Question 1

What is short selling and how does it work? Why do people do it? Give an example.

Accepted Answer

In a short sale, the investor borrows sh

Question 2

Bonds differ in terms of riskiness, but they are identical in terms of maturity dates.

Accepted Answer

A) True 
 B)False

Question 3

What are the five steps in the risk management process?

Accepted Answer

- Step 1: Identify risks and potential l

Question 4

Most bank loans do not require a promissory note.

Accepted Answer

A) True 
 B)False

Question 5

Debt financing does not affect management control, but it does affect management flexibility.

Accepted Answer

A) True 
 B)False

Question 6

Marco is a bullish investor, but the stock market is currently bearish. What is Marco most likely to do?

Accepted Answer

A)  Sell every stock and go to a 100 percent cash position 
B)  Sell certain winning stocks to realize a profit and put the cash to work buying stock when prices are low 
C)  Maintain all stock positions until the market completely recovers and then buy more stocks 
D)  Sell losing stocks to avoid further losses, and hold onto winners 
E)  Buy defensive stocks in the expectation that they will not fall much 
A)  Sell every stock and go to a 100 percent cash position 
B)  Sell certain winning stocks to realize a profit and put the cash to work buying stock when prices are low 
C)  Maintain all stock positions until the market completely recovers and then buy more stocks 
D)  Sell losing stocks to avoid further losses, and hold onto winners 
E)  Buy defensive stocks in the expectation that they will not fall much

Question 7

What is the difference between registered bonds and bearer bonds?

Accepted Answer

A)  Registered bonds have to be registered with the government of Canada, but bearer bonds do not. 
B)  Registered bonds generally pay lower rates of interest than bearer bonds. 
C)  Registered bondholders automatically receive interest cheques, but holders of bearer bonds have to clip coupons and send them to the company. 
D)  Registered bonds have lower financial risk than bearer bonds. 
E)  There is really no practical difference between registered and bearer bonds. 
A)  Registered bonds have to be registered with the government of Canada, but bearer bonds do not. 
B)  Registered bonds generally pay lower rates of interest than bearer bonds. 
C)  Registered bondholders automatically receive interest cheques, but holders of bearer bonds have to clip coupons and send them to the company. 
D)  Registered bonds have lower financial risk than bearer bonds. 
E)  There is really no practical difference between registered and bearer bonds.

Question 8

Mega has just shipped one of its products to Compucell on faith that they will pay the invoice. This is a(n)

Accepted Answer

A)  trade acceptance. 
B)  revolving credit agreement. 
C)  line of credit. 
D)  open-book credit. 
E)  promissory note. 
A)  trade acceptance. 
B)  revolving credit agreement. 
C)  line of credit. 
D)  open-book credit. 
E)  promissory note.

Question 9

Debt financing refers to the long-term borrowing of funds from outside the company.

Accepted Answer

A) True 
 B)False

Question 10

What is a debenture?

Accepted Answer

Debentures are bonds which are

Question 11

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 assumptions does Ryerson have to make to support his statements?

Accepted Answer

A)  Some people make money by investing. 
B)  Interest is the only thing that changes the value of a savings account. 
C)  Most people want to save money instead of spending it. 
D)  Companies issue stock only if there is no other way to make money. 
E)  There are few companies whose stock always grows in value. 
A)  Some people make money by investing. 
B)  Interest is the only thing that changes the value of a savings account. 
C)  Most people want to save money instead of spending it. 
D)  Companies issue stock only if there is no other way to make money. 
E)  There are few companies whose stock always grows in value.

Question 12

Discuss the methods by which bonds may be retired. Which method offers the greatest security for investors? Which method does the issuing firm prefer?

Accepted Answer

- Callable bonds may be paid off by the

Question 13

Collateral gives the lender the right to seize certain assets if payment is not made as promised.

Accepted Answer

A) True 
 B)False

Question 14

During a bear market

Accepted Answer

A)  stock prices as a whole are rising. 
B)  corporations are being funded through secondary market transactions. 
C)  stock prices as a whole are falling. 
D)  both stock prices as a whole are falling and speculators are avoiding short selling. 
E)  speculators are avoiding short selling. 
A)  stock prices as a whole are rising. 
B)  corporations are being funded through secondary market transactions. 
C)  stock prices as a whole are falling. 
D)  both stock prices as a whole are falling and speculators are avoiding short selling. 
E)  speculators are avoiding short selling.

