Deck 17: Financial Management

Question 1

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
A(n)_____is a document that specifies the funds a company will need for a period of time,the time of inflows and outflows,and the most appropriate uses of funds.

Answer 1

g

Question 2

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
A(n)_____ is an executive who develops and implements a company's financial plan and determines the most appropriate sources and uses of funds.

Answer 2

l

Question 3

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
_____ consists of funds provided by a company's owners when they reinvest earnings,make additional contributions,liquidate assets,issue stock,or raise capital.

Answer 3

f

Question 4

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
Similar to venture capitalists,_____ are investment companies that raise money to invest in all types of promising companies,including mature businesses.

Question 5

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
The technique of increasing the rate of return on an investment by financing it with borrowed funds is called _____.

Question 6

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
When Disney purchased Marvel using a combination of cash and securities,Disney made a(n)_____.

Question 7

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
_____ is extended by suppliers when a company receives goods or services,agreeing to pay them at a later date.

Question 8

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
A transaction in which public shareholders are bought out and the company reverts to private status is known as a(n)_____.

Question 9

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
_____ are low-risk securities that either have short maturities or can easily be sold in secondary markets.

Question 10

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
The process by which decisions are made regarding investments in long-lived assets is _____.

Question 11

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
Stocks or bonds that are sold exclusively to a small group of major investors are known as _____.

Question 12

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
A(n)_____ is a sale of assets by a company.

Question 13

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
An offer made by an outside investor or company to the target company's shareholders is a(n)_____.

Question 14

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
Certificates of indebtedness sold to raise long-term funds for a corporation or government agency are known as _____.

Question 15

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
Funds obtained through borrowing are _____.

Question 16

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
In _____,a business sells its accounts receivable to either a bank or finance company at a discount.

Question 17

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
_____ is the amount of assets needed to generate a given level of sales.

Question 18

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
_____ raise money from wealthy individuals and institutional investors,and invest these funds in small,start-up companies.

Question 19

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
A mix of a company's debt and equity capital is _____.

Question 20

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
A sell-off is a type of _____.

Question 21

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
Companies within the automobile industry typically have higher _____ ratios.

Question 22

Explain how the cash inflows and outflows of a business are similar to those of a household.

Question 23

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
_____ involves managing working capital and making sure that too much cash is not tied up in operations.

Question 24

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
In a _____ type of transaction,the assets sold form a new firm.

Question 25

Discuss the educational requirements and skills that are essential to become a financial manager.

Question 26

Illustrate the concept of inventory control.

Question 27

Explain the difference between an expansion decision and a replacement decision.

Question 28

Explain the concept of risk-return trade-off.

Question 29

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
Periodic cash payments made to shareholders are known as _____.

Question 30

Discuss the responsibilities of financial managers.

Question 31

Explain what can be indicated by the growing importance of financial professionals.

Question 32

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
_____ are private investment companies open only to qualified large investors.

Question 33

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
In addition to fees,some lenders require the borrower to keep so-called_____-5 to 20% of the outstanding loan amount-in a checking account.

Question 34

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
The debt-to-equity (D/E)ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented by _____.

Question 35

Explain the concept of leverage.

Question 36

Describe the process involved in preparing a financial plan.

Question 37

Complete the following using the terms listed.
a.Venture capitalists
b.private placements
c.factoring
d.capital investment analysis
e.debt capital
f.equity capital
g.financial plan
h.leveraged buyout
i.private equity funds
j.divestiture
k.Marketable securities
l.financial manager
m.tender offer
n.Trade credit
o.leverage
p.capital structure
q.Asset intensity
r.bonds
s.spin-off
t.Hedge funds
u.Inventory control
v.dividends
x.debt-to-equity (D/E)
y.compensating balances
z.shareholder's equity
Earnings that are paid in dividends are not reinvested in the firm and don't contribute additional _____.

Question 38

Explain each role in the hierarchy of financial management at a large firm.

Question 39

Explain why companies frequently choose to use debt.

Question 40

What is the purpose of a financial plan?

Question 41

What is an LBO?

Question 42

In the context of the role of the financial manager,who among the following reports directly to the chief financial officer?

A)The CEO
B)The COO
C)The treasurer
D)The investor

Question 43

Exemplify the concept of synergy.

Question 44

Discuss the two types of short-term bank loans.

Question 45

The process that periodically checks actual revenues and expenses against forecast values is _____.

A)strategic planning
B)leveraging
C)budgeting
D)financial control

Question 46

Which of the following is the best definition of financial risk?

A)It is the uncertainty about the gain or loss from an investment.
B)It is the uncertainty that an investment's actual return will be less than its expected return.
C)It is the possibility that an investment will earn a negative return.
D)It is the possibility that an investment will lose money.

Question 47

Randy works in the financial division of his company and is responsible for preparing monetary forecasts and analyzing major investment decisions.What is Randy's title?

A)Treasurer
B)Chief financial officer
C)Vice president for financial management
D)Controller

Question 48

How do a company's investment opportunities influence its dividend policy?

