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

Investing in fixed assets would be classified under operating budgeting.

A high burn rate would indicate that the company is doing which of the following?

Which of the following in its narrowest sense consists of a firm's holdings of currency and demand deposits?

The Tuckerverse Corporation just received a shipment of parts from a supplier that contained the terms 2/15 net 30.Under these terms the firm has no real financial incentive to pay this bill earlier than its due date.

What is the main advantage of financial leverage?

At Sips and Chips,a local cybercafé,management is measuring the profit earned on each dollar invested by the shareholders.What are the managers measuring?

Accurately forecasting cash flows can be a challenge for financial managers as they must analyze only which of the following?

What are the basic challenges that finance managers face?

Which of the following is used to predict when a firm will likely experience temporary shortages or surpluses of cash?

Which of the following represents an advantage of offering more lenient credit terms to a firm?

Retained earnings is the net income a firm makes when revenues exceed liabilities.

Which cash equivalent raises funds by selling shares to large numbers of investors and then pools these funds to purchase short-term,liquid securities?

You have the opportunity to spend $1000 today to purchase an investment that will pay you $360 next year,$360 in two years,and $400 in three years.This is clearly a good deal because the total amount of money you will receive over this three-year period is $1120,which is more than the $1000 you'd have to pay for the investment.

Define capital budgeting,and explain how it is used to evaluate business proposals.

Define the two primary sources of equity financing.

The Lottadoe Corporation is considering financing some new long-term investments by issuing additional long-term debt.One disadvantage of this approach is that it locks the firm into making fixed payments that could create cash flow problems if the firm's earnings are lower than expected.

Capital structure is the value of a firm's physical assets,such as its buildings and other permanent structures,less accumulated depreciation.

Lottadoe and Bigbux are two companies that are identical in every respect except that Lottadoe uses only equity financing while Bigbux relies heavily on debt financing.Over the past year,the firms had identical net incomes before interest and taxes were taken into account.If the firms faced a rough year with very low earnings,what would be the result?

How are lines of credit and revolving credit arrangements similar? How are they different?

T-bills are long-term IOUs issued by corporations and regulated by the federal government.