Question 1

When a firm makes annual deposits to repay bondholders at maturity, it is using a

Accepted Answer

A)  serial bond issue. 
B)  sinking fund. 
C)  trustee plan. 
D)  savings plan. 
E)  debenture bond issue. 
A)  serial bond issue. 
B)  sinking fund. 
C)  trustee plan. 
D)  savings plan. 
E)  debenture bond issue.

Question 2

Bonds from a single issue that have staggered maturity dates are called serial bonds.

Accepted Answer

A) True 
 B)False

Question 3

When constructing budgets, most managers begin with departmental budgets for sales and various expenses that are then combined into a company-wide cash budget.

Accepted Answer

A) True 
 B)False

Question 4

Explain the primary differences between the primary market and the secondary market. Which is needed (or both) in order for a corporation to raise capital for the firm by selling stock?

Accepted Answer

The primary market is where new securiti

Question 5

The most basic form of corporate ownership is common stock.

Accepted Answer

A) True 
 B)False

Question 6

If a firm's earnings should drop below the interest cost of borrowed money, the return on owners' equity will increase.

Accepted Answer

A) True 
 B)False

Question 7

For the majority of businesses, newly proposed financial reforms by the U.S. House of Representatives and the Senate will likely increase the time and cost of obtaining financing.

Accepted Answer

A) True 
 B)False

Question 8

If money is reserved each year to guarantee that a bond will be paid off at maturity, the money will be held in a ____ fund.

Accepted Answer

A)  capitalization 
B)  sinking 
C)  compounding 
D)  retirement 
E)  redemption 
A)  capitalization 
B)  sinking 
C)  compounding 
D)  retirement 
E)  redemption

Question 9

Maria has been asked by top management to develop financial ____ that the company will achieve over the next one- to ten-year period.

Accepted Answer

A)  strategies 
B)  directives 
C)  plans 
D)  objectives 
E)  goals 
A)  strategies 
B)  directives 
C)  plans 
D)  objectives 
E)  goals

Question 10

Most small businesses can expect to obtain venture capital financing if they have a good credit history of paying their bills on time.

Accepted Answer

A) True 
 B)False

Question 11

Money received from the sale of shares of ownership in a business is called

Accepted Answer

A)  sales revenue. 
B)  debt capital. 
C)  equity capital. 
D)  factor proceeds. 
E)  cash flow. 
A)  sales revenue. 
B)  debt capital. 
C)  equity capital. 
D)  factor proceeds. 
E)  cash flow.

Question 12

What does it mean to use equity financing? Why might a large corporation want to do this?

Accepted Answer

Equity financing refers to raising capit

Question 13

A promissory note that requires a borrower to repay funds in installments is called a(n)

Accepted Answer

A)  term-loan agreement. 
B)  installment plan. 
C)  lease. 
D)  mortgage. 
E)  annuity loan agreement. 
A)  term-loan agreement. 
B)  installment plan. 
C)  lease. 
D)  mortgage. 
E)  annuity loan agreement.

Question 14

The representative for bond owners is called a(n)

Accepted Answer

A)  broker. 
B)  attorney. 
C)  member of the board of directors. 
D)  trustee. 
E)  bond counselor. 
A)  broker. 
B)  attorney. 
C)  member of the board of directors. 
D)  trustee. 
E)  bond counselor.

Question 15

The denominations for corporate bonds range from $1,000 to $50,000.

Accepted Answer

A) True 
 B)False

Question 16

Although a corporation does not have to pay dividends on common stock, it is required to pay dividends on preferred stock.

Accepted Answer

A) True 
 B)False

Question 17

Although Hargrove Co. makes enough money to pay for everything it needs, it still chooses to have some debt and pay a larger portion of retained earnings back to the stockholders. What is likely the best explanation for this decision?

