Question 1

Which of the following is an advantage of debt financing?

Accepted Answer

A)  The interest payments a firm makes on debt are a tax-deductible expense. 
B)  A firm using debt financing is not required to make fixed payments. 
C)  It is less risky than equity financing. 
D)  It is more flexible than equity financing. 
A)  The interest payments a firm makes on debt are a tax-deductible expense. 
B)  A firm using debt financing is not required to make fixed payments. 
C)  It is less risky than equity financing. 
D)  It is more flexible than equity financing.

Question 2

Which of the following scenarios involves the use of corporate bonds?

Accepted Answer

A)  Nigel buys an IOU of Herbiscus Pharmaceuticals with a maturity period of eight years. 
B)  Belingtin Trade Inc. issues short-term promissory notes by keeping its stock as collateral. 
C)  Gary buys some shares of Transient Textiles and receives 20 percent of the profit. 
D)  Porliod Films takes a loan from the local bank to pay its debts to its investors. 
A)  Nigel buys an IOU of Herbiscus Pharmaceuticals with a maturity period of eight years. 
B)  Belingtin Trade Inc. issues short-term promissory notes by keeping its stock as collateral. 
C)  Gary buys some shares of Transient Textiles and receives 20 percent of the profit. 
D)  Porliod Films takes a loan from the local bank to pay its debts to its investors.

Question 3

In finance, a _____ is one that can be quickly converted into cash with little risk of loss.

Accepted Answer

A)  capital asset 
B)  fixed asset 
C)  tangible asset 
D)  liquid asset 
A)  capital asset 
B)  fixed asset 
C)  tangible asset 
D)  liquid asset

Question 4

Which of the following statements is true of commercial paper?

Accepted Answer

A)  It cannot be issued for more than 365 days. 
B)  It consists of treasury bonds. 
C)  It is not backed by a pledge of collateral. 
D)  It is normally secured. 
A)  It cannot be issued for more than 365 days. 
B)  It consists of treasury bonds. 
C)  It is not backed by a pledge of collateral. 
D)  It is normally secured.

Question 5

Which of the following is a source of long-term funds for a firm?

Accepted Answer

A)  Revolving credit agreements 
B)  Factoring 
C)  Spontaneous financing 
D)  Retained earnings 
A)  Revolving credit agreements 
B)  Factoring 
C)  Spontaneous financing 
D)  Retained earnings

Question 6

Which of the following is a disadvantage of debt financing?

Accepted Answer

A)  It requires firms to sell stock to new investors to acquire additional funds. 
B)  It requires firms to make fixed payments. 
C)  It does not yield any tax benefits. 
D)  It forgoes the opportunity to use financial leverage. 
A)  It requires firms to sell stock to new investors to acquire additional funds. 
B)  It requires firms to make fixed payments. 
C)  It does not yield any tax benefits. 
D)  It forgoes the opportunity to use financial leverage.

Question 7

The main disadvantage of financial leverage is that:

Accepted Answer

A)  it increases the taxes of firms that use it. 
B)  it requires owners to invest more of their own money. 
C)  it reduces the financial return to stockholders' investment when times are bad. 
D)  it protects firms from predatory lending practices by financial institutions. 
A)  it increases the taxes of firms that use it. 
B)  it requires owners to invest more of their own money. 
C)  it reduces the financial return to stockholders' investment when times are bad. 
D)  it protects firms from predatory lending practices by financial institutions.

Question 8

_____ are ratios that measure the rate of return a firm is earning on various measures of investment.

Accepted Answer

A)  Liquidity ratios 
B)  Activity ratios 
C)  Leverage ratios 
D)  Profitability ratios 
A)  Liquidity ratios 
B)  Activity ratios 
C)  Leverage ratios 
D)  Profitability ratios

Question 9

_____ are safe and highly liquid assets that many firms list with their cash holdings on their balance sheet.

Accepted Answer

A)  Trade credits 
B)  Marketable derivatives 
C)  Cash equivalents 
D)  Cash certificates 
A)  Trade credits 
B)  Marketable derivatives 
C)  Cash equivalents 
D)  Cash certificates

Question 10

In the context of the capital structure of a firm, which of the following statements is true of equity financing?