Question 15

Which market handles the buying and selling of new stocks and bonds by business firms or governments?

Accepted Answer

A)  The primary securities market 
B)  The tertiary security market 
C)  The over-the-counter market 
D)  The commodities market 
E)  The secondary securities market 
A)  The primary securities market 
B)  The tertiary security market 
C)  The over-the-counter market 
D)  The commodities market 
E)  The secondary securities market

Question 16

What is the difference between debt financing and equity financing?

Accepted Answer

Equity financing means selling ownership

Question 17

What is the difference between debt and equity financing?

Accepted Answer

A)  Debt financing is more expensive than equity financing. 
B)  Equity financing is cheaper than debt financing because no money has to be paid back to the people who bought the company's stock. 
C)  Debt financing is riskier than equity financing because with debt financing debts are incurred which must be paid back. 
D)  Debt financing is more short-term oriented than equity financing. 
E)  Equity financing can be done successfully only when stock markets are rising, whereas debt financing can be done any time. 
A)  Debt financing is more expensive than equity financing. 
B)  Equity financing is cheaper than debt financing because no money has to be paid back to the people who bought the company's stock. 
C)  Debt financing is riskier than equity financing because with debt financing debts are incurred which must be paid back. 
D)  Debt financing is more short-term oriented than equity financing. 
E)  Equity financing can be done successfully only when stock markets are rising, whereas debt financing can be done any time.

Question 18

List the four choices that a company has to handle risk.

Accepted Answer

Risk avoidance, risk

Question 19

In order for a security to be listed on the Toronto Stock Exchange, the issuing corporation must

Accepted Answer

A)  have at least 200 employees. 
B)  have paid a fee. 
C)  never have traded its stock anywhere else. 
D)  be making a profit. 
E)  all of these. 
A)  have at least 200 employees. 
B)  have paid a fee. 
C)  never have traded its stock anywhere else. 
D)  be making a profit. 
E)  all of these.

Question 20

Discuss the advantages and disadvantages of financing using preferred stock.

Accepted Answer

Preferred stock is a form of hybrid fina

What is short selling and how does it work? Why do people do it? Give an example.

Bonds differ in terms of riskiness, but they are identical in terms of maturity dates.

What are the five steps in the risk management process?

Most bank loans do not require a promissory note.

Debt financing does not affect management control, but it does affect management flexibility.

Marco is a bullish investor, but the stock market is currently bearish. What is Marco most likely to do?

What is the difference between registered bonds and bearer bonds?

Mega has just shipped one of its products to Compucell on faith that they will pay the invoice. This is a(n)

Debt financing refers to the long-term borrowing of funds from outside the company.

What is a debenture?

Discuss the methods by which bonds may be retired. Which method offers the greatest security for investors? Which method does the issuing firm prefer?

Collateral gives the lender the right to seize certain assets if payment is not made as promised.

During a bear market

Which market handles the buying and selling of new stocks and bonds by business firms or governments?

What is the difference between debt financing and equity financing?

What is the difference between debt and equity financing?

List the four choices that a company has to handle risk.

In order for a security to be listed on the Toronto Stock Exchange, the issuing corporation must

Discuss the advantages and disadvantages of financing using preferred stock.

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 is short selling and how does it work? Why do people do it? Give an example.

Bonds differ in terms of riskiness, but they are identical in terms of maturity dates.

What are the five steps in the risk management process?

Most bank loans do not require a promissory note.

Debt financing does not affect management control, but it does affect management flexibility.

Marco is a bullish investor, but the stock market is currently bearish. What is Marco most likely to do?

What is the difference between registered bonds and bearer bonds?

Mega has just shipped one of its products to Compucell on faith that they will pay the invoice. This is a(n)

Debt financing refers to the long-term borrowing of funds from outside the company.

What is a debenture?

Discuss the methods by which bonds may be retired. Which method offers the greatest security for investors? Which method does the issuing firm prefer?

Collateral gives the lender the right to seize certain assets if payment is not made as promised.

During a bear market

Which market handles the buying and selling of new stocks and bonds by business firms or governments?

What is the difference between debt financing and equity financing?

What is the difference between debt and equity financing?

List the four choices that a company has to handle risk.

In order for a security to be listed on the Toronto Stock Exchange, the issuing corporation must

Discuss the advantages and disadvantages of financing using preferred stock.

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