Exam 9: Finance: Acquiring and Using Funds to Maximize Value

As a financial manager, Garry wants to know when his firm will need to arrange for short-term financing and when the firm is likely to have surplus cash available to pay off loans or to invest in short-term liquid assets. These concerns suggest that Garry would want to develop a:

Alpha Inc.saw an increase in profits in the previous year following which the management decided to reinvest earnings. These retained earnings will be used to:

Cash budgets normally cover a five-year period and show projected cash inflows and outflows for each week.

A large, well-established company with an impeccable financial record considers borrowing money to meet its short-term financing needs. The company hopes to borrow money using _________ since this form of financing typically carries a lower interest rate than that than commercial banks charge on short-term loans.

Financial managers should focus solely on meeting the financial needs of their firms in the short run, leaving the long-term financial issues to the top management.

One drawback of offering liberal credit to customers is that it can:

Ashton is working on a project at PowerTek Inc., a well-known multinational corporation. He is using capital budgeting to estimate the project's future cash flows. He finds that the present value of the estimated future cash flows is greater than the cost of the project. How likely is he to gain approval from the board?

An advantage of offering more lenient credit terms is that it helps a firm _____.

David needs to acquire financial capital to purchase a printing press for his business. David can either acquire the financial capital for the press by borrowing money from a bank or by purchasing the press on credit from his supplier.

Cash equivalents are long-term, unsecured but highly liquid assets that firms list in the fixed assets section on their balance sheet.

Which of the following statements is true of a current ratio?

Pro Corp. and Darths Inc.are two companies that are identical in every aspect except for the fact that Pro uses only equity financing, while Darths relies heavily on debt financing. Over the past year, the firms had identical earnings before interest and taxes. If net income for both firms was high, _____.

_____ ratios measure the ability of an organization to convert assets into the cash it needs to pay off liabilities that come due in the next year.

What is a pro forma statement? Describe the two major types of pro forma statements, and explain the role they play in financial planning.

Which of the following is a long-term financing option for a firm?

The Chief Financial Officer of Orange Motors Inc.recently mentioned in an interview that a dollar received today is worth more than a dollar received in the future because the sooner you receive a sum of money, the quicker you can put that money to work. The Chief Financial Officer was speaking about the _________.

Which of the following best describes a highly leveraged firm?

Wild Trails Inc., an adventure resort in Texas, has 500 shares of outstanding common stock and has not issued any preferred stock. Net income is $27,500. Wild Trails Inc.'s earnings per share is _____.

Which of the following statements best describes a money market mutual fund?

If an invoice lists the terms 2/10 net 30, it means that the supplier is offering a 10 percent cash discount off the invoice price if the buyer pays within 2 days.