Exam 9: Finance: Acquiring Using Funds to Maximize Value

Jessie, the regional manager of a large electronics firm, is trying to determine whether a new warehouse for her firm would be a good investment. After discussing with her firm's financial managers, she concludes that the project carries a negative NPV (Net Present Value). What should Jessie do and why?

Firms that rely on a lot of debt in their capital structure are said to be _____.

A(n) _____ makes a profit by purchasing the receivables of a firm at a discount and collecting the full amount from the firm's customers.

_____ are very safe and highly liquid assets that can be converted into cash quickly and easily.

Alpha Inc. saw an increase in profits in the previous year following which the management decided to reinvest its earnings. These retained earnings will be used to:

Unlike a line of credit, in a revolving credit agreement:

Westbro Inc., a home appliances company, wants to invest in marketing new products. In order to generate funds for the process, it issues its own formal IOUs and sells them to its investors. Which of the following sources of long-term funds is being used by Westbro Inc. in the given scenario?

David needs to acquire financial capital to purchase a printing press for his business. David can either acquire the financial capital for the press by borrowing money from a bank or by purchasing the press on credit from his supplier.

Which of the following statements is true of financial leverage?

In the context of liquidity ratios, a firm's _____ are the debts that must be repaid in the following year.

From a financial manager's perspective, the time value of money reflects the fact that:

Which of the following statements is most likely true of a company that relies mainly on equity financing?

Gratinut Entos, an automobile company, wants to launch a new model of bike that would appeal to young adults. The company issues its own formal IOUs to fund the project. Which of the following sources of long-term funds is being used by Gratinut Entos in the given scenario?

Rudolf and Martin, a finance management company, offers funds to corporations that require a permanent source of funding. However, it required the company to make fixed payments on a regular schedule to ensure that the amount borrowed and interest are repaid. Which of the following sources of long-term funds is being offered by Rudolf and Martin in the given scenario?

Initiatium, a software development firm, utilized $2 million to create a new software. Half of the total budget was acquired from loans from different sponsors while the rest was funded by the firm. The debt ratio amounts to 0.5. The given scenario illustrates the analysis of _____.

Since common stockholders are the true owners, preferred stockholders' dividends are deducted from net income before computing _____.

Describe how net present value (NPV) is used to evaluate capital budgeting proposals.

Grisham is the financial manager of Plink Inc., an electronics company. He invests a major portion of the company's profit in his business. He believes that money has the potential to grow in value over a certain period, which is why he prefers to receive and invest an amount of money today rather than in the future. In this scenario, Grisham is most likely to be influenced by _____ while utilizing the finances of the company.

_____ measure the ability of an organization to convert assets into the cash it needs to pay off liabilities that come due in the following year.

_____ is a spontaneous financing granted by sellers when they deliver goods and services to customers without requiring immediate payment.