Exam 9: Finance: Acquiring Using Funds to Maximize Value

A wealthy relative of Emma's promises to give her $5,000 once she completes all of the college courses needed to earn a degree in business. She would invest this money in her bank till then, at a specific interest rate. The present value of this future sum will be:

The Dodd­Frank Act requires large firms in the financial sector to:

If an invoice contains the terms 2/10 net 30, the supplier is offering a 10 percent cash discount off the invoice price if the buyer pays within 2 days.

Higher the debt ratio, the greater the firm's reliance on debt.

Which of the following best explains the time value of money?

Which of the following statements is true of the current ratio?

The current ratio is calculated by dividing the firm's current liabilities by its total assets.

A money market mutual fund is a mutual fund that pools funds from many investors and uses the funds to purchase highly liquid, short­term securities.

New Coffee Company uses JIT (just­in­time) logistical supply methods. This indicates that the company doesn't really keep large stocks of coffee on hand, which is cheaper, from the standpoint of operations, but more risky because of the potential havoc any significant under­ or over­supply of product could wreak. Which of the following ratios is of the utmost importance to New Coffee Company?

Financial managers who have a good understanding of the risk­return tradeoff know that sources and uses of funds that offer:

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Return­on­equity is a profitability ratio that compares the amount of profit to some measure of resources invested.

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?

In financial management, risk is referred to as:

When an invoice list the terms as 3/15 net 45, the "net 45" means that the seller requires payment in full within 45 days

The debt­to­asset ratio compares a firm's total liabilities to its total assets and is a way of measuring the degree of financial leverage.

The use of debt to meet a firm's financial needs is termed _____.

Which of the following best describes a highly leveraged firm?

Snow Trails Inc., a ski resort located in Colorado, has 500 shares of outstanding common stock and has not issued any preferred stock. Net income is $27,500. Calculate its earnings per share.

Describe risk­return tradeoff and why it is important to financial managers.