Question 49

A(n)_____ is a document that specifies the funds a company will need for a period of time,the timing of inflows and outflows,and the most appropriate sources and uses of funds.

A)asset management plan
B)leverage plan
C)strategic plan
D)financial plan

Question 50

In a typical firm,the _____ is the chief accounting manager.

A)chief executive officer
B)controller
C)treasurer
D)chief financial officer

Question 51

The gain or loss that results from an investment over a specified period of time is known as _____.

A)risk
B)return
C)probability
D)value

Question 52

Describe a disadvantage of equity capital.

Question 53

Explain,using a suitable example,why automobile companies have high debt-to equity ratios.

Question 54

Describe hedge funds.

Question 55

What is factoring?

Question 56

Discuss how Hyde Park Venture Partners (HPVP),a Chicago-based firm,exemplifies the concept of venture capitalism.

Question 57

Which of the following individuals has the direct responsibility for shareholder relations?

A)The controller
B)The chief financial officer
C)The chief executive officer
D)The treasurer

Question 58

The financial manager for a typical corporation is responsible for _____.

A)designing the accounting system
B)gathering,recording,and reporting financial information
C)determining the most appropriate sources and uses of funds
D)preparing operating budgets for various departments

Question 59

Discuss why companies tend to rely on long-term funds instead of short-term funds.

Question 60

Why do firms divest assets?

Question 61

Kevin's company needs to obtain funds in order to keep the business going;however,he does not want stockholders influencing the direction of his company.What type of financing should Kevin acquire?

A)Angel investment
B)Venture capital
C)Debt capital
D)Equity capital

Question 62

A(n)_____ is a transaction in which one company buys another.

A)acquisition
B)merger
C)takeover
D)synergy

Question 63

Rexton Pharmaceuticals needs to raise funds to buy new production equipment.The financial manager would probably suggest that his company raise debt capital by _____.

A)using accumulated earnings
B)selling stock
C)selling marketable securities
D)borrowing money from a bank

Question 64

The sovereign wealth fund is a variation of _____.

A)market securities
B)private equity fund
C)private placements
D)debt capital

Question 65

Borrowing money _____.

A)creates leverage
B)increases equity
C)decreases risk
D)reduces liquidity

Question 66

Grace is the financial manager for Branson Inc.and has decided to raise additional funds for the company by raising equity capital.She might do so by _____.

A)selling bonds
B)persuading existing owners to contribute additional funds
C)selling marketable securities
D)establishing a line of credit with a local bank

Question 67

All of the following are sources of short-term funds EXCEPT _____.

A)commercial paper
B)trade credit
C)corporate bonds
D)bank loans

Question 68

All of the following actions result in equity capital EXCEPT _____.

A)issuing bonds
B)liquidating assets
C)issuing stock
D)reinvesting earnings

Question 69

A company's financial plan should answer all of the following questions EXCEPT _____.

A)What is the contingency plan in case of bankruptcy?
B)What funds will the company require during the appropriate period of operations?
C)How will it obtain the necessary money?
D)When will it need more cash?

Question 70

The term used to describe the benefits produced by a merger or acquisition is _____.

A)partnership
B)leverage
C)synergy
D)profit

Question 71

_____ are investment companies that raise funds from wealthy individuals and institutional investors and use the funds to make investments in both public and private companies.

A)Venture capitalists
B)Private placements
C)Hedge funds
D)Private equity funds

Question 72

Which of the following is true of short-term funds?

A)They are more expensive than long-term funds.
B)They are less risky than long-term funds.
C)They have volatile interest rates.
D)They include equity and exclude current liabilities.

Question 73

_____ would be the LEAST likely to obtain a private placement.

A)Small individual investors
B)Life insurance companies
C)Commercial banks
D)Pension fund managers

Question 74

Major current assets include all of the following EXCEPT_____.

A)accounts receivable
B)stockholders' equity
C)marketable securities
D)cash

Question 75

Britt raises money from wealthy individuals and institutional investors,and invests them in a variety of promising new companies.In exchange,he will become part owner of those businesses.Britt is a(n)_____.

A)angel investor
B)underwriter
C)entrepreneur
D)venture capitalist

Question 76

When a firm receives goods or services from a supplier and agrees to pay for them at a later date,this arrangement is called _____.

A)a short-term loan
B)a repurchase agreement
C)trade credit
D)commercial credit

Question 77

Leverage _____ the return to shareholders and _____ the risk of their investment.

A)lowers;lowers
B)lowers;increases
C)increases;lowers
D)increases;increases

Question 78

Most private placements are _____.

A)U.S.government securities
B)corporate debt issues
C)corporate equity issues
D)municipal debt issues

Question 79

Which of the following assets would a firm most likely finance using long-term sources?

A)Inventory
B)Accounts receivable
C)Marketable securities
D)Another company

Question 80

Short-term assets are expected to be converted into cash within _____.

A)a month
B)a year
C)four months
D)six months