Exam 9: Finance: Acquiring and Using Funds to Maximize Value

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.

The time value of money reflects the fact that:

Pro Corp. and Darths Inc. are two companies that are identical in every aspect except for the fact that Pro only uses equity financing, while Darths relies heavily on debt financing. Over the past year, the firms had identical earnings before interest and taxes. If net income for both firms is high, _____.

Maurio Pena, a petroleum company, needs to pay $2 million to Zaiten Inc. Maurio Pena sells its old assets to another company and obtains enough money to pay its debt. In this scenario, Maurio Pena's ability to sell its old assets to another company in order to pay its debt to Zaiten is measured by analyzing _____.

Financial managers use__________to assess the financial strengths and weaknesses of their firm.

Cash budgets normally cover a one-year period and show projected cash inflows and outflows for each month.

_____ are ratios that measure the extent to which a firm relies on debt financing in its capital structure.

Nestrum, a real estate management company, employs qualified analysts to predict customers' buying habits and budgets. Hence, the company has been able to acquire at least one customer per month. In the given scenario, the analysts most likely need to analyze the company's _____ to measure how effectively it has been using its assets to generate revenues.

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?

If an invoice lists the terms of trade credit as 2/10 net 30, it means that the supplier is offering a 10 percent cash discount off the invoice price if the buyer pays within 2 days.

A manufacturing firm does not necessarily need an inventory of parts and materials to assemble its products.

Mezzinzi Bank offers loans to companies in the form of bonds. The companies who apply for these loans can repay the amount over a prolonged period of time. Which of the following financing options is being offered by Mezzinzi Bank in the given scenario?

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.

Bon Suede, a shoe manufacturing company, produces ten thousand units of shoes of a distinct design. In 2015, the company was able to sell all the units within six months of manufacture, prompting the company to produce an additional ten thousand units. Which of the following financial ratios has most likely been analyzed in the given scenario?

Financial managers evaluate a firm's current strengths and weaknesses by computing ratios that compare values of key accounts listed on their firm's:

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?

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?

Connink, a software development firm, invested on developing new products from the company's earnings from the previous year. Which of the following sources of long-term funds is being used by Connink in the given scenario?

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

Trumbeak Inc., an electronics company, needs to pay its debt to Breston Bank the following year. Trumbeak Inc. sells half of its shares to other companies and is able to acquire the cash it needs to pay its debt. In this scenario, Trumbeak Inc.'s ability to sell its shares to other companies in order to pay its debt to Breston Bank is measured by calculating _____.