Accepted Answer

A)  Reduced interest rate 
B)  Financial leverage 
C)  Return multiplier 
D)  Equity leverage 
E)  Debt multiplier 
A)  Reduced interest rate 
B)  Financial leverage 
C)  Return multiplier 
D)  Equity leverage 
E)  Debt multiplier

Question 18

The quality of a firm's accounts receivables is the credit standing of the firm's customers, coupled with the customers' ability to repay their credit obligations.

Accepted Answer

A) True 
 B)False

Question 19

Retained earnings are

Accepted Answer

A)  the same as net profit. 
B)  interest earned on bond investments. 
C)  nontaxable income. 
D)  a form of equity financing. 
E)  the portion of the profit paid to stockholders. 
A)  the same as net profit. 
B)  interest earned on bond investments. 
C)  nontaxable income. 
D)  a form of equity financing. 
E)  the portion of the profit paid to stockholders.

Question 20

Debbie Brooks purchased a $1,000 corporate bond that pays 9 percent interest. The face value of her bond is $1,000. What is the amount of interest that she will receive each year?

Accepted Answer

A)  $100 
B)  $90 
C)  $50 
D)  $46.25 
E)  $10 
A)  $100 
B)  $90 
C)  $50 
D)  $46.25 
E)  $10

Exam 19: Mastering Financial Management

When a firm makes annual deposits to repay bondholders at maturity, it is using a

Bonds from a single issue that have staggered maturity dates are called serial bonds.

When constructing budgets, most managers begin with departmental budgets for sales and various expenses that are then combined into a company-wide cash budget.

Explain the primary differences between the primary market and the secondary market. Which is needed (or both) in order for a corporation to raise capital for the firm by selling stock?

The most basic form of corporate ownership is common stock.

If a firm's earnings should drop below the interest cost of borrowed money, the return on owners' equity will increase.

For the majority of businesses, newly proposed financial reforms by the U.S. House of Representatives and the Senate will likely increase the time and cost of obtaining financing.

If money is reserved each year to guarantee that a bond will be paid off at maturity, the money will be held in a ____ fund.

Maria has been asked by top management to develop financial ____ that the company will achieve over the next one- to ten-year period.

Most small businesses can expect to obtain venture capital financing if they have a good credit history of paying their bills on time.

Money received from the sale of shares of ownership in a business is called

What does it mean to use equity financing? Why might a large corporation want to do this?

A promissory note that requires a borrower to repay funds in installments is called a(n)

The representative for bond owners is called a(n)

The denominations for corporate bonds range from $1,000 to $50,000.

Although a corporation does not have to pay dividends on common stock, it is required to pay dividends on preferred stock.

Although Hargrove Co. makes enough money to pay for everything it needs, it still chooses to have some debt and pay a larger portion of retained earnings back to the stockholders. What is likely the best explanation for this decision?

The quality of a firm's accounts receivables is the credit standing of the firm's customers, coupled with the customers' ability to repay their credit obligations.

Retained earnings are

Debbie Brooks purchased a $1,000 corporate bond that pays 9 percent interest. The face value of her bond is $1,000. What is the amount of interest that she will receive each year?

Exploring the World of Business and Economics

A: Being Ethical and Socially Responsible

B: Being Ethical and Socially Responsible

A: Exploring Global Business

B: Exploring Global Business

Choosing a Form of Business Ownership

Small Business, Entrepreneurship, and Franchises

Understanding the Management Process

Creating a Flexible Organization

Producing Quality Goods and Services

Attracting and Retaining the Best Employees

Motivating and Satisfying Employees and Teams

Enhancing Union-Management Relations

Building Customer Relationships Through Effective Marketing

A: Creating and Pricing Products That Satisfy Customers

B: Creating and Pricing Products That Satisfy Customers

Wholesaling, Retailing, and Physical Distribution

Developing Integrated Marketing Communications

Social Media, E-Business, and Accounting

Using Management and Accounting Information

Understanding Money, Banking, and Credit

A: Understanding Personal Finances and Investments

B: Understanding Personal Finances and Investments

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