Question 1

Which of the following is the method most commonly used to transfer risks?

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 2

Why is preferred stock referred to as hybrid financing?

Accepted Answer

- it has features of both debt and equit

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

Guy is very conservative in his investing and holds mostly government savings bonds and bank GICs.What type of investment would you recommend to Guy if he says he wants to move up one notch in risk?

Accepted Answer

A)  Medium-quality preferred stock and high-grade corporate bonds 
B)  Commercial paper and lower-quality common stocks 
C)  High-grade corporate bonds and commercial paper 
D)  Commercial paper and medium-quality preferred stocks 
E)  Junk bonds and high-grade corporate bonds 
A)  Medium-quality preferred stock and high-grade corporate bonds 
B)  Commercial paper and lower-quality common stocks 
C)  High-grade corporate bonds and commercial paper 
D)  Commercial paper and medium-quality preferred stocks 
E)  Junk bonds and high-grade corporate bonds

Question 5

If Sunshine Tanning's founders invested $10 000 by buying the original 500 shares at $20.00 per share in 1994 and then raised $50 000 by selling 500 more shares at $100 per share,the additional paid-in capital would bring shareholder's equity to

Accepted Answer

A)  $40 000 
B)  $50.00 per shareholder 
C)  $60 000 
D)  $51 000 
E)  $100.00 per shareholder 
A)  $40 000 
B)  $50.00 per shareholder 
C)  $60 000 
D)  $51 000 
E)  $100.00 per shareholder

Question 6

Acres Corp.is involved in the risk management process.They have just completed identifying the risks the company faces and the potential losses that might be incurred.Their next step should be to evaluate various alternatives and choose the techniques that will best handle the potential losses.

Accepted Answer

A) True 
 B)False

Question 7

When managers at Kraft Foods anticipate how much cheddar cheese Safeway supermarkets will buy each month and when they will pay for those purchases,Kraft is managing its

Accepted Answer

A)  accounts payable. 
B)  accounts receivable. 
C)  credit policies. 
D)  capital expenditures. 
E)  inventories. 
A)  accounts payable. 
B)  accounts receivable. 
C)  credit policies. 
D)  capital expenditures. 
E)  inventories.

Question 8

What is a trade draft?

Accepted Answer

A)  A type of secured loan with trade products serving as collateral. 
B)  A means of pledging accounts receivable. 
C)  An agreement to meet certain terms,which are attached to the shipment,and which must be signed before the goods are delivered to the buyer. 
D)  A legal agreement promising to pay for the goods,which is signed by the buyer before the seller will ship the goods. 
E)  A standing agreement between a bank and a firm. 
A)  A type of secured loan with trade products serving as collateral. 
B)  A means of pledging accounts receivable. 
C)  An agreement to meet certain terms,which are attached to the shipment,and which must be signed before the goods are delivered to the buyer. 
D)  A legal agreement promising to pay for the goods,which is signed by the buyer before the seller will ship the goods. 
E)  A standing agreement between a bank and a firm.

Question 9

The most common form of trade credit is

Accepted Answer

A)  the trade acceptance. 
B)  the trade draft. 
C)  the promissory note. 
D)  open-book credit. 
E)  none of these. 
A)  the trade acceptance. 
B)  the trade draft. 
C)  the promissory note. 
D)  open-book credit. 
E)  none of these.

Question 10

Conserving the firm's earning power and assets by reducing the threat of losses due to uncontrollable events is known as ________ management.

Accepted Answer

A)  contingency 
B)  insurance 
C)  financial 
D)  risk 
E)  disaster 
A)  contingency 
B)  insurance 
C)  financial 
D)  risk 
E)  disaster

Question 11

Discuss the two forms of insurance that apply to the departure or death of key employees or owners.

Accepted Answer

- key person insurance: insurance that p

Question 12

What are the four responsibilities of finance (corporate finance)?

Accepted Answer

- Determining a firm's long te

Question 13

Claremont Corp.wants to buy insurance to protect itself against the possibility of financial loss if its new product line does not sell well.But Claremont will find that no company will sell it such insurance because new product development violates the verifiability criterion for insurable risks.

Accepted Answer

A) True 
 B)False

Question 14

Fresh Foods needs some quick cash to pay some overdue bills.If the following facts were known,which one would support the idea of factoring to obtain the cash?

