Exam 9: Finance: Acquiring Using Funds to Maximize Value

Cathy purchased several corporate bonds from a large corporation five years ago. She decides to sell those bonds to raise funds to start a business. Since the bonds have a maturity date that is 10 years from the date of purchase, Cathy will not be able to sell her bonds to other investors.

A cash budget typically covers a five­year period and forecasts the types of assets a firm will need to implement its future plans.

Retained earnings are the profits a firm reinvests and are often a major source of long­term funds.

Firms that would benefit from a factoring service are firms that:

Money market mutual funds are a way for small investors to get into the market for securities.

What is spontaneous financing? What is the most common source of this type of financing? If you see 2/10 net 30 on a shipment invoice, what does it tell the buyer about the payment terms?

Dan wanted to invest his savings of $1000.00. He found an investment opportunity that would earn 7 percent interest compounded annually each year for the next two years. If he puts his money into this investment, in the first year he will earn $70 in interest, while in the second year he will earn _____ in interest.

The traditional goal of financial management has been to maximize the value of the firm to its owners.

United Financial Corporation is a large, well­known company. Its financial managers project that United Financial will require short­term financing in the near future. They believe that borrowing short­term loans from banks is not a good option as interest rates on these loans are undesirably high. The financing option that the financial managers are most likely to consider is to:

Leverage increases the return on the stockholder's investments when times are good, but it also reduces the financial return to stockholders when times are bad.

If a firm financed half its assets with debt and half with owners' equity, its debt ratio would be _____.

Harry Haddock is the Chief Financial Officer of a small construction company and has just been presented with the sales budget and other cost budgets. He uses this information to develop a forecast of the firm's net income for the next year. In this scenario, Harry is reviewing the company's:

A _____ is used to develop a forecast of net income for the planning period of the firm.

Sally Meadows works for Swictek Industries. Her primary responsibilities include management of the firm's working capital and the analysis of long­ term investment opportunities for Swictek. Sally is a part of the firm's _____

A positive net present value indicates that the cost of the project is greater than the present values of the expected cash flows from the project.

Define accounts receivable. What are the advantages and disadvantages of having a large accounts receivable account? Describe how corporations manage their accounts receivable accounts.

Inventories include stocks of finished goods, work­in­process, parts, and materials that firms hold as part of doing business.

For financial managers to be socially responsible, it is necessary that they:

Pro forma statements are idealized financial statements that show the firm's average financial performance over the past 10 years.

Which of the following decisions can help a CEO commit to social responsibilities?