Question 1

Projects with a negative net present value should be:

Accepted Answer

A)  rejected as it does not take the time value of money into account. 
B)  rejected since the expected future cash flows from the project are less than the cost of the investment. 
C)  accepted since the net present value does not alter the company's capital budgeting. 
D)  accepted since the expected future cash flows from the project exceed the cost of the investment. 
A)  rejected as it does not take the time value of money into account. 
B)  rejected since the expected future cash flows from the project are less than the cost of the investment. 
C)  accepted since the net present value does not alter the company's capital budgeting. 
D)  accepted since the expected future cash flows from the project exceed the cost of the investment.

Question 2

A drawback of commercial paper is that it takes a long time to mature, thus making it a risky asset to hold if the firm is likely to need cash in the near future.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an advantage of debt financing?

Accepted Answer

A)  The requirement to make fixed payments 
B)  Restrictive covenants on borrowings 
C)  Higher risk than equity financing 
D)  Tax­deductible interest payments 
A)  The requirement to make fixed payments 
B)  Restrictive covenants on borrowings 
C)  Higher risk than equity financing 
D)  Tax­deductible interest payments

Question 4

A high debt­to­asset ratio indicates that the firm is relying heavily on debt, or is "highly leveraged."

Accepted Answer

A) True 
 B)False

Question 5

Alex needs to acquire financial capital to purchase a printing press for his business. Alex 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.

Accepted Answer

A) True 
 B)False

Question 6

Historically, the most widely accepted goal of financial management has been to maximize the value of the firm to its owners.

Accepted Answer

A) True 
 B)False

Question 7

What is a pro forma statement? Describe the two major types of pro forma statements, and explain the role they play in financial planning.

Accepted Answer

A key element of financial planning is t

Question 8

The _____ forecasts the types and amounts of assets a firm will need to implement its future plans as well as the amount of additional financing the firm must arrange in order to acquire those assets.

Accepted Answer

A)  query report 
B)  cash budget 
C)  statement of cash flows 
D)  budgeted balance sheet 
A)  query report 
B)  cash budget 
C)  statement of cash flows 
D)  budgeted balance sheet

Question 9

Name and discuss two main goals of finance. Are these goals mutually exclusive? Explain your answer.

Accepted Answer

Historically, the goal of financial mana

Question 10

While keeping inventories as low as possible tends to reduce cost and improve efficiency, it also leaves a firm vulnerable to supply disruptions.

Accepted Answer

A) True 
 B)False

Question 11

A certificate of deposit is different from a savings account in that a certificate of deposit seldom requires the funds to remain on deposit for a fixed term.

Accepted Answer

A) True 
 B)False

Question 12

The assumed rate of interest that affects the present value of a cash flow to determine its future value is known as the _____.

Accepted Answer

A)  increase rate 
B)  risk­return tradeoff 
C)  risk rate 
D)  discount rate 
A)  increase rate 
B)  risk­return tradeoff 
C)  risk rate 
D)  discount rate

Question 13

Which of the following statements is true of the average collection period?

Accepted Answer

A)  Generally, the larger the average collection period ratio the better. 
B)  Average collection periods under 30 days are considered to be very strong. 
C)  The average collection period is computed by dividing accounts payable by average daily credit sales. 
D)  Average collection period ratios are classified under leverage ratios. 
A)  Generally, the larger the average collection period ratio the better. 
B)  Average collection periods under 30 days are considered to be very strong. 
C)  The average collection period is computed by dividing accounts payable by average daily credit sales. 
D)  Average collection period ratios are classified under leverage ratios.

Question 14

A pro forma balance sheet projects the types and amounts of assets a firm will need to execute future plans and shows the amount of additional financing needed to acquire those assets.

Accepted Answer

A) True 
 B)False

Question 15

_____ are short­term IOUs issued by the U.S. government that typically mature in 4, 13, or 26 weeks.

Accepted Answer

A)  Debentures 
B)  Covenants 
C)  Treasury bills 
D)  Trade credits 
A)  Debentures 
B)  Covenants 
C)  Treasury bills 
D)  Trade credits

Question 16

Long­term capital budgeting proposals are normally expected to incur negative cash flows in the initial time period, but eventually they should generate positive cash flows.

Accepted Answer

A) True 
 B)False

Question 17

The smaller the current ratio, the easier it is for a firm to pay its short­term debts.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is characteristic of a firm that is highly leveraged?

Accepted Answer

A)  Its owners will not want to issue more stock for fear of diluting their ownership. 
B)  Its financial return to stockholders will decrease during recession. 
C)  It can skip paying dividends to its stockholders without fearing bankruptcy. 
D)  It can skip paying interest to its creditors without fearing bankruptcy. 
A)  Its owners will not want to issue more stock for fear of diluting their ownership. 
B)  Its financial return to stockholders will decrease during recession. 
C)  It can skip paying dividends to its stockholders without fearing bankruptcy. 
D)  It can skip paying interest to its creditors without fearing bankruptcy.

