Question 1

Venture capital is money invested in small firms that have the potential to become very successful.

Accepted Answer

A) True 
 B)False

Question 2

Effective financial management involves careful planning to determine the best financial sources and to ensure that projected uses are in keeping with the organization's goals.

Accepted Answer

A) True 
 B)False

Question 3

Debt capital is borrowed money that does not have to be repaid.

Accepted Answer

A) True 
 B)False

Question 4

Jacob and Molly decide to start a new cake-decorating business. They each contribute $10,000 to get the business off the ground. This money is considered

Accepted Answer

A)  sales revenue. 
B)  long-term debt. 
C)  equity capital. 
D)  short-term financing. 
E)  cash flow. 
A)  sales revenue. 
B)  long-term debt. 
C)  equity capital. 
D)  short-term financing. 
E)  cash flow.

Question 5

Are there any risks for a corporation that uses long-term debt financing? Support your answer.

Accepted Answer

Yes, there are risks for a corporation t

Question 6

When a corporation uses an initial public offering to raise capital, the stock is sold in the

Accepted Answer

A)  primary market. 
B)  secondary market. 
C)  unsecured financing market. 
D)  securities exchange. 
E)  over-the-counter market. 
A)  primary market. 
B)  secondary market. 
C)  unsecured financing market. 
D)  securities exchange. 
E)  over-the-counter market.

Question 7

Since the financial crisis peak in 2009, what goals were proposed by the U.S. House of Representatives and Senate? Briefly discuss the benefits and drawbacks of such proposals.

Accepted Answer

Since the financial crisis peak in 2009,

Question 8

Commercial paper is short-term promissory notes issued by large corporations.

Accepted Answer

A) True 
 B)False

Question 9

What types of businesses obtain venture capital financing? How does venture capital differ from a private placement?

Accepted Answer

Venture capital financing is typically o

Question 10

Bonds that are secured by various assets of the issuing corporation are called debenture bonds.

Accepted Answer

A) True 
 B)False

Question 11

William owns 100 shares of Textron convertible preferred stock. To what can this preferred stock be converted in most companies?

Accepted Answer

A)  A different type of preferred stock 
B)  Common stock 
C)  Corporate bonds 
D)  Trade credit 
E)  Retained earnings 
A)  A different type of preferred stock 
B)  Common stock 
C)  Corporate bonds 
D)  Trade credit 
E)  Retained earnings

Question 12

A marketplace where member brokers meet to buy and sell securities is known as

Accepted Answer

A)  the primary market. 
B)  the supplemental market. 
C)  the overseas market. 
D)  an IPO. 
E)  a securities exchange. 
A)  the primary market. 
B)  the supplemental market. 
C)  the overseas market. 
D)  an IPO. 
E)  a securities exchange.

Question 13

As a stockholder in the Giant Plants Company, you have the right to vote on all of the following issues except

Accepted Answer

A)  amendments to the corporate charter. 
B)  the price the firm charges for its products. 
C)  the sale of certain assets. 
D)  new issues of preferred stock or bonds. 
E)  changes in the amount of common stock issued. 
A)  amendments to the corporate charter. 
B)  the price the firm charges for its products. 
C)  the sale of certain assets. 
D)  new issues of preferred stock or bonds. 
E)  changes in the amount of common stock issued.

Question 14

To be successful while pursuing a career in finance, an employee must

Accepted Answer

A)  graduate from a four-year university. 
B)  have a strong background in accounting or mathematics. 
C)  have fifteen years of experience. 
D)  be driven by a motive to become very rich. 
E)  start a career as a bank officer. 
A)  graduate from a four-year university. 
B)  have a strong background in accounting or mathematics. 
C)  have fifteen years of experience. 
D)  be driven by a motive to become very rich. 
E)  start a career as a bank officer.

