Question 1

What is margin trading? Give an example.

Accepted Answer

Margin trading means putting down only a

Question 2

Blake Corp. wants to transfer its risk to another organization. Which of the following methods would it most likely use?

Accepted Answer

A)  Surety bonds 
B)  Fidelity bonds 
C)  Premiums 
D)  Contracts 
E)  Insurance 
A)  Surety bonds 
B)  Fidelity bonds 
C)  Premiums 
D)  Contracts 
E)  Insurance

Question 3

How may a firm obtain an unsecured short-term bank loan?

Accepted Answer

A)  Obtain open-book credit 
B)  Provide a fixed asset as a guarantee of payment 
C)  Pledge accounts receivable 
D)  Obtain a line of credit agreement 
E)  Obtain an inventory loan 
A)  Obtain open-book credit 
B)  Provide a fixed asset as a guarantee of payment 
C)  Pledge accounts receivable 
D)  Obtain a line of credit agreement 
E)  Obtain an inventory loan

Question 4

Twenty-six-year-old Lisa Lamont became an investor one day after a friend explained that there was a much better way to make her money work for her than by letting it sit in a savings account earning a very low rate of interest. Lisa decided to withdraw $10,000 from her savings account and invest it in stocks. She wanted to invest it in such a way as to minimize her risk. Which one of the following strategies makes the most sense for a new investor like Lisa?

Accepted Answer

A)  Invest all $10 000 in a small fast-growing computer company. 
B)  Invest $5000 in a gold mining company and $5000 in a silver mine. 
C)  Invest the $10 000 in four different home builders. 
D)  Invest $10 000 in ten different oil companies. 
E)  Invest $10 000 in a mutual fund. 
A)  Invest all $10 000 in a small fast-growing computer company. 
B)  Invest $5000 in a gold mining company and $5000 in a silver mine. 
C)  Invest the $10 000 in four different home builders. 
D)  Invest $10 000 in ten different oil companies. 
E)  Invest $10 000 in a mutual fund.

Question 5

Long-term expenditures are usually more carefully planned than short-term outlays because

Accepted Answer

A)  they represent a binding commitment of company funds that continues long into the future. 
B)  they are usually sold at high-profit margins. 
C)  they can be used to pay off accounts payable. 
D)  the expenditures must finance items that are easily liquidated. 
E)  all of these. 
A)  they represent a binding commitment of company funds that continues long into the future. 
B)  they are usually sold at high-profit margins. 
C)  they can be used to pay off accounts payable. 
D)  the expenditures must finance items that are easily liquidated. 
E)  all of these.

Question 6

Mutual funds that include money market funds and government bonds are emphasizing

Accepted Answer

A)  high current income. 
B)  aggressive growth. 
C)  stability. 
D)  growth. 
E)  safety. 
A)  high current income. 
B)  aggressive growth. 
C)  stability. 
D)  growth. 
E)  safety.

Question 7

Maury is currently invested in medium-quality preferred stock. What type of investment would you recommend to Maury if he says he wants to move up one notch in risk?

Accepted Answer

A)  High-quality, stable common stocks 
B)  junk bonds 
C)  high-quality, cyclical common stocks 
D)  lower quality common stocks. 
E)  high-grade corporate bonds. 
A)  High-quality, stable common stocks 
B)  junk bonds 
C)  high-quality, cyclical common stocks 
D)  lower quality common stocks. 
E)  high-grade corporate bonds.

Question 8

When a company decides to insure its buildings and equipment against loss by fire, it is practising risk transfer.

Accepted Answer

A) True 
 B)False

Question 9

Why is it necessary for a business firm to put up collateral when it takes out a loan?

Accepted Answer

A)  So that the bank can keep a portion as advance payment on the loan 
B)  To show the bank that the business is big enough to require the loan 
C)  To assure the bank that loan payments will be made as promised 
D)  So the financial managers know dates of payment 
E)  So that the accounting people can generate accurate financial statements 
A)  So that the bank can keep a portion as advance payment on the loan 
B)  To show the bank that the business is big enough to require the loan 
C)  To assure the bank that loan payments will be made as promised 
D)  So the financial managers know dates of payment 
E)  So that the accounting people can generate accurate financial statements

Question 10

A promissory note states when payment will be made and how much money will be paid to the seller in return for immediate credit.

Accepted Answer

A) True 
 B)False

Question 11

Mega Computer needs a large amount of long-term financing for a long period of time. The best choice is most likely

Accepted Answer

A)  loans. 
B)  preferred stock. 
C)  common stock. 
D)  commercial paper. 
E)  bonds. 
A)  loans. 
B)  preferred stock. 
C)  common stock. 
D)  commercial paper. 
E)  bonds.

Question 12

Jarvis Corp. is expanding its product line; this is an example of ________ risk.

Accepted Answer

A)  speculative 
B)  avoidance 
C)  pure 
D)  transferable 
E)  financial 
A)  speculative 
B)  avoidance 
C)  pure 
D)  transferable 
E)  financial

Question 13

List three sources of short-term funds.

