Question 1

Which of the following is a financing method for short-term funds?
Retained earnings
Trade credit
Equity financing
Common stock
Bonds

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Question 2

What is the meaning of "par value" when discussing common stock?
The current price of a share of stock
The selling price of the previous day's last transactions involving that stock
The average price paid on the previous day's trades
The face value of a share of common stock
One dollar

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Question 3

What is an advantage of issuing a bond with a sinking fund provision?
This provision offers greater security to an investor because funds to retire the bond issue are set aside each year into the sinking fund.
The bonds may be converted to a specified number of shares of common stock at the firm's convenience.
The firm has the right to call in the outstanding bonds at any time and thus sink the bond issue.
The firm can decide to redeem the fund at any time.
The firm may retire portions of the bond issue at different predetermined dates.

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Question 4

In most cases, equity financing takes two forms:
revolving credit agreements and lines of credit.
bank loans and commercial paper.
issuing common stock and retaining the firm's earnings.
issuing common stock and lines of credit.
commercial paper and retaining the firm's earnings.

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Question 5

Just like clockwork, Mr. and Mrs. Clark, an elderly retired couple, walk in the bank every year on November 1 to clip coupons from their bonds. What kind of bonds are these?
Registered
Secured
Callable
Bearer
Retirement

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Question 6

John bought $40 000 worth of receivables for 60 percent of that sum ($24 000). He will profit if the money he eventually collects exceeds the amount he paid for the receivables. John is involved in
pledging accounts receivable.
leveraging goods-in-process inventory.
collateralizing inventory.
factoring accounts receivable.
hedging.

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Question 7

Monolith Corp.'s credit rating is so high that it is able to issue ________, which is backed solely by the firm's promise to pay.
accounts receivable
commercial paper
promissory notes
trade credit
debentures

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Question 8

What is the major source of long-term debt financing for most large corporations?
Corporate bonds
Long-term loans
Trade credit
Equity financing
Retained earnings

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Question 9

A factor buys $50 000 worth of receivables. How much will the factor eventually sell the receivables for?
$40 000
$45 000
$80 000
$85 000
It is impossible to know, given the information that is provided

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Question 10

The two primary sources of long-term debt funds are
lines of credit and revolving credit agreements.
common stock and preferred stock.
trade credit and commercial paper.
commercial paper and bank loans.
long-term loans and the sale of bonds.

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Question 11

What is the difference between registered bonds and bearer bonds?
Registered bonds have to be registered with the government of Canada, but bearer bonds do not.
Registered bonds generally pay lower rates of interest than bearer bonds.
Registered bondholders automatically receive interest cheques, but holders of bearer bonds have to clip coupons and send them to the company.
Registered bonds have lower financial risk than bearer bonds.
There is really no practical difference between registered and bearer bonds.

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Question 12

A ________ bond permits the issuing firm to retire portions of the bond issue at different predetermined dates.
municipal
serial
secured
callable
convertible

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Question 13

John is a factor who has just bought $40 000 worth of finished goods for $24 000. The profit that he will make on this transaction depends on
the quality of the receivables, the cost of collecting them, and interest rates.
the cash he has available, and the trade credit he is able to get.
the availability of government loans, the quality of the receivables, and the interest rate.
the interest rate, the cost of collecting the receivables, and the maturity date of bonds of his company.
the general state of the economy, the number of firms who might be interested in the receivables, and the amount of money those firms have available.

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Question 14

Which of the following is correct with respect to long-term loans?
Businesses try to avoid them whenever possible because banks charge high interest rates.
Large borrowers may have trouble finding lenders to supply enough funds.
Once a loan's terms are set, they cannot be changed until all the money is paid back.
Loans are difficult to arrange quickly.
The time frame of the loan may be difficult to match with the borrower's needs.

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Question 15

Manitoba Hydro has steady, predictable profits and cash-flow patterns. Its best choice for long-term funding is most likely
factoring accounts receivable.
common stock.
either common or preferred stock but not bonds.
preferred stock.
bonds.

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Question 16

Mega Computer needs a large amount of long-term financing for a long period of time. The best choice is most likely
loans.
preferred stock.
common stock.
commercial paper.
bonds.

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Question 17

Issuers of bonds are most likely to call them in when
the prevailing rate of interest exceeds that stipulated on the bonds.
when investor confidence goes down.
the prevailing rate of interest is less than that stipulated on the bonds.
when investor confidence goes up.
when the government revises its capital gains tax law.

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Question 18

Which of the following is a source of long-term borrowing from outside the corporation?
Corporate bonds
Sale of equity shares
Commercial paper
Line of credit
Inventory loans

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Question 19

What is the difference between a line of credit and a revolving credit agreement?
A line of credit is normally used by charitable and public-sector organizations, while a revolving credit agreement is usually used by private-sector business firms.
More money can be borrowed with a line of credit than with a revolving credit agreement.
There is no guarantee that the money will be available when it is requested in a line of credit, but there is an agreement that it will be available when requested in a revolving credit agreement.
A line of credit is only obtainable from a credit union, while a revolving credit agreement is only obtainable from a bank.
All of these

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Question 20

Suppose you were interested in purchasing a printing company. This might be an attractive target if the ________ value of the stock was less than the ________ value.
book; market
par; market
book; par
market; book
market; par

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Quiz 15: Financial Decisions and Risk Management

Which of the following is a financing method for short-term funds? Retained earnings Trade credit Equity financing Common stock Bonds

What is the meaning of "par value" when discussing common stock? The current price of a share of stock The selling price of the previous day's last transactions involving that stock The average price paid on the previous day's trades The face value of a share of common stock One dollar

In most cases, equity financing takes two forms: revolving credit agreements and lines of credit. bank loans and commercial paper. issuing common stock and retaining the firm's earnings. issuing common stock and lines of credit. commercial paper and retaining the firm's earnings.

Just like clockwork, Mr. and Mrs. Clark, an elderly retired couple, walk in the bank every year on November 1 to clip coupons from their bonds. What kind of bonds are these? Registered Secured Callable Bearer Retirement

Monolith Corp.'s credit rating is so high that it is able to issue ________, which is backed solely by the firm's promise to pay. accounts receivable commercial paper promissory notes trade credit debentures

What is the major source of long-term debt financing for most large corporations? Corporate bonds Long-term loans Trade credit Equity financing Retained earnings

A factor buys $50 000 worth of receivables. How much will the factor eventually sell the receivables for? $40 000 $45 000 $80 000 $85 000 It is impossible to know, given the information that is provided

The two primary sources of long-term debt funds are lines of credit and revolving credit agreements. common stock and preferred stock. trade credit and commercial paper. commercial paper and bank loans. long-term loans and the sale of bonds.

A ________ bond permits the issuing firm to retire portions of the bond issue at different predetermined dates. municipal serial secured callable convertible

Manitoba Hydro has steady, predictable profits and cash-flow patterns. Its best choice for long-term funding is most likely factoring accounts receivable. common stock. either common or preferred stock but not bonds. preferred stock. bonds.

Mega Computer needs a large amount of long-term financing for a long period of time. The best choice is most likely loans. preferred stock. common stock. commercial paper. bonds.

Which of the following is a source of long-term borrowing from outside the corporation? Corporate bonds Sale of equity shares Commercial paper Line of credit Inventory loans

Suppose you were interested in purchasing a printing company. This might be an attractive target if the value of the stock was less than the value. book; market par; market book; par market; book market; par