution deregulation has eased competition between banks and foreign financial institutions.

Accepted Answer

A) True 
 B)False

Question 19

Which method of controlling pledged inventory provides the greatest degree of security to the lender?

Accepted Answer

A)  Blanket inventory liens. 
B)  Overall inventory liens. 
C)  Trust receipts. 
D)  Warehousing. 
A)  Blanket inventory liens. 
B)  Overall inventory liens. 
C)  Trust receipts. 
D)  Warehousing.

Question 20

The commercial paper market is available to all publicly traded companies.

Accepted Answer

A) True 
 B)False

After treasury bills, the largest outstanding short-term security is:

Small businesses frequently find commercial paper a useful means of obtaining funds when it is not possible to raise funds by other means.

Bank term loans:

Analog Computers needs to borrow $800,000 from the Midland Bank. The bank requires a 15% compensating balance. How much money will Analog need to borrow in order to end up with $800,000 spendable cash?

The financial futures market:

Commercial paper is an unsecured short-term IOU from a large financially secure company.

The Magic Pumpkin Limousine Company wants to purchase a car telephone system for one of its automobiles. The telephone vendor has offered to finance the $1,500 purchase over one year in 12 installments, with a total of $140 in interest to be paid on the loan. Magic

Other things being equal, an increase in the number of days that a commercial bank loan is outstanding will mean:

The London Interbank Offered Rate (LIBOR):

A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 3.5/9, net 25. What change might be expected on the balance sheets of its customers?

The London Interbank Offered Rate (LIBOR):

In financing accounts receivable, pledging uses receivables _ while factoring uses receivables ___.

An instalment loan uses a series of equal payments to retire a loan.

A discounted loan features subtraction of the calculated interest payment in advance.

Firms can almost always increase the amount of time they take to pay for purchases without incurring problems.

Financial institution deregulation has eased competition between banks and foreign financial institutions.

Which method of controlling pledged inventory provides the greatest degree of security to the lender?

The commercial paper market is available to all publicly traded companies.

The Goals and Functions of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

The Time Value of Money

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Underwriting

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Derivative Securities

External Growth Through Mergers

International Financial Management

Filters

Exam 8: Sources of Short-Term Financing

After treasury bills, the largest outstanding short-term security is:

Small businesses frequently find commercial paper a useful means of obtaining funds when it is not possible to raise funds by other means.

Bank term loans:

Analog Computers needs to borrow $800,000 from the Midland Bank. The bank requires a 15% compensating balance. How much money will Analog need to borrow in order to end up with $800,000 spendable cash?

The financial futures market:

Commercial paper is an unsecured short-term IOU from a large financially secure company.

The Magic Pumpkin Limousine Company wants to purchase a car telephone system for one of its automobiles. The telephone vendor has offered to finance the $1,500 purchase over one year in 12 installments, with a total of $140 in interest to be paid on the loan. Magic

Other things being equal, an increase in the number of days that a commercial bank loan is outstanding will mean:

The London Interbank Offered Rate (LIBOR):

A large manufacturing firm has been selling on a 3/10, net 30 basis. The firm changes its credit terms to 3.5/9, net 25. What change might be expected on the balance sheets of its customers?

The London Interbank Offered Rate (LIBOR):

In financing accounts receivable, pledging uses receivables _______ while factoring uses receivables _________.

An instalment loan uses a series of equal payments to retire a loan.

A discounted loan features subtraction of the calculated interest payment in advance.

Firms can almost always increase the amount of time they take to pay for purchases without incurring problems.

Financial institution deregulation has eased competition between banks and foreign financial institutions.

Which method of controlling pledged inventory provides the greatest degree of security to the lender?

The commercial paper market is available to all publicly traded companies.

The Goals and Functions of Financial Management

Review of Accounting

Financial Analysis

Financial Forecasting

Operating and Financial Leverage

Working Capital and the Financing Decision

Current Asset Management

The Time Value of Money

Valuation and Rates of Return

Cost of Capital

The Capital Budgeting Decision

Risk and Capital Budgeting

Capital Markets

Investment Underwriting

Long-Term Debt and Lease Financing

Common and Preferred Stock Financing

Dividend Policy and Retained Earnings

Derivative Securities

External Growth Through Mergers

International Financial Management

Filters

In financing accounts receivable, pledging uses receivables _ while factoring uses receivables ___.