Exam 19: Mastering Financial Management

Inventory requires considerable investment for most manufacturers, wholesalers, and retailers. This problem is complicated by the fact that most goods are manufactured four to nine months before they are actually sold to consumers. Manufacturers that engage in this type of speculative production often need short-term financing to do all of the following except

Morgan's Transition Morgan is currently a manager of a small financial planning firm. He is seeking a new career with a large corporation in the banking industry. He recently applied for the financial manager opening at G & T Bank. He is concerned that the transition from his small firm to a large corporation will be difficult. To better prepare himself for this change, he has decided to enroll in a few business classes to strengthen his understanding of corporate finance. The business classes have proven to be a valuable tool for learning the critical skills needed to fully understand a financial plan, equity financing, and debt financing. Morgan now believes he has strengthened his competitive advantage in his quest for the job. -Refer to Morgan's Transition. When Morgan has to counsel clients on short-term versus long-term financing needs, which of the following should he identify as a short-term financing need?

Interest paid on outstanding bonds is usually paid

Short-term financing is used to finance a merger or expansion.

Which of the following firms is most likely to receive venture capital?

While common stockholders have the right to receive dividends, holders of preferred stock elect the board of directors and approve or disapprove major corporate actions.

Over the years, Zebra Productions has been slow making payments to its bank. Now it is in need of financing. Based on past experience, the interest rate Zebra will pay is the

According to the risk-return ratio, conservative decisions actually result in more risk when compared to decisions that are often considered high-risk decisions.

The distribution of a corporation's earnings to the stockholders is called paying a dividend.

Rick's Wholesale Office Supplies prefers to handle its accounts receivable itself, but it also needs to use them to facilitate short-term borrowing. What can Rick's do?

The right to vote on major corporate actions belongs to

McGines, Inc. Sam McGines, CEO of McGines, Inc., decided that upon his retirement, he would elect his son Derrick to become the new CEO. Sam thought it would be a good idea to have Derrick shadow him at work to understand the roles and responsibilities of a CEO. Derrick shadowed his father for months in order to learn every aspect of the business. Sam knew that the best way for Derrick to learn was to actually perform some of the tasks he did on a daily basis, rather than simply describe them. The company generally focused on short-term financing, and Sam felt that it was important for Derrick to understand the different types of financing. Derrick learned about the type of bonds that the company usually offered to raise capital. These bonds allow the purchasers of the bond to keep them until maturity. Derrick also learned the process of obtaining bonds and the various types of long-term financing methods. Job shadowing was indeed a worthwhile experience for Derrick. -Refer to McGines, Inc. If Derrick has learned and understood the business, he should know that today most corporate bonds are

Collateral is not required for most short-term financing.

Each year Caliente, Inc., follows a budgeting process. The first step is always to look at the previous year's budget and see if anything needs to be updated. Caliente uses ____ budgeting.

When bonds issued at the same time mature on different dates, they are referred to as ____ bonds.

Borrowed money that will be used for more than one year is called

Sally Jackson was told that when she sold her corporate bonds she must endorse her bonds before transferring ownership to the new owner. This means that Sally sold

Explain the problems a firm might encounter in a rapidly growing market if long- term debt or equity financing were not available.

____ is (are) the earnings of a corporation that are distributed to the stockholders.

Which of the following is not a characteristic of short-term financing?