Exam 8: Finance: Acquiring and Using Funds to Maximize Value

Dan inherited $1000 from his grandmother's estate.He has found an investment opportunity that will earn 7% interest compounded annually each year for the next two years.If he puts his money into this investment,what will he earn in interest at the end of two years?

Cash equivalents are long-term,unsecured but highly liquid assets that firms list in the fixed assets section on their balance sheet.

At Chips and Dips,a local convenience market,an increase in the inventory turnover ratio would indicate which of the following?

Interest payments on a firm's debt are a tax-deductible expense.

Pro forma income statements forecast the assets a firm will need in the next accounting period.

What are two major projected financial statements developed during financial planning?

Which term is used to describe the mix of equity and debt financing a firm uses to meet long-term financing needs?

Jasmine started a small business two years ago.The business is just now seeing some success,and Jasmine notes that she has a few thousand dollars more in her bank account than she currently needs to pay her bills.However,because of the uncertainty of cash flows in her new business,she is concerned that she may need access to these funds on fairly short notice in the future.Given this situation,what should Jasmine do?

Return on equity and return on assets are both classified as what type of ratios?

One advantage of using factors as a source of short-term financing is that it allows the firm to outsource its collection efforts,thus avoiding the hassle of collecting accounts receivables from customers who pay late.

Define NPV,and describe how it is used to evaluate capital budgeting proposals.

Retained earnings are considered a form of equity financing.

Firms that sell goods that spoil easily or quickly become obsolete would want a very low inventory turnover ratio.

At Sips and Chips,a local cybercafé,a financial manager has calculated the debt to equity ratio and discovered it is equal to one.What does this indicate about Sips and Chips?

Cash budgets can help financial managers determine when their firms are likely to have short-term surpluses of cash available to pay off loans or invest in other assets.

United Financial Corporation is a large,well-known company with an excellent credit rating.Its financial managers project that United Financial will need to obtain some short-term financing in the near future.These same managers believe that interest rates on short-term loans from banks are currently undesirably high.What is one financing option that these financial managers might find attractive?

When financial managers are concerned about the ability to pay off debts that will come due in the next year,they are likely to focus on which of the following?

Timmy's Timbers has just arranged a $300 000 line of credit with its banker for the next year.What does this mean for Timmy's Timbers?

Which of the following is the difference between a firm's current assets and current liabilities?

Sally McGregor sells lawn and garden products in bulk to companies that do lawn and garden work.She extends credit to her customers for 60 days,but she is worried about cash flow problems.But this is a highly competitive business and most of her competitors also offer credit-some of them for up to 90 days.Sally is also concerned with the cost of billing and collecting money from her customers,some of whom make it a habit of paying late.Which of the following represents the most useful advice to Sally?