Accepted Answer

Trade cred

Question 14

Regarding the issue of investor relations, it is correct to say that

Accepted Answer

A)  investor relations activities do not have much impact on the price of a firm's stock. 
B)  investor relations may include inviting financial analysts to one of the operating sites of a firm. 
C)  investor relations is a relatively new idea that began to be practised in the late 1980s. 
D)  investor relations are not that important to a firm's success. 
E)  investor relations target individual buyers of corporate stock rather than brokers and financial analysts. 
A)  investor relations activities do not have much impact on the price of a firm's stock. 
B)  investor relations may include inviting financial analysts to one of the operating sites of a firm. 
C)  investor relations is a relatively new idea that began to be practised in the late 1980s. 
D)  investor relations are not that important to a firm's success. 
E)  investor relations target individual buyers of corporate stock rather than brokers and financial analysts.

Question 15

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 needs some quickly obtainable funds to pay some overdue bills. It is considering using factoring-obtaining cash in exchange for outstanding accounts receivable funds. Which of the following, if true, would strengthen the case for using factoring?

Accepted Answer

A)  Factoring can be a costly way to obtain ready cash. 
B)  Aardvark would not have to liquidate any of its core assets to stay in business. 
C)  Customers may be annoyed if they think their account has been turned over to a collection agency. 
D)  Additional accounting practices are necessary to keep track of factored customer accounts. 
E)  Factoring companies usually won't take on receivables more than 90 days old. 
A)  Factoring can be a costly way to obtain ready cash. 
B)  Aardvark would not have to liquidate any of its core assets to stay in business. 
C)  Customers may be annoyed if they think their account has been turned over to a collection agency. 
D)  Additional accounting practices are necessary to keep track of factored customer accounts. 
E)  Factoring companies usually won't take on receivables more than 90 days old.

Question 16

Stocks are known as securities because they represent a secured interest in a company.

Accepted Answer

A) True 
 B)False

Question 17

Small businesses are notorious for not planning cash flow needs properly.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is correct with respect to long-term loans?

Accepted Answer

A)  Businesses try to avoid them whenever possible because banks charge high interest rates. 
B)  Large borrowers may have trouble finding lenders to supply enough funds. 
C)  Once a loan's terms are set, they cannot be changed until all the money is paid back. 
D)  Loans are difficult to arrange quickly. 
E)  The time frame of the loan may be difficult to match with the borrower's needs. 
A)  Businesses try to avoid them whenever possible because banks charge high interest rates. 
B)  Large borrowers may have trouble finding lenders to supply enough funds. 
C)  Once a loan's terms are set, they cannot be changed until all the money is paid back. 
D)  Loans are difficult to arrange quickly. 
E)  The time frame of the loan may be difficult to match with the borrower's needs.

Question 19

A mutual fund pools investments from individuals and firms to purchase a portfolio of stocks, bonds, and short-term securities.

Accepted Answer

A) True 
 B)False

Question 20

The main difference between a line of credit and a revolving credit agreement is that more money is involved with a revolving credit agreement.

Accepted Answer

A) True 
 B)False

What is margin trading? Give an example.

Blake Corp. wants to transfer its risk to another organization. Which of the following methods would it most likely use?

How may a firm obtain an unsecured short-term bank loan?

Long-term expenditures are usually more carefully planned than short-term outlays because

Mutual funds that include money market funds and government bonds are emphasizing

Maury is currently invested in medium-quality preferred stock. What type of investment would you recommend to Maury if he says he wants to move up one notch in risk?

When a company decides to insure its buildings and equipment against loss by fire, it is practising risk transfer.

Why is it necessary for a business firm to put up collateral when it takes out a loan?

A promissory note states when payment will be made and how much money will be paid to the seller in return for immediate credit.

Mega Computer needs a large amount of long-term financing for a long period of time. The best choice is most likely

Jarvis Corp. is expanding its product line; this is an example of ________ risk.

List three sources of short-term funds.

Regarding the issue of investor relations, it is correct to say that

Stocks are known as securities because they represent a secured interest in a company.

Small businesses are notorious for not planning cash flow needs properly.

Which of the following is correct with respect to long-term loans?

A mutual fund pools investments from individuals and firms to purchase a portfolio of stocks, bonds, and short-term securities.

The main difference between a line of credit and a revolving credit agreement is that more money is involved with a revolving credit agreement.

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 margin trading? Give an example.

Blake Corp. wants to transfer its risk to another organization. Which of the following methods would it most likely use?

How may a firm obtain an unsecured short-term bank loan?

Long-term expenditures are usually more carefully planned than short-term outlays because

Mutual funds that include money market funds and government bonds are emphasizing

Maury is currently invested in medium-quality preferred stock. What type of investment would you recommend to Maury if he says he wants to move up one notch in risk?

When a company decides to insure its buildings and equipment against loss by fire, it is practising risk transfer.

Why is it necessary for a business firm to put up collateral when it takes out a loan?

A promissory note states when payment will be made and how much money will be paid to the seller in return for immediate credit.

Mega Computer needs a large amount of long-term financing for a long period of time. The best choice is most likely

Jarvis Corp. is expanding its product line; this is an example of ________ risk.

List three sources of short-term funds.

Regarding the issue of investor relations, it is correct to say that

Stocks are known as securities because they represent a secured interest in a company.

Small businesses are notorious for not planning cash flow needs properly.

Which of the following is correct with respect to long-term loans?

A mutual fund pools investments from individuals and firms to purchase a portfolio of stocks, bonds, and short-term securities.

The main difference between a line of credit and a revolving credit agreement is that more money is involved with a revolving credit agreement.

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