Question 1

Retained earnings are

Accepted Answer

A)   all the earnings of the corporation.
B)   profits before taxes.
C)   profits after taxes.
D)   undistributed profits.
E)   total owners' equity.

Question 2

The managers at John Manufacturing decided to borrow money to finance a new production facility.The loan agreement they signed required that they pay 10 percent interest on the loan.Based on this information,which of the following statements is true?

Accepted Answer

A)   John doesn't have to pay the 10 percent if the firm isn't profitable.
B)   John can pay the 10 percent whenever its managers vote to pay it.
C)   The company will make more money if the firm earns less than a 10 percent return on its investment in the new plant.
D)   John is using financial leverage to increase profits as long as the firm earns more than the 10 percent it pays to borrow the money required to finance the new plant.
E)   Even if the new plant is extremely profitable,John should have found another way to finance the new plant.

Question 3

Isabella feels confident about obtaining short-term financing for her art gallery because,like many companies,she has a(n)

Accepted Answer

A)   unlimited source of financing available to her.
B)   relatively large amount of money she can borrow.
C)   stockpile of cash to use in place of short-term financing.
D)   relationship with the friend of her banker.
E)   close working relationship with a lender.

Question 4

The most expensive form of short-term financing is factoring of accounts receivable.

Accepted Answer

A) True 
 B)False

Question 5

Esther bought one share of The Walt Disney Company stock for each of her grandchildren for Christmas.Each stock certificate had the name of the owner printed on it and was decorated with the Disney characters.Esther explained to the grandchildren that when The Walt Disney Company had an annual meeting,the whole family would go because each of them now owned a part of The Walt Disney Company.The children were excited.When it was time to go to the meeting they all drove to the Anaheim Convention Center together,showed their proxy card to the door attendant and were admitted.They were greeted by Disney characters and were able to pose with them before taking their seats.During the meeting,the board of directors was introduced,the president gave a speech,and each director spoke about the area of The Walt Disney Company they were in charge of and showed movies and PowerPoints about the financial aspects of their area of responsibility.At the end of the meeting,Esther and the children voted for the new president of the company,a director,and approved the accounting firm.What kind of stock do Esther and her grandchildren own in The Walt Disney Company?

Accepted Answer

A)   Common stock
B)   Preferred stock
C)   Convertible stock
D)   Initial public offering

Question 6

The Nasdaq only carries small company's stocks;by regulation,large firms' stock must trade on the NYSE,not on the Nasdaq.

Accepted Answer

A) True 
 B)False

Question 7

Rollins,Inc. Mat Rollins,CEO of Rollins,Inc.,decided that upon his retirement,he would elect his son Chris to become the new CEO.Mat thought it would be a good idea to have Chris shadow him at work to understand the roles and responsibilities of a CEO.Chris shadowed his father for months in order to learn every aspect of the business.Mat knew that the best way for Chris to learn was to actually perform some of the tasks he did on a daily basis,rather than simply describe them.The company generally focused on short-term financing,and Mat felt that it was important for Chris to understand the different types of financing.Chris learned about the type of bonds that the company usually offered to raise capital.These bonds allow the purchasers of the bond to keep them until maturity.Chris also learned the process of obtaining bonds and the various types of long-term financing methods.Job shadowing was indeed a worthwhile experience for Chris.
-Refer to Rollins,Inc.At one point,Chris was not sure about which type of bond was backed only by the reputation of the issuing corporation.Which of the following would you suggest?

Accepted Answer

A)   Mortgage bond
B)   Convertible bond
C)   Debenture bond
D)   Registered bond
E)   Corporate bond

Question 8

In what situations would you seek short-term financing? In what situations would you seek long-term financing?

Accepted Answer

Short-term financing,money that will be ...