Question 15

Rosemary Wyatt bought preferred stock issued by General Products, Inc. The stock has a par value of $100 and pays 7 percent. The dividend for this preferred stock issue is

Accepted Answer

A)  $1.00. 
B)  $3.25. 
C)  $3.88. 
D)  $5.12. 
E)  $7.00. 
A)  $1.00. 
B)  $3.25. 
C)  $3.88. 
D)  $5.12. 
E)  $7.00.

Question 16

When compared to common stockholders, preferred stockholders have a priority claim on corporate assets.

Accepted Answer

A) True 
 B)False

Question 17

For a corporation, equity capital is obtained from

Accepted Answer

A)  bondholders. 
B)  banks. 
C)  stockholders. 
D)  insurance companies. 
E)  credit unions. 
A)  bondholders. 
B)  banks. 
C)  stockholders. 
D)  insurance companies. 
E)  credit unions.

Question 18

With regard to the ongoing expense of long-term corporate financing, which of the following would be the least expensive?

Accepted Answer

A)  Long-term loans 
B)  Corporate bonds 
C)  Debenture bonds 
D)  Common stock 
E)  Trade credit 
A)  Long-term loans 
B)  Corporate bonds 
C)  Debenture bonds 
D)  Common stock 
E)  Trade credit

Question 19

Retained earnings are

Accepted Answer

A)  all the earnings of the corporation. 
B)  profits before taxes. 
C)  profits after taxes. 
D)  undistributed profits. 
E)  total owners' equity. 
A)  all the earnings of the corporation. 
B)  profits before taxes. 
C)  profits after taxes. 
D)  undistributed profits. 
E)  total owners' equity.

Question 20

Slater Co. has very old computers and manufacturing equipment and knows it needs to upgrade them or risk losing much of its business. Slater does not have the money to purchase the computers, so it will most likely need

Accepted Answer

A)  a short-term loan. 
B)  to keep using the old computers. 
C)  to deduct the cost from employees' salaries. 
D)  long-term financing. 
E)  to use increased cash flow from sales. 
A)  a short-term loan. 
B)  to keep using the old computers. 
C)  to deduct the cost from employees' salaries. 
D)  long-term financing. 
E)  to use increased cash flow from sales.

Exam 19: Mastering Financial Management

Venture capital is money invested in small firms that have the potential to become very successful.

Effective financial management involves careful planning to determine the best financial sources and to ensure that projected uses are in keeping with the organization's goals.

Debt capital is borrowed money that does not have to be repaid.

Jacob and Molly decide to start a new cake-decorating business. They each contribute $10,000 to get the business off the ground. This money is considered

Are there any risks for a corporation that uses long-term debt financing? Support your answer.

When a corporation uses an initial public offering to raise capital, the stock is sold in the

Since the financial crisis peak in 2009, what goals were proposed by the U.S. House of Representatives and Senate? Briefly discuss the benefits and drawbacks of such proposals.

Commercial paper is short-term promissory notes issued by large corporations.

What types of businesses obtain venture capital financing? How does venture capital differ from a private placement?

Bonds that are secured by various assets of the issuing corporation are called debenture bonds.

William owns 100 shares of Textron convertible preferred stock. To what can this preferred stock be converted in most companies?

A marketplace where member brokers meet to buy and sell securities is known as

As a stockholder in the Giant Plants Company, you have the right to vote on all of the following issues except

To be successful while pursuing a career in finance, an employee must

Rosemary Wyatt bought preferred stock issued by General Products, Inc. The stock has a par value of $100 and pays 7 percent. The dividend for this preferred stock issue is

When compared to common stockholders, preferred stockholders have a priority claim on corporate assets.

For a corporation, equity capital is obtained from

With regard to the ongoing expense of long-term corporate financing, which of the following would be the least expensive?

Retained earnings are

Slater Co. has very old computers and manufacturing equipment and knows it needs to upgrade them or risk losing much of its business. Slater does not have the money to purchase the computers, so it will most likely need

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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