Question 1

What does a credit policy of "2/10, net 30" mean?

Accepted Answer

A)  That the selling company offers a 10 percent discount if the customer pays within 2 days. The customer has 30 days to pay the regular price. 
B)  That if the buyer pays the net bill within 10 days, a 2 percent discount will be given. 
C)  That the selling company offers a 2 percent discount if the customer pays within 10 days. The customer has 30 days to pay the regular price. 
D)  That the buyer has two months to pay the bill. If the buyer pays before that time, a 10 percent discount will be given. 
E)  None of these are correct. 
A)  That the selling company offers a 10 percent discount if the customer pays within 2 days. The customer has 30 days to pay the regular price. 
B)  That if the buyer pays the net bill within 10 days, a 2 percent discount will be given. 
C)  That the selling company offers a 2 percent discount if the customer pays within 10 days. The customer has 30 days to pay the regular price. 
D)  That the buyer has two months to pay the bill. If the buyer pays before that time, a 10 percent discount will be given. 
E)  None of these are correct.

Question 2

Explain the process by which securities are bought and sold.

Accepted Answer

Investors generally use such financial i

Question 3

Why is preferred stock referred to as hybrid financing?

Accepted Answer

It has features of both debt and equity

Question 4

Bearer bonds require the owner to clip coupons and send them to the issuer in order to receive their interest payments.

Accepted Answer

A) True 
 B)False

Question 5

What is an exchange-traded fund (ETF)? How is it different than a mutual fund?

Accepted Answer

An ETF is a bundle of stocks (or bonds)

Question 6

What is commercial paper?

Accepted Answer

Commercial paper is

Question 7

The mix of debt and equity funding that a firm uses is called its

Accepted Answer

A)  long-term funding mix. 
B)  financial mix. 
C)  corporate capital mix. 
D)  capital structure. 
E)  debt-to-equity ratio. 
A)  long-term funding mix. 
B)  financial mix. 
C)  corporate capital mix. 
D)  capital structure. 
E)  debt-to-equity ratio.

Question 8

Aardvark is a small pest-control business that has 30 employees. The company started business within the past year, and needs to make a decision on how best to make sure its finances are managed well as the company continues to grow its customer base and its business. Aardvark is considering undertaking an IPO in order to raise money. Which of the following, if true, would strengthen the case for doing so?

Accepted Answer

A)  The company's expected stock price will be low. 
B)  The company wants to maintain internal control over all its decision making. 
C)  The company's customer base has been in decline. 
D)  The company has a healthy amount of assets. 
E)  The company is in a significant amount of debt. 
A)  The company's expected stock price will be low. 
B)  The company wants to maintain internal control over all its decision making. 
C)  The company's customer base has been in decline. 
D)  The company has a healthy amount of assets. 
E)  The company is in a significant amount of debt.

Question 9

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.

Accepted Answer

A)  accounts receivable 
B)  commercial paper 
C)  promissory notes 
D)  trade credit 
E)  debentures 
A)  accounts receivable 
B)  commercial paper 
C)  promissory notes 
D)  trade credit 
E)  debentures

Question 10

Designing and distributing a new product is a pure risk because there is the possibility of either a gain or a loss.

Accepted Answer

A) True 
 B)False

Question 11

A stop order prevents the broker from selling a client's stock.

Accepted Answer

A) True 
 B)False

Question 12

A call option requires brokers to call their clients before buying or selling stocks.

Accepted Answer

A) True 
 B)False

Question 13

What is a market index? Identify and describe the major market indices in Canada and the United States.

Accepted Answer

A market index is a measure of the marke

Question 14

How is a line of credit different than a revolving credit agreement?

Accepted Answer

With a line of credit, the company borro

Question 15

The most conservative investments are government savings bonds and bank GICs. In decreasing order of conservativeness, the next two investments are

Accepted Answer

A)  medium-quality preferred stock and high-grade corporate bonds. 
B)  commercial paper and lower-quality common stocks. 
C)  high-grade corporate bonds and commercial paper. 
D)  commercial paper and medium-quality preferred stocks. 
E)  junk bonds and high-grade corporate bonds. 
A)  medium-quality preferred stock and high-grade corporate bonds. 
B)  commercial paper and lower-quality common stocks. 
C)  high-grade corporate bonds and commercial paper. 
D)  commercial paper and medium-quality preferred stocks. 
E)  junk bonds and high-grade corporate bonds.