Question 9

The Fruitiest Candy Company finds that from time to time it needs short-term funds to cover its operating expenses.It wants to establish a prearranged loan with a bank but has not found a bank that will guarantee such a loan.Perplexed by this,the management team asks you how they should proceed.You recommend that they

Accepted Answer

A)   file a suit against the banks.
B)   find a bank out of state or out of the country that will guarantee that the money will be available when needed.
C)   simply file a claim with the FDIC.
D)   retaliate by withdrawing all cash from the local bank and canceling all certificates of deposit.
E)   set up a line of credit with a bank that offers a revolving credit agreement.

Question 10

The costs of selling stock to the general public are referred to as flotation costs.

Accepted Answer

A) True 
 B)False

Question 11

To raise money,Fawcett Productions sold its accounts receivable to a ____.In doing so,Fawcett received cash and shifted to the other company both the task of collecting and the risk of nonpayment.

Accepted Answer

A)   credit-reporting agency
B)   stockbroker
C)   factor
D)   real estate agent
E)   credit union

Question 12

Bonds from a single issue that have staggered maturity dates are called serial bonds.

Accepted Answer

A) True 
 B)False

Question 13

The right to vote on major corporate actions belongs to

Accepted Answer

A)   bondholders.
B)   preferred stockholders.
C)   participating preferred stockholders.
D)   convertible preferred stockholders.
E)   common stockholders.

Question 14

Willy received unsecured financing from a bank for his plumbing business.This means that Willy did not have to provide the bank with any

Accepted Answer

A)   application forms.
B)   collateral.
C)   reasons for the loan.
D)   promise to pay interest.
E)   scheduled monthly payments.

Question 15

Baxter Equipment earned $300,000 last year.Its owners' equity totaled $2,500,000.Based on these amounts,what is the firm's return on owners' equity?

Accepted Answer

A)   1.2 percent
B)   8.33 percent
C)   12 percent
D)   122 percent
E)   It is impossible to calculate the return on owners' equity with this information.

Question 16

Liz Hick purchased a $1,000 corporate bond that pays 9 percent interest.The face value of her bond is $1,000.What is the amount of interest that she will receive each year?

Accepted Answer

A)   $100
B)   $90
C)   $50
D)   $46.25
E)   $10

Question 17

Drew and Tammy decide to start a new cake-decorating business.They each contribute $10,000 to get the business off the ground.This money is considered

Accepted Answer

A)   sales revenue.
B)   long-term debt.
C)   equity capital.
D)   short-term financing.
E)   cash flow.

Question 18

While common stockholders have the right to receive dividends,holders of preferred stock elect the board of directors and approve or disapprove major corporate actions.

Accepted Answer

A) True 
 B)False

Question 19

​JBP Incorporated's ____ has determined that the company should retain earnings for the year.This has been approved by the board of directors.

Accepted Answer

A)   ​corporate management
B)   ​common stockholders
C)   ​preferred stockholders
D)   ​corporate creditors

Question 20

Which of the following sources of funds would be the last resort for a corporation?

Accepted Answer

A)   Sales revenues
B)   Common stock
C)   Preferred stock
D)   Debt capital
E)   The sale of assets

Exam 16: Mastering Financial Management

Correct Answer
verified

Correct Answer
verified

To raise money,Fawcett Productions sold its accounts receivable to a ____.In doing so,Fawcett received cash and shifted to the other company both the task of collecting and the risk of nonpayment.

Correct Answer
verified

Correct Answer
verified

Drew and Tammy decide to start a new cake-decorating business.They each contribute $10,000 to get the business off the ground.This money is considered

Correct Answer
verified

JBP Incorporated's ____ has determined that the company should retain earnings for the year.This has been approved by the board of directors.

Correct Answer
verified

Willy received unsecured financing from a bank for his plumbing business.This means that Willy did not have to provide the bank with any

Correct Answer
verified

Liz Hick purchased a $1,000 corporate bond that pays 9 percent interest.The face value of her bond is $1,000.What is the amount of interest that she will receive each year?