Accepted Answer

A)  It is less flexible than debt financing. 
B)  It is less risky than debt financing. 
C)  It requires firms to agree to burdensome covenants. 
D)  It yields the same tax benefits as debt financing. 
A)  It is less flexible than debt financing. 
B)  It is less risky than debt financing. 
C)  It requires firms to agree to burdensome covenants. 
D)  It yields the same tax benefits as debt financing.

Question 11

Tusken Thaw, a shipping industry, plans to expand its customer base to other countries. To facilitate this process, Tusken Thaw seeks financial assistance from Jermino Bank. The bank agrees to lend a specified amount of money; however, it mandates Tusken Thaw to return the amount with interest in a regular schedule of fixed payments. Which of the following sources of long-term funds is being used by Tusken Thaw in the given scenario?

Accepted Answer

A)  A line of credit 
B)  Commercial paper 
C)  Trade credit 
D)  A term loan 
A)  A line of credit 
B)  Commercial paper 
C)  Trade credit 
D)  A term loan

Question 12

Financial capital refers to the:

Accepted Answer

A)  money that a business earns in sales, minus the expenses. 
B)  costs a business incurs when its expenses are greater than its revenues. 
C)  funds a firm uses to acquire its assets and finance its operations. 
D)  returns that a firm pays its owners for their investments in the company. 
A)  money that a business earns in sales, minus the expenses. 
B)  costs a business incurs when its expenses are greater than its revenues. 
C)  funds a firm uses to acquire its assets and finance its operations. 
D)  returns that a firm pays its owners for their investments in the company.

Question 13

The _____ is an asset management ratio that measures how quickly a firm sells its stock to generate revenue.

Accepted Answer

A)  current ratio 
B)  inventory turnover ratio 
C)  debt ratio 
D)  working capital turnover ratio 
A)  current ratio 
B)  inventory turnover ratio 
C)  debt ratio 
D)  working capital turnover ratio

Question 14

One drawback of offering liberal credit to customers is that it can:

Accepted Answer

A)  delay sales to a future period. 
B)  increase the cost of credit to customers. 
C)  delay the receipt of cash that the firm needs to meet its financial obligations. 
D)  decrease sales by the extension of credit and cause a loss to the company. 
A)  delay sales to a future period. 
B)  increase the cost of credit to customers. 
C)  delay the receipt of cash that the firm needs to meet its financial obligations. 
D)  decrease sales by the extension of credit and cause a loss to the company.

Question 15

Wild Trails Inc., an adventure resort in Texas, has 500 shares of outstanding common stock and has not issued any preferred stock. Its net income is $27,500. Wild Trails Inc.'s earnings per share (EPS) is _____.

Accepted Answer

A)  $55 
B)  $0.018 
C)  $13,750 
D)  $27,000 
A)  $55 
B)  $0.018 
C)  $13,750 
D)  $27,000

Question 16

Which of the following statements is true of a socially responsible firm?

Accepted Answer

A)  It increases the bargaining power of buyers. 
B)  It has high employee turnover. 
C)  It has an obligation to respect the needs of all stakeholders. 
D)  It emphasizes maximizing shareholder value. 
A)  It increases the bargaining power of buyers. 
B)  It has high employee turnover. 
C)  It has an obligation to respect the needs of all stakeholders. 
D)  It emphasizes maximizing shareholder value.

Question 17

_____ are ratios that measure the extent to which a firm relies on debt financing in its capital structure.

Accepted Answer

A)  Liquidity ratios 
B)  Activity ratios 
C)  Leverage ratios 
D)  Profitability ratios 
A)  Liquidity ratios 
B)  Activity ratios 
C)  Leverage ratios 
D)  Profitability ratios

Question 18

Lean inventory policies can be ineffective in a firm, although they do not leave the firm vulnerable to supply disruptions.

Accepted Answer

A) True 
 B)False

Question 19

The following questions must be answered when setting credit terms: How long should the firm extend credit? What type of cash discount should the firm offer to encourage early payments?

Accepted Answer

A) True 
 B)False

Question 20

Maurio Inc., a publishing house, wants to invest in digital publishing. However, the company does not possess enough capital to kick start the project. In order to gain immediate funds, Maurio Inc. sells its accounts of credits to Restube, a financing firm, at a discount. Which of the following short-term financing options is being used by Maurio Inc. in the given scenario?

Accepted Answer

A)  Factoring 
B)  Trade credit 
C)  Commercial paper 
D)  Short-term bank loans 
A)  Factoring 
B)  Trade credit 
C)  Commercial paper 
D)  Short-term bank loans

Which of the following is an advantage of debt financing?