Question 16

Ryerson says: "Money is hard to come by, so when one has money one should make sure that, above all, one doesn't lose it. One hears a lot of success stories about people making a lot of money by investing, but of course you don't hear about the people who lose money investing. As risky as it is, based on so many unknown factors, investing your money really is like gambling. The only prudent plan is to keep money in a savings account where it can earn a predictable amount of interest. One can't lose money that way, at least, so with money in a savings account one can always count on it being there for future needs." Groh responds by saying: "Investing is inherently risky, but the risk need not be insurmountable. It is true that the more potential there is for a higher return, the higher the chance is also for more money to be lost. But there are more and less risky ways to invest, and even the less risky investments can give a significantly higher return than a simple savings account. When one diversifies one's stock holdings, one increases the chances of getting a good return among one's holdings, and decreases the damage from a loss in value. Also, even if stocks lose value temporarily, the value of stocks overall has always gone up over long periods of time. So a savings account, while it may seem prudent and safe, is probably not the best way to ensure that money is being saved in the most optimal way possible."
Which of the following, if true, would undermine Groh's point about diversification?

Accepted Answer

A)  Not every investor can afford every stock. 
B)  The value of some stocks drop and never recover. 
C)  When one stock value drops, others tend to also drop. 
D)  Some investors prefer as little risk as possible when investing. 
E)  The value of some stock is greater than others. 
A)  Not every investor can afford every stock. 
B)  The value of some stocks drop and never recover. 
C)  When one stock value drops, others tend to also drop. 
D)  Some investors prefer as little risk as possible when investing. 
E)  The value of some stock is greater than others.

Question 17

In case of financial distress, the firm would pay its stockholders before paying its bondholders.

Accepted Answer

A) True 
 B)False

Question 18

The final step in a risk management program is to

Accepted Answer

A)  measure frequency and severity of potential losses. 
B)  identify risks and potential losses. 
C)  monitor results of the program. 
D)  implement the program. 
E)  evaluate alternatives. 
A)  measure frequency and severity of potential losses. 
B)  identify risks and potential losses. 
C)  monitor results of the program. 
D)  implement the program. 
E)  evaluate alternatives.

Question 19

When a delivery service trains its drivers in defensive-driving techniques and maintains their trucks in good working order, they are practising risk avoidance.

Accepted Answer

A) True 
 B)False

Question 20

What is a short sale?

Accepted Answer

A short sale is a stock sale i

What does a credit policy of "2/10, net 30" mean?

Explain the process by which securities are bought and sold.

Why is preferred stock referred to as hybrid financing?

Bearer bonds require the owner to clip coupons and send them to the issuer in order to receive their interest payments.

What is an exchange-traded fund (ETF)? How is it different than a mutual fund?

What is commercial paper?

The mix of debt and equity funding that a firm uses is called its

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.

Designing and distributing a new product is a pure risk because there is the possibility of either a gain or a loss.

A stop order prevents the broker from selling a client's stock.

A call option requires brokers to call their clients before buying or selling stocks.

What is a market index? Identify and describe the major market indices in Canada and the United States.

How is a line of credit different than a revolving credit agreement?

The most conservative investments are government savings bonds and bank GICs. In decreasing order of conservativeness, the next two investments are

In case of financial distress, the firm would pay its stockholders before paying its bondholders.

The final step in a risk management program is to

When a delivery service trains its drivers in defensive-driving techniques and maintains their trucks in good working order, they are practising risk avoidance.

What is a short sale?

Understanding the Canadian Business System

The Environment of Business

Conducting Business Ethically and Responsibly

Entrepreneurship, Small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Organizing the Business Enterprise

Managing Human Resources and Labour Relations

Motivating, Satisfying, and Leading Employees

Operations Management, Productivity, and Quality

Understanding Accounting

Understanding Marketing Principles and Developing Products

Pricing, Promotion, and Distributing Products

Money and Banking

Filters

Exam 15: Finacial Decisions and Risk Management

What does a credit policy of "2/10, net 30" mean?

Explain the process by which securities are bought and sold.

Why is preferred stock referred to as hybrid financing?

Bearer bonds require the owner to clip coupons and send them to the issuer in order to receive their interest payments.

What is an exchange-traded fund (ETF)? How is it different than a mutual fund?

What is commercial paper?

The mix of debt and equity funding that a firm uses is called its

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.

Designing and distributing a new product is a pure risk because there is the possibility of either a gain or a loss.

A stop order prevents the broker from selling a client's stock.

A call option requires brokers to call their clients before buying or selling stocks.

What is a market index? Identify and describe the major market indices in Canada and the United States.

How is a line of credit different than a revolving credit agreement?

The most conservative investments are government savings bonds and bank GICs. In decreasing order of conservativeness, the next two investments are

In case of financial distress, the firm would pay its stockholders before paying its bondholders.

The final step in a risk management program is to

When a delivery service trains its drivers in defensive-driving techniques and maintains their trucks in good working order, they are practising risk avoidance.

What is a short sale?

Understanding the Canadian Business System

The Environment of Business

Conducting Business Ethically and Responsibly

Entrepreneurship, Small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Organizing the Business Enterprise

Managing Human Resources and Labour Relations

Motivating, Satisfying, and Leading Employees

Operations Management, Productivity, and Quality

Understanding Accounting

Understanding Marketing Principles and Developing Products

Pricing, Promotion, and Distributing Products

Money and Banking

Filters