Correct Answer
verified

While common stockholders have the right to receive dividends,holders of preferred stock elect the board of directors and approve or disapprove major corporate actions.

Correct Answer
verified

Retained earnings are

Correct Answer
verified

The right to vote on major corporate actions belongs to

Correct Answer
verified

Bonds from a single issue that have staggered maturity dates are called serial bonds.

Correct Answer
verified

In what situations would you seek short-term financing? In what situations would you seek long-term financing?

Correct Answer
verified
Short-term financing,money that will be ...
View Answer

The managers at John Manufacturing decided to borrow money to finance a new production facility.The loan agreement they signed required that they pay 10 percent interest on the loan.Based on this information,which of the following statements is true?

Correct Answer
verified

Which of the following sources of funds would be the last resort for a corporation?

Correct Answer
verified

The Nasdaq only carries small company's stocks;by regulation,large firms' stock must trade on the NYSE,not on the Nasdaq.

Correct Answer
verified

Baxter Equipment earned $300,000 last year.Its owners' equity totaled $2,500,000.Based on these amounts,what is the firm's return on owners' equity?

Correct Answer
verified

The costs of selling stock to the general public are referred to as flotation costs.

Correct Answer
verified

Isabella feels confident about obtaining short-term financing for her art gallery because,like many companies,she has a(n)

Correct Answer
verified

The most expensive form of short-term financing is factoring of accounts receivable.

Correct Answer
verified

Exam 16: Mastering Financial Management

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To raise money,Fawcett Productions sold its accounts receivable to a ____.In doing so,Fawcett received cash and shifted to the other company both the task of collecting and the risk of nonpayment.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Drew and Tammy decide to start a new cake-decorating business.They each contribute $10,000 to get the business off the ground.This money is considered

Correct AnswerverifiedShow Answer

​JBP Incorporated's ____ has determined that the company should retain earnings for the year.This has been approved by the board of directors.

Correct AnswerverifiedShow Answer

Willy received unsecured financing from a bank for his plumbing business.This means that Willy did not have to provide the bank with any

Correct AnswerverifiedShow Answer

Liz Hick purchased a $1,000 corporate bond that pays 9 percent interest.The face value of her bond is $1,000.What is the amount of interest that she will receive each year?

Correct AnswerverifiedShow Answer

While common stockholders have the right to receive dividends,holders of preferred stock elect the board of directors and approve or disapprove major corporate actions.

Correct AnswerverifiedShow Answer

Retained earnings are

Correct AnswerverifiedShow Answer

The right to vote on major corporate actions belongs to

Correct AnswerverifiedShow Answer

Bonds from a single issue that have staggered maturity dates are called serial bonds.

Correct AnswerverifiedShow Answer

In what situations would you seek short-term financing? In what situations would you seek long-term financing?

Correct AnswerverifiedShort-term financing,money that will be ...View AnswerShow Answer

The managers at John Manufacturing decided to borrow money to finance a new production facility.The loan agreement they signed required that they pay 10 percent interest on the loan.Based on this information,which of the following statements is true?

Correct AnswerverifiedShow Answer

Which of the following sources of funds would be the last resort for a corporation?

Correct AnswerverifiedShow Answer

The Nasdaq only carries small company's stocks;by regulation,large firms' stock must trade on the NYSE,not on the Nasdaq.

Correct AnswerverifiedShow Answer

Baxter Equipment earned $300,000 last year.Its owners' equity totaled $2,500,000.Based on these amounts,what is the firm's return on owners' equity?

Correct AnswerverifiedShow Answer

The costs of selling stock to the general public are referred to as flotation costs.

Correct AnswerverifiedShow Answer

Isabella feels confident about obtaining short-term financing for her art gallery because,like many companies,she has a(n)

Correct AnswerverifiedShow Answer

The most expensive form of short-term financing is factoring of accounts receivable.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

JBP Incorporated's ____ has determined that the company should retain earnings for the year.This has been approved by the board of directors.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Short-term financing,money that will be ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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