Question 1

When considering the cost of financing, that there is no interest cost for most common forms of stock is one benefit of which type of financing?

Accepted Answer

A)  debt 
B)  interest 
C)  equity 
D)  term 
A)  debt 
B)  interest 
C)  equity 
D)  term

Question 2

ConAgra Foods offer shares of their company stock. This is a form of which of the following?

Accepted Answer

A)  long-term debt financing that is secured 
B)  short-term equity financing that is unsecured 
C)  long-term equity financing that is secured 
D)  short-term debt financing that is secured 
A)  long-term debt financing that is secured 
B)  short-term equity financing that is unsecured 
C)  long-term equity financing that is secured 
D)  short-term debt financing that is secured

Question 3

An assisted living facility in your town is currently at capacity. The company that operates it decides to expand and build an additional wing on to the building that will house 20 more residents. Which of the following does this represent for the company?

Accepted Answer

A)  positive cash flow 
B)  seasonality 
C)  negative cash flow cycle 
D)  long-term investment 
A)  positive cash flow 
B)  seasonality 
C)  negative cash flow cycle 
D)  long-term investment

Question 4

Brian needs major financing for the educational software company he has founded. He is offering an equity stake of 5% in exchange for an investment of $500,000. At what amount is Brian valuing his business?

Accepted Answer

A)  $5,000,000 
B)  $25,000,000 
C)  $2,500,000 
D)  $10,000,000 
A)  $5,000,000 
B)  $25,000,000 
C)  $2,500,000 
D)  $10,000,000

Question 5

What is short-term financing NOT backed by collateral called?

Accepted Answer

A)  unsecured financing 
B)  unprotected financing 
C)  debt capital 
D)  trade credit 
A)  unsecured financing 
B)  unprotected financing 
C)  debt capital 
D)  trade credit

Question 6

You would like to start a small photography business. You own a nice camera, but you need to purchase some additional equipment in order to get your business started. You approach your parents and offer them 10% equity in your business for a $2300 investment. Given these numbers, what do you feel your company valuation is?

Accepted Answer

A)  $4370 
B)  $43,000 
C)  $23,000 
D)  $17,500 
A)  $4370 
B)  $43,000 
C)  $23,000 
D)  $17,500

Question 7

Which of the following are loans from banks and financing companies that are protected by collateral such as inventory or accounts receivable balances?

Accepted Answer

A)  secured loans 
B)  equity financing 
C)  a line of credit 
D)  trade credit 
A)  secured loans 
B)  equity financing 
C)  a line of credit 
D)  trade credit

Question 8

Which of the following would be the most appropriate use of long-term financing?

Accepted Answer

A)  developing new products 
B)  paying for speculative production 
C)  paying salaries 
D)  purchasing inventory for resale 
A)  developing new products 
B)  paying for speculative production 
C)  paying salaries 
D)  purchasing inventory for resale

Question 9

Vikram and Rupi decide to start a new restaurant. They obtain a loan from the bank, but the bank insists that they pledge the equipment owned by the restaurant as security for the repayment of the loan. Which of the following does this exemplify?

Accepted Answer

A)  securitization 
B)  amortization 
C)  collateral 
D)  working capital 
A)  securitization 
B)  amortization 
C)  collateral 
D)  working capital

Question 10

According to the risk-return ratio, which of the following statements is correct?

Accepted Answer

A)  Decisions involving higher risk should yield higher returns. 
B)  Decisions involving lower risk should yield higher returns. 
C)  Decisions involving more risk should yield fewer returns. 
D)  Decisions involving high risk should yield more predictable returns. 
A)  Decisions involving higher risk should yield higher returns. 
B)  Decisions involving lower risk should yield higher returns. 
C)  Decisions involving more risk should yield fewer returns. 
D)  Decisions involving high risk should yield more predictable returns.

Question 11

Slater Co. has an old, outdated manufacturing facility that needs extensive renovation and expansion. Slater does not have the cash available for this renovation/expansion, so it will most likely need which of the following?

Accepted Answer

A)  to use trade credit 
B)  to obtain an unsecured loan 
C)  long-term financing 
D)  a short-term loan 
A)  to use trade credit 
B)  to obtain an unsecured loan 
C)  long-term financing 
D)  a short-term loan

Question 12

Which of the following would reflect the cost of acquiring a new company?

