Exam 15: Finacial Decisions and Risk Management

Convertible bonds can be converted to common stock, but only with approval of the issuing company.

A factor buys $50 000 worth of receivables. How much will the factor eventually sell the receivables for?

A(n) ________ is an order to a stock broker to buy a security only if its price is equal to or less than a specified amount.

A put option gives its owner the right to sell a particular stock at a specified price.

Assume you bought a $1000 par value bond in 2004 for 85 1/4 with an interest rate of 4.7 percent. If you held the bond until maturity in 2014, what would be the total amount that you would earn on this bond?

It is in the firm's best interest to pay its accounts payables as rapidly as possible.

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 Ryerson's argument?

Generally speaking, what is the best approach to use when coping with potential losses?

Tony is responsible for planning and controlling the acquisition and dispersal of the company's financial assets. What is Tony's job title?

Tim wants to invest in stocks and bonds that will double his money in seven years. Which of the following interest rates should he be targeting?

What is par value?

What is the difference between full-service and discount brokers?

Scott is managing a company and he has been advised by his financial manager that his largest source of short-term debt is too high. What source of funding is Scott's financial manager probably talking about?

The par value of a stock is an arbitrary accounting value that is generally of little interest to stock purchasers.

A ________ bond permits the issuing firm to retire portions of the bond issue at different predetermined dates.

When managers at Kraft Foods anticipate how much cheddar cheese Safeway supermarkets will buy each month and when Safeway will pay for those purchases, Kraft is managing its

Budgets are key in financial control.

Explain the differences between primary and secondary securities markets.

Scott just called his broker to place an order to buy 100 shares of IBM at a price of $70 or less. Which of the terms below describe his order?

What is the meaning of "par value" when discussing common stock?