Question 1

All of the following are TRUE regarding long-term investments in any given enterprise EXCEPT

Accepted Answer

A)   only a limited supply of funds is available.
B)   the most efficient and profitable companies attract the lowest-cost funds.
C)   newer and less prosperous firms must pay higher costs to attract capital.
D)   an unlimited supply of funds is available.
E)   if companies manage their financial resources wisely, they can reduce the costs of their funds.F) A) and B)
G) A) and C)

Question 2

Classic Cars Corporation makes the vast majority of its car sales on credit. What is something Classic Cars Corporation may do to encourage quick payment of these accounts receivable?

Accepted Answer

A)   Offer customers discounts if they pay off their balances within a specified time period.
B)   Threaten to charge customers extra money if they pay their balances after the specified time period is over.
C)   Offer customers a free upgrade to a nicer car model if they pay their balances off on time.
D)   Send customer accounts to collections if they do not pay off their balances on time.
E)   Extend credit to customers who don't have good credit ratings to encourage them to feel obligated to pay their balances quickly.F) B) and E)
G) A) and B)

Question 3

Discuss securities markets. How are securities sold in primary and secondary markets?

Accepted Answer

Securities markets provide a mechanism f...

Question 4

Rhea is traveling internationally, selling her company's computer software. While she is in Ireland, she makes a deposit of $10,000 in a bank there. What short-term investment does this scenario describe?

Accepted Answer

A)   an international deposit
B)   a eurodollar deposit
C)   commercial paper
D)   a commercial certificate of deposit
E)   an international certificate of depositF) A) and E)
G) B) and D)

Question 5

A surfboard manufacturer orders 100 units of fiberglass material and promises to pay the supplier at a later date. The surfboard manufacturer will record the amount to be paid as

Accepted Answer

A)   a secured loan.
B)   accounts receivable.
C)   a serial bond.
D)   accounts payable.
E)   trade credit.F) A) and C)
G) A) and B)

Question 6

Which type of commercial loan offers an advantage when interest rates are falling but represents a distinct disadvantage when interest rates are rising?

Accepted Answer

A)   a floating-rate loan
B)   a non-variable loan
C)   an unsecured loan
D)   a secured loan
E)   a flexible loanF) D) and E)
G) A) and E)

Question 7

If the offering price of a stock is $4 and its capital in excess of par is $1, the par value of the stock is

Accepted Answer

A)   $2.00.
B)   $3.50.
C)   $5.00.
D)   $7.00.
E)   $10.00.F) B) and D)
G) A) and B)

Question 8

Esther is a financial manager who focuses on current assets and liabilities. Her chief goal is to maximize returns on all of the following EXCEPT

Accepted Answer

A)   cash.
B)   inventory.
C)   temporary investments of idle cash.
D)   accounts receivable.
E)   accrued taxes.F) C) and E)
G) A) and B)

Question 9

Marcus works for a gaming company that is developing a new online car racing game. Since developing new software is expensive, the company takes a loan. What is true regarding this scenario?

Accepted Answer

A)   As long as this company develops a fun game, regardless of costs versus returns, the company will profit.
B)   The returns from this project must cover the costs of operating the project but also the cost of capital used to finance the project.
C)   Since the finance company pays for the operating expenses, the gaming company only needs the returns from the project to cover the interest expenses for the loan.
D)   Since this type of business loan is interest-free, the returns from this project only need to cover the gaming company's operating expenses.
E)   Even if this company can't cover all of its costs, it will eventually succeed because the market is strong.F) B) and D)
G) B) and C)

Question 10

Whether secured or unsecured, bonds may be repaid

Accepted Answer

A)   only after the maturity date passes.
B)   only when bondholders decide to cash out the bond.
C)   in daily installments.
D)   in one lump sum or with many payments spread out over a period of time.
E)   in payments that start after the maturity date and continue for several years.F) B) and C)
G) A) and D)

Question 11

All of the following are reasons that performance measures, such as averages and indexes, are important EXCEPT

Accepted Answer

A)   investors want to know how well their investments are performing relative to the market as a whole.
B)   financial managers need to know how their companies' securities are performing when compared with their competitors' securities.
C)   they greatly diminish competition among companies' securities.
D)   they indicate the performance of a particular securities market.
E)   they provide a measure of the overall health of the economy.F) A) and E)
G) None of the above

Question 12

Fabulous Finds, a large home decorating company with stores located nationwide, wants to collect cash from its customers quickly but pay out cash to its suppliers slowly. How might Fabulous Finds succeed in accomplishing this goal?