Question 19

Equity financing is provided by:

Accepted Answer

A)  creditors; debt financing is provided by shareholders. 
B)  lenders; debt financing is provided by owners. 
C)  owners; debt financing is provided by creditors. 
D)  owners, debt financing is provided by investors. 
A)  creditors; debt financing is provided by shareholders. 
B)  lenders; debt financing is provided by owners. 
C)  owners; debt financing is provided by creditors. 
D)  owners, debt financing is provided by investors.

Question 20

What options do corporations have to acquire long­term funds?

Accepted Answer

Well­established corporations usually ha

Projects with a negative net present value should be:

A drawback of commercial paper is that it takes a long time to mature, thus making it a risky asset to hold if the firm is likely to need cash in the near future.

Which of the following is an advantage of debt financing?

A high debttoasset ratio indicates that the firm is relying heavily on debt, or is "highly leveraged."

Alex needs to acquire financial capital to purchase a printing press for his business. Alex 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.

Historically, the most widely accepted goal of financial management has been to maximize the value of the firm to its owners.

What is a pro forma statement? Describe the two major types of pro forma statements, and explain the role they play in financial planning.

The _____ forecasts the types and amounts of assets a firm will need to implement its future plans as well as the amount of additional financing the firm must arrange in order to acquire those assets.

Name and discuss two main goals of finance. Are these goals mutually exclusive? Explain your answer.

While keeping inventories as low as possible tends to reduce cost and improve efficiency, it also leaves a firm vulnerable to supply disruptions.

A certificate of deposit is different from a savings account in that a certificate of deposit seldom requires the funds to remain on deposit for a fixed term.

The assumed rate of interest that affects the present value of a cash flow to determine its future value is known as the _____.

Which of the following statements is true of the average collection period?

A pro forma balance sheet projects the types and amounts of assets a firm will need to execute future plans and shows the amount of additional financing needed to acquire those assets.

_____ are shortterm IOUs issued by the U.S. government that typically mature in 4, 13, or 26 weeks.

Longterm capital budgeting proposals are normally expected to incur negative cash flows in the initial time period, but eventually they should generate positive cash flows.

The smaller the current ratio, the easier it is for a firm to pay its shortterm debts.

Which of the following is characteristic of a firm that is highly leveraged?

Equity financing is provided by:

What options do corporations have to acquire longterm funds?

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

HRM: Building a Top Quality Workforce

Managing Information Technology: Finding New Ways to Learn and Link

Om: Putting It All Together Endnotes

Appendix Studentinstructor Review Cards

Online Appendix

Filters

Exam 9: Finance: Acquiring Using Funds to Maximize Value

Projects with a negative net present value should be:

A drawback of commercial paper is that it takes a long time to mature, thus making it a risky asset to hold if the firm is likely to need cash in the near future.

Which of the following is an advantage of debt financing?

A high debt­to­asset ratio indicates that the firm is relying heavily on debt, or is "highly leveraged."

Alex needs to acquire financial capital to purchase a printing press for his business. Alex 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.

Historically, the most widely accepted goal of financial management has been to maximize the value of the firm to its owners.

What is a pro forma statement? Describe the two major types of pro forma statements, and explain the role they play in financial planning.

The _____ forecasts the types and amounts of assets a firm will need to implement its future plans as well as the amount of additional financing the firm must arrange in order to acquire those assets.

Name and discuss two main goals of finance. Are these goals mutually exclusive? Explain your answer.

While keeping inventories as low as possible tends to reduce cost and improve efficiency, it also leaves a firm vulnerable to supply disruptions.

A certificate of deposit is different from a savings account in that a certificate of deposit seldom requires the funds to remain on deposit for a fixed term.

The assumed rate of interest that affects the present value of a cash flow to determine its future value is known as the _____.

Which of the following statements is true of the average collection period?

A pro forma balance sheet projects the types and amounts of assets a firm will need to execute future plans and shows the amount of additional financing needed to acquire those assets.

_____ are short­term IOUs issued by the U.S. government that typically mature in 4, 13, or 26 weeks.

Long­term capital budgeting proposals are normally expected to incur negative cash flows in the initial time period, but eventually they should generate positive cash flows.

The smaller the current ratio, the easier it is for a firm to pay its short­term debts.

Which of the following is characteristic of a firm that is highly leveraged?

Equity financing is provided by:

What options do corporations have to acquire long­term funds?

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

HRM: Building a Top Quality Workforce

Managing Information Technology: Finding New Ways to Learn and Link

Om: Putting It All Together Endnotes

Appendix Studentinstructor Review Cards

Online Appendix

Filters

A high debttoasset ratio indicates that the firm is relying heavily on debt, or is "highly leveraged."

_____ are shortterm IOUs issued by the U.S. government that typically mature in 4, 13, or 26 weeks.

Longterm capital budgeting proposals are normally expected to incur negative cash flows in the initial time period, but eventually they should generate positive cash flows.

The smaller the current ratio, the easier it is for a firm to pay its shortterm debts.

What options do corporations have to acquire longterm funds?