Accepted Answer

A)  capital budget 
B)  operating budget 
C)  income statement 
D)  balance sheet 
A)  capital budget 
B)  operating budget 
C)  income statement 
D)  balance sheet

Question 13

Which of the following is a statement that projects income and/or expenditures over a specified future period?

Accepted Answer

A)  capital budget 
B)  balance sheet 
C)  statement of cash flows 
D)  operating budget 
A)  capital budget 
B)  balance sheet 
C)  statement of cash flows 
D)  operating budget

Question 14

The finance manager advises the CEO, "We've got a short-term cash-flow problem. We can draw on our line of credit, and the interest rate is only 2.5%. If we sell our accounts receivable, it'll cost us 3%. I recommend drawing on our line of credit." Which consideration in evaluating financing options does this illustrate?

Accepted Answer

A)  amount of financing 
B)  external factors 
C)  term of financing 
D)  cost of financing 
A)  amount of financing 
B)  external factors 
C)  term of financing 
D)  cost of financing

Question 15

Companies often look at short-term debt financing because it is usually easier to obtain than long-term debt financing for three reasons. Which of the following is NOT one of the three reasons?

Accepted Answer

A)  For the lender, the shorter repayment period means less risk of default. 
B)  Short-term loans look better on the balance sheet than long-term loans. 
C)  The dollar amounts are usually lower than those of long-term loans. 
D)  A close working relationship normally exists between the short-term borrower and the lender. 
A)  For the lender, the shorter repayment period means less risk of default. 
B)  Short-term loans look better on the balance sheet than long-term loans. 
C)  The dollar amounts are usually lower than those of long-term loans. 
D)  A close working relationship normally exists between the short-term borrower and the lender.

Question 16

Liza is evaluating two different investment opportunities. One investment appears to be speculative and uncertain, but the potential rewards are substantial. The other investment seems much more predictable, but the potential payoff is low. Which of the following do you suggest she consider in reaching her decision?

Accepted Answer

A)  the risk-return ratio 
B)  entrepreneurial analysis 
C)  capital allocation 
D)  the acid-test ratio 
A)  the risk-return ratio 
B)  entrepreneurial analysis 
C)  capital allocation 
D)  the acid-test ratio

Question 17

Abbott Laboratories, a worldwide health care company, looks to invest $50 million in new technologies for diagnostic instrument systems. This investment into research and development would appear in which of Abbot's budgets?

Accepted Answer

A)  cash budget 
B)  capital budget 
C)  operating budget 
D)  zero-balance budget 
A)  cash budget 
B)  capital budget 
C)  operating budget 
D)  zero-balance budget

Question 18

Which companies raise large pools of money from private and institutional investors and invest in companies that have the potential to become large and successful?

Accepted Answer

A)  hedge funds 
B)  mutual funds 
C)  venture capital organizations 
D)  speculative capital organizations 
A)  hedge funds 
B)  mutual funds 
C)  venture capital organizations 
D)  speculative capital organizations

Question 19

During 2011 Sampson Technology sold common shares for the first time on the open market, representing which of the following for the company?

Accepted Answer

A)  preferred stock offering 
B)  stock dividend 
C)  initial public offering 
D)  public stock sale 
A)  preferred stock offering 
B)  stock dividend 
C)  initial public offering 
D)  public stock sale

Question 20

All of the following are uses of long-term financing EXCEPT which one?

Accepted Answer

A)  replacing obsolete equipment 
B)  eliminating immediate cash-flow problems 
C)  beginning a new business 
D)  executing mergers and expansions 
A)  replacing obsolete equipment 
B)  eliminating immediate cash-flow problems 
C)  beginning a new business 
D)  executing mergers and expansions

When considering the cost of financing, that there is no interest cost for most common forms of stock is one benefit of which type of financing?

ConAgra Foods offer shares of their company stock. This is a form of which of the following?

An assisted living facility in your town is currently at capacity. The company that operates it decides to expand and build an additional wing on to the building that will house 20 more residents. Which of the following does this represent for the company?

Brian needs major financing for the educational software company he has founded. He is offering an equity stake of 5% in exchange for an investment of $500,000. At what amount is Brian valuing his business?

What is short-term financing NOT backed by collateral called?

Which of the following are loans from banks and financing companies that are protected by collateral such as inventory or accounts receivable balances?