Accepted Answer

A)  Factoring can be a costly way to obtain cash. 
B)  The company would not have to liquidate any of its core assets if it chooses factoring. 
C)  The company's customers might be unhappy if they hear that their account has been turned over to a factor. 
D)  The company would incur additional accounting expenses because they would have to keep track of the factored customer accounts. 
E)  Factoring companies usually aren't interested in receivables more than 90 days old. 
A)  Factoring can be a costly way to obtain cash. 
B)  The company would not have to liquidate any of its core assets if it chooses factoring. 
C)  The company's customers might be unhappy if they hear that their account has been turned over to a factor. 
D)  The company would incur additional accounting expenses because they would have to keep track of the factored customer accounts. 
E)  Factoring companies usually aren't interested in receivables more than 90 days old.

Question 15

Credit terms of "2/10,net 30" mean that the selling company offers a 10 percent discount if the customer pays within 30 days.

Accepted Answer

A) True 
 B)False

Question 16

You are managing a company that needs a quick injection of cash.Two ways of raising secured funds quickly are

Accepted Answer

A)  bank loans and lines of credit. 
B)  inventory loans and factoring accounts receivable. 
C)  inventory loans and accessing accounts receivable. 
D)  accounts receivable and trade credit. 
E)  lines of credit and commercial paper. 
A)  bank loans and lines of credit. 
B)  inventory loans and factoring accounts receivable. 
C)  inventory loans and accessing accounts receivable. 
D)  accounts receivable and trade credit. 
E)  lines of credit and commercial paper.

Question 17

What are the primary short-term sources of funds? How can the lender gain some sort of assurance that the borrower of funds will repay the debt?

Accepted Answer

- trade credit: the granting of credit b

Question 18

Quick-X Corp.recently sent its delivery drivers to a defensive driving course in order to reduce accidents with company vehicles.This is an example of

Accepted Answer

A)  risk shift. 
B)  risk control. 
C)  risk transfer. 
D)  risk retention. 
E)  risk avoidance. 
A)  risk shift. 
B)  risk control. 
C)  risk transfer. 
D)  risk retention. 
E)  risk avoidance.

Question 19

Equity financing is obtained by borrowing funds from the corporation's shareholders.

Accepted Answer

A) True 
 B)False

Question 20

Mountain Steel brings in graphite,carbon,iron ore,nickel,and sulphur to produce steel.These supplies are

Accepted Answer

A)  production inventory. 
B)  merchandise inventory. 
C)  raw materials inventory. 
D)  work-in-process inventory. 
E)  finished goods inventory. 
A)  production inventory. 
B)  merchandise inventory. 
C)  raw materials inventory. 
D)  work-in-process inventory. 
E)  finished goods inventory.

Which of the following is the method most commonly used to transfer risks?

Why is preferred stock referred to as hybrid financing?

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

Guy is very conservative in his investing and holds mostly government savings bonds and bank GICs.What type of investment would you recommend to Guy if he says he wants to move up one notch in risk?

If Sunshine Tanning's founders invested $10 000 by buying the original 500 shares at $20.00 per share in 1994 and then raised $50 000 by selling 500 more shares at $100 per share,the additional paid-in capital would bring shareholder's equity to

Acres Corp.is involved in the risk management process.They have just completed identifying the risks the company faces and the potential losses that might be incurred.Their next step should be to evaluate various alternatives and choose the techniques that will best handle the potential losses.

When managers at Kraft Foods anticipate how much cheddar cheese Safeway supermarkets will buy each month and when they will pay for those purchases,Kraft is managing its

What is a trade draft?

The most common form of trade credit is

Conserving the firm's earning power and assets by reducing the threat of losses due to uncontrollable events is known as ________ management.

Discuss the two forms of insurance that apply to the departure or death of key employees or owners.

What are the four responsibilities of finance (corporate finance)?

Claremont Corp.wants to buy insurance to protect itself against the possibility of financial loss if its new product line does not sell well.But Claremont will find that no company will sell it such insurance because new product development violates the verifiability criterion for insurable risks.

Fresh Foods needs some quick cash to pay some overdue bills.If the following facts were known,which one would support the idea of factoring to obtain the cash?

Credit terms of "2/10,net 30" mean that the selling company offers a 10 percent discount if the customer pays within 30 days.

You are managing a company that needs a quick injection of cash.Two ways of raising secured funds quickly are

What are the primary short-term sources of funds? How can the lender gain some sort of assurance that the borrower of funds will repay the debt?

Quick-X Corp.recently sent its delivery drivers to a defensive driving course in order to reduce accidents with company vehicles.This is an example of

Equity financing is obtained by borrowing funds from the corporation's shareholders.

Mountain Steel brings in graphite,carbon,iron ore,nickel,and sulphur to produce steel.These supplies are

Understanding the Canadian Business System

Understanding the Environments of Business

Conducting Business Ethically and Responsibly

Understanding Entrepreneurship