Which of the following scenarios involves the use of corporate bonds?

In finance, a _____ is one that can be quickly converted into cash with little risk of loss.

Which of the following statements is true of commercial paper?

Which of the following is a source of long-term funds for a firm?

Which of the following is a disadvantage of debt financing?

The main disadvantage of financial leverage is that:

_____ are ratios that measure the rate of return a firm is earning on various measures of investment.

_____ are safe and highly liquid assets that many firms list with their cash holdings on their balance sheet.

In the context of the capital structure of a firm, which of the following statements is true of equity financing?

Financial capital refers to the:

The _____ is an asset management ratio that measures how quickly a firm sells its stock to generate revenue.

One drawback of offering liberal credit to customers is that it can:

Wild Trails Inc., an adventure resort in Texas, has 500 shares of outstanding common stock and has not issued any preferred stock. Its net income is $27,500. Wild Trails Inc.'s earnings per share (EPS) is _____.

Which of the following statements is true of a socially responsible firm?

_____ are ratios that measure the extent to which a firm relies on debt financing in its capital structure.

Lean inventory policies can be ineffective in a firm, although they do not leave the firm vulnerable to supply disruptions.

The following questions must be answered when setting credit terms: How long should the firm extend credit? What type of cash discount should the firm offer to encourage early payments?

Business Now: Change Is the Only Constant

Economics: The Framework of Business

The World Marketplace: Business Without Borders

Business Ethics Social Responsibility: Doing Well by Doing Good

Business Communication: Creating Delivering Messages That Matter

Business Formation: Choosing the Form That Fits

Small Business Entrepreneurship: Economic Rocket Fuel

Accounting: Decision Making by the Numbers

Securities Markets: Trading Financial Resources

Marketing: Building Profitable Customer Connections

Product and Promotion: Creating and Communicating Value

Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Management, Motivation, and Leadership: Bringing Business to Life

Human Resource Management: Building a Top Quality Workforce

Managing Information Technology: Finding New Ways to Learn and Link

Operations Management: Putting It All Together

Appendix :personal-Finance-Appendix

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Exam 9: Finance: Acquiring Using Funds to Maximize Value

Which of the following is an advantage of debt financing?

Which of the following scenarios involves the use of corporate bonds?

In finance, a _____ is one that can be quickly converted into cash with little risk of loss.

Which of the following statements is true of commercial paper?

Which of the following is a source of long-term funds for a firm?

Which of the following is a disadvantage of debt financing?

The main disadvantage of financial leverage is that:

_____ are ratios that measure the rate of return a firm is earning on various measures of investment.

_____ are safe and highly liquid assets that many firms list with their cash holdings on their balance sheet.

In the context of the capital structure of a firm, which of the following statements is true of equity financing?

Financial capital refers to the:

The _____ is an asset management ratio that measures how quickly a firm sells its stock to generate revenue.

One drawback of offering liberal credit to customers is that it can:

Wild Trails Inc., an adventure resort in Texas, has 500 shares of outstanding common stock and has not issued any preferred stock. Its net income is $27,500. Wild Trails Inc.'s earnings per share (EPS) is _____.

Which of the following statements is true of a socially responsible firm?

_____ are ratios that measure the extent to which a firm relies on debt financing in its capital structure.

Lean inventory policies can be ineffective in a firm, although they do not leave the firm vulnerable to supply disruptions.

The following questions must be answered when setting credit terms: How long should the firm extend credit? What type of cash discount should the firm offer to encourage early payments?

Business Now: Change Is the Only Constant

Economics: The Framework of Business

The World Marketplace: Business Without Borders

Business Ethics Social Responsibility: Doing Well by Doing Good

Business Communication: Creating Delivering Messages That Matter

Business Formation: Choosing the Form That Fits

Small Business Entrepreneurship: Economic Rocket Fuel

Accounting: Decision Making by the Numbers

Securities Markets: Trading Financial Resources

Marketing: Building Profitable Customer Connections

Product and Promotion: Creating and Communicating Value

Distribution and Pricing: Right Product, Right Person, Right Place, Right Price

Management, Motivation, and Leadership: Bringing Business to Life

Human Resource Management: Building a Top Quality Workforce

Managing Information Technology: Finding New Ways to Learn and Link

Operations Management: Putting It All Together

Appendix :personal-Finance-Appendix

Filters