Which of the following would be the most appropriate use of long-term financing?

Vikram and Rupi decide to start a new restaurant. They obtain a loan from the bank, but the bank insists that they pledge the equipment owned by the restaurant as security for the repayment of the loan. Which of the following does this exemplify?

According to the risk-return ratio, which of the following statements is correct?

Slater Co. has an old, outdated manufacturing facility that needs extensive renovation and expansion. Slater does not have the cash available for this renovation/expansion, so it will most likely need which of the following?

Which of the following would reflect the cost of acquiring a new company?

Which of the following is a statement that projects income and/or expenditures over a specified future period?

Companies often look at short-term debt financing because it is usually easier to obtain than long-term debt financing for three reasons. Which of the following is NOT one of the three reasons?

Abbott Laboratories, a worldwide health care company, looks to invest $50 million in new technologies for diagnostic instrument systems. This investment into research and development would appear in which of Abbot's budgets?

Which companies raise large pools of money from private and institutional investors and invest in companies that have the potential to become large and successful?

During 2011 Sampson Technology sold common shares for the first time on the open market, representing which of the following for the company?

All of the following are uses of long-term financing EXCEPT which one?

Exploring the World of Business and Economics

Being Ethical and Socially Responsible

Exploring Global Business

Choosing a Form of Business Ownership

Considering Small Business Entrepreneurship and Franchises

Understanding the Management Process

Creating a Flexible Organization

Producing Quality Goods and Services

Attracting and Retaining the Best Employees

Motivating Employees and Teams

Enhancing Employee Management Relations

Building Customer Relationships Through Effective Marketing

Developing and Managing Products

Managing Distribution and Pricing

Developing Integrated Marketing Communications

Exploring Business Technology

Using Accounting and Financial Information

Understanding Money Banking and Credit

Understanding Personal Finance and Investments

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Exam 19: Recognizing the Basics of Financial Management

When considering the cost of financing, that there is no interest cost for most common forms of stock is one benefit of which type of financing?

ConAgra Foods offer shares of their company stock. This is a form of which of the following?

An assisted living facility in your town is currently at capacity. The company that operates it decides to expand and build an additional wing on to the building that will house 20 more residents. Which of the following does this represent for the company?

Brian needs major financing for the educational software company he has founded. He is offering an equity stake of 5% in exchange for an investment of $500,000. At what amount is Brian valuing his business?

What is short-term financing NOT backed by collateral called?

Which of the following are loans from banks and financing companies that are protected by collateral such as inventory or accounts receivable balances?

Which of the following would be the most appropriate use of long-term financing?

Vikram and Rupi decide to start a new restaurant. They obtain a loan from the bank, but the bank insists that they pledge the equipment owned by the restaurant as security for the repayment of the loan. Which of the following does this exemplify?

According to the risk-return ratio, which of the following statements is correct?

Slater Co. has an old, outdated manufacturing facility that needs extensive renovation and expansion. Slater does not have the cash available for this renovation/expansion, so it will most likely need which of the following?

Which of the following would reflect the cost of acquiring a new company?

Which of the following is a statement that projects income and/or expenditures over a specified future period?

Companies often look at short-term debt financing because it is usually easier to obtain than long-term debt financing for three reasons. Which of the following is NOT one of the three reasons?

Abbott Laboratories, a worldwide health care company, looks to invest $50 million in new technologies for diagnostic instrument systems. This investment into research and development would appear in which of Abbot's budgets?

Which companies raise large pools of money from private and institutional investors and invest in companies that have the potential to become large and successful?

During 2011 Sampson Technology sold common shares for the first time on the open market, representing which of the following for the company?

All of the following are uses of long-term financing EXCEPT which one?

Exploring the World of Business and Economics

Being Ethical and Socially Responsible

Exploring Global Business

Choosing a Form of Business Ownership

Considering Small Business Entrepreneurship and Franchises

Understanding the Management Process

Creating a Flexible Organization

Producing Quality Goods and Services

Attracting and Retaining the Best Employees

Motivating Employees and Teams

Enhancing Employee Management Relations

Building Customer Relationships Through Effective Marketing

Developing and Managing Products

Managing Distribution and Pricing

Developing Integrated Marketing Communications

Exploring Business Technology

Using Accounting and Financial Information

Understanding Money Banking and Credit

Understanding Personal Finance and Investments

Filters