Exam 20: Financial Decisions and Risk Management

In 2012,Canadian Pacific Railway Ltd.announced that it would make investments totaling $1.2 billion in order to improve its operating ratio,which in 2011 was the worst among North America's Big Six railways.This activity is CPR's

What are the two methods of equity financing for long-term funding requirements? What issues must be considered before the choice is made between the two methods? Explain your reason.

What is the difference between factoring accounts receivable and pledging accounts receivable as collateral for a short-term loan?

Some unsecured loans are one-time-only arrangements,and may take the form of lines of credit,revolving credit agreements,or commercial paper.

A trucking company that decides it is cheaper to pay for vandalism repairs than it is to submit claims to its insurance company is practicing risk control.

What are the two factors that are used to determine where a specific financial instrument will be placed on the risk-return continuum?

Which of the following is a short-term source of funds for an organization?

Accounts payable is an example of short-term expenditures.

Which of the following would a bank most likely offer?

Which term is used to identify the granting of credit by one firm to another?

Equity financing involves obtaining long-term funding from within the business firm.

Developing a new product is a pure risk because there is the possibility of either a gain or a loss.

Payments to preferred shareholders are fixed in amount,but they can be withheld if the company wishes.

The first step in the risk management process is to measure the frequency and severity of losses and their impact.

Manicure Ltd.is a large lawn care company with hundreds of clients.The company needs some short-term financing to meet a cash flow gap while it makes immediate capital expenditures.If the following facts are known,which one would suggest that the company use a credit card for this purpose?

What is venture capital?

What does a credit policy of "2/10,net 30" mean?

Samantha should prepare a cash flow requirements projection for her business because

A corporate bond is used to raise a large amount of money for long periods of time.

To measure the frequency and severity of losses,managers must consider both past history and current activities.