Accepted Answer

A)   use electronic funds transfers to collect payments and checks to make payments
B)   use checks to collect payments and electronic funds transfers to make payments
C)   have customers send payments directly to its mailing address and send payments to suppliers via their lockboxes
D)   use electronic funds transfers for both, but set the delivery dates to one day for payments from customers and three or four days for payments to suppliers
E)   use checks for both, but require customers to send checks via express mail and send checks to suppliers via regular mailF) C) and D)
G) A) and E)

Question 13

Callie's Curtain Shop invests the cash it earns in marketable securities, for periods as short as one day or for as long as one year, until it is needed. What temporary investment would Callie's Curtain Shop most likely use to invest these funds?

Accepted Answer

A)   certificates of deposit
B)   tradable equities
C)   transaction balances
D)   stock dividends
E)   cash depositsF) B) and C)
G) C) and D)

Question 14

Valerie is a financial manager for a large office supply store. One of the most important facets of her job is ensuring that sufficient, but not excessive, funds are on hand to meet the store's obligations. What current asset is Valerie managing in this scenario?

Accepted Answer

A)   accrued taxes
B)   temporary investments
C)   inventory
D)   cash
E)   accounts receivableF) All of the above
G) C) and D)

Question 15

What type of bonds became an attractive way of financing corporate mergers in the mid-1980s?

Accepted Answer

A)   secured bonds
B)   serial bonds
C)   unsecured bonds
D)   junk bonds
E)   floating-rate bondsF) B) and C)
G) A) and B)

Question 16

Commercial certificates of deposit (CDs) work exactly the same way as consumer certificates of deposit, except that commercial CDs must be held until maturity.

Accepted Answer

A) True 
 B)False

Question 17

Trendy Fashions is a national chain of clothing stores that is offering its stock to the public for the first time. What does this scenario best describe?

Accepted Answer

A)   an initial public offering
B)   a public debut
C)   a public premiere
D)   a new issue
E)   a public issueF) A) and C)
G) A) and D)

Question 18

Money owed to a business by credit customers is referred to as

Accepted Answer

A)   accounts receivable.
B)   accounts payable.
C)   trade credit.
D)   working capital.
E)   idle cash.F) A) and E)
G) A) and B)

Question 19

Pipe Supply Company offers its customers trade credit terms of 2/10 net 30. What does this mean?

Accepted Answer

A)   Customers have 2 days to pay 10 percent of their bill, and then, they have 30 days to pay the rest.
B)   Customers can save 2 percent off the invoice amount if they pay within 10 days, or they can pay the entire amount within 30 days.
C)   Customers can save 30 percent off their invoice amount if they pay 10 percent of the bill within 2 days.
D)   Customers can save $2 for every $10 they spend if they pay within 30 days.
E)   Customers can save 10 percent off the invoice amount if they pay within 2 days, or they can pay the entire amount within 30 days.F) All of the above
G) A) and C)

Question 20

Mauricio owns a catering business, and he has put all his savings into running this business. During the busy holiday season, he realizes that he needs short-term help financing the business' operations, so he goes to the bank to request $25,000. The bank agrees to lend Mauricio this amount of money. What type of bank loans does this scenario best describe?

Accepted Answer

A)   an unsecured loan
B)   a certificate of deposit
C)   a trade credit
D)   a secured loan
E)   a line of creditF) C) and D)
G) B) and D)

Exam 16: Financial Management and Securities Markets

Commercial certificates of deposit (CDs) work exactly the same way as consumer certificates of deposit, except that commercial CDs must be held until maturity.

Correct Answer
verified

Marcus works for a gaming company that is developing a new online car racing game. Since developing new software is expensive, the company takes a loan. What is true regarding this scenario?

Correct Answer
verified

What type of bonds became an attractive way of financing corporate mergers in the mid-1980s?

Correct Answer
verified

Pipe Supply Company offers its customers trade credit terms of 2/10 net 30. What does this mean?

Correct Answer
verified

Esther is a financial manager who focuses on current assets and liabilities. Her chief goal is to maximize returns on all of the following EXCEPT

Correct Answer
verified

Callie's Curtain Shop invests the cash it earns in marketable securities, for periods as short as one day or for as long as one year, until it is needed. What temporary investment would Callie's Curtain Shop most likely use to invest these funds?

Correct Answer
verified

Valerie is a financial manager for a large office supply store. One of the most important facets of her job is ensuring that sufficient, but not excessive, funds are on hand to meet the store's obligations. What current asset is Valerie managing in this scenario?

Correct Answer
verified

If the offering price of a stock is $4 and its capital in excess of par is $1, the par value of the stock is

Correct Answer
verified

Rhea is traveling internationally, selling her company's computer software. While she is in Ireland, she makes a deposit of $10,000 in a bank there. What short-term investment does this scenario describe?

Correct Answer
verified

All of the following are TRUE regarding long-term investments in any given enterprise EXCEPT

Correct Answer
verified

All of the following are reasons that performance measures, such as averages and indexes, are important EXCEPT

Correct Answer
verified

Discuss securities markets. How are securities sold in primary and secondary markets?

Correct Answer
verified
Securities markets provide a mechanism f...
View Answer

A surfboard manufacturer orders 100 units of fiberglass material and promises to pay the supplier at a later date. The surfboard manufacturer will record the amount to be paid as

Correct Answer
verified

Which type of commercial loan offers an advantage when interest rates are falling but represents a distinct disadvantage when interest rates are rising?

Correct Answer
verified

Fabulous Finds, a large home decorating company with stores located nationwide, wants to collect cash from its customers quickly but pay out cash to its suppliers slowly. How might Fabulous Finds succeed in accomplishing this goal?

Correct Answer
verified

Whether secured or unsecured, bonds may be repaid

Correct Answer
verified

Correct Answer
verified

Classic Cars Corporation makes the vast majority of its car sales on credit. What is something Classic Cars Corporation may do to encourage quick payment of these accounts receivable?

Correct Answer
verified

Money owed to a business by credit customers is referred to as

Correct Answer
verified

Trendy Fashions is a national chain of clothing stores that is offering its stock to the public for the first time. What does this scenario best describe?

Correct Answer
verified

Exam 16: Financial Management and Securities Markets

Commercial certificates of deposit (CDs) work exactly the same way as consumer certificates of deposit, except that commercial CDs must be held until maturity.

Correct AnswerverifiedShow Answer

Marcus works for a gaming company that is developing a new online car racing game. Since developing new software is expensive, the company takes a loan. What is true regarding this scenario?

Correct AnswerverifiedShow Answer

What type of bonds became an attractive way of financing corporate mergers in the mid-1980s?

Correct AnswerverifiedShow Answer

Pipe Supply Company offers its customers trade credit terms of 2/10 net 30. What does this mean?

Correct AnswerverifiedShow Answer

Esther is a financial manager who focuses on current assets and liabilities. Her chief goal is to maximize returns on all of the following EXCEPT

Correct AnswerverifiedShow Answer

Callie's Curtain Shop invests the cash it earns in marketable securities, for periods as short as one day or for as long as one year, until it is needed. What temporary investment would Callie's Curtain Shop most likely use to invest these funds?

Correct AnswerverifiedShow Answer

Valerie is a financial manager for a large office supply store. One of the most important facets of her job is ensuring that sufficient, but not excessive, funds are on hand to meet the store's obligations. What current asset is Valerie managing in this scenario?

Correct AnswerverifiedShow Answer

If the offering price of a stock is $4 and its capital in excess of par is $1, the par value of the stock is

Correct AnswerverifiedShow Answer

Rhea is traveling internationally, selling her company's computer software. While she is in Ireland, she makes a deposit of $10,000 in a bank there. What short-term investment does this scenario describe?

Correct AnswerverifiedShow Answer

All of the following are TRUE regarding long-term investments in any given enterprise EXCEPT

Correct AnswerverifiedShow Answer

All of the following are reasons that performance measures, such as averages and indexes, are important EXCEPT

Correct AnswerverifiedShow Answer

Discuss securities markets. How are securities sold in primary and secondary markets?

Correct AnswerverifiedSecurities markets provide a mechanism f...View AnswerShow Answer

A surfboard manufacturer orders 100 units of fiberglass material and promises to pay the supplier at a later date. The surfboard manufacturer will record the amount to be paid as

Correct AnswerverifiedShow Answer

Which type of commercial loan offers an advantage when interest rates are falling but represents a distinct disadvantage when interest rates are rising?

Correct AnswerverifiedShow Answer

Fabulous Finds, a large home decorating company with stores located nationwide, wants to collect cash from its customers quickly but pay out cash to its suppliers slowly. How might Fabulous Finds succeed in accomplishing this goal?

Correct AnswerverifiedShow Answer

Whether secured or unsecured, bonds may be repaid

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Classic Cars Corporation makes the vast majority of its car sales on credit. What is something Classic Cars Corporation may do to encourage quick payment of these accounts receivable?

Correct AnswerverifiedShow Answer

Money owed to a business by credit customers is referred to as

Correct AnswerverifiedShow Answer

Trendy Fashions is a national chain of clothing stores that is offering its stock to the public for the first time. What does this scenario best describe?

Correct AnswerverifiedShow Answer

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Securities markets provide a mechanism f...
View Answer

Correct Answer
verified

Correct Answer
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