Exam 9: Finance: Acquiring Using Funds to Maximize Value

A commitment to meeting social responsibilities can contribute to a more profitable company and an increase in shareholder value.

Under a revolving credit agreement, the _____ is lower than the interest on the borrowed funds, but it can amount to a fairly hefty charge if the firm has a large unused balance.

_____ refers to financing that arises during the natural course of business without the need for special arrangements.

Tunebeak, a fast food service chain, wants to introduce a new product. However, it lacks the financial support required to promote its product. Therefore, it sells its accounts receivables from its customers to a financing firm and is able to invest in the promotion of its product. Which of the following short-term financing options is being used by Tunebeak in the given scenario?

Timini Inc., a beverage company, wants to produce a new health drink. It borrows money from Maverk Bank to finance the procedure. The bank mandates Timini Inc. 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 Timini Inc. in the given scenario?

Financial managers emphasize the goal of maximizing the market price of stock because:

The main advantage of financial leverage is that:

A disadvantage of debt financing is that creditors often impose covenants on the borrower.

Firms buy commercial paper as part of their portfolio of cash equivalents because:

_____ is a guaranteed line of credit in which a bank makes a binding commitment to provide a business with funds up to a specified credit limit at any time during the term of the agreement.

Which of the following statements best describes a highly leveraged firm?

Explain the role a factor plays in providing short-term financing to a firm.

_____ compares assets that will provide cash in the following year to debts that will come due in the following year.

Rumerion Inc., a shoe manufacturing company, buys its raw materials from Coy Kaymilford, a footwear raw material supplier. Coy Kaymilford allows Rumerion Inc. to make the payment at a later date, as opposed to immediate payment. Which of the following short-term financing options is being used by Rumerion in the given scenario?

Financial managers should focus solely on meeting the financial needs of their firms in the short run, leaving the long-term financial issues to the top management.

Ashton is working on a project at PowerTek Inc., a well-known multinational corporation. He uses capital budgeting to estimate the project's future cash flows. He finds that the present value of the estimated future cash flows is greater than the cost of the project. How likely is he to gain approval from the board?

Kenneth wants to start a new business. To get start-up capital, he takes a short-term loan from a bank. The bank agrees to provide him the agreed-upon funds as per a legally binding commitment. However, the bank requires Kenneth to pay interest on any fund he borrows and a commitment fee based on the unused amount of funds. Which of the following short-term financing sources does Kenneth utilize to fund his business in the given scenario?

MVJ Corp., a market research firm, borrowed $2 million from Trimitium Bank. While negotiating with the bank, the firm signs a promissory note, which specifies that the firm must pay the borrowed amount in 90 days with interest. However, the bank also requires the firm's inventories and receivables to be pledged as collateral to back the loan. Which of the following short-term financing options is being offered by Trimitium Bank in the given scenario?

Trumen House, a confectionary manufacturing company, orders its raw materials in bulk from Nesinbon. Nesinbon allows Trumen House to make the payment at a later date, as opposed to immediate payment. Which of the following short-term financing options is being offered by Nesinbon?

_____ helps financial managers determine the amount of additional financing a firm must arrange to acquire the assets needed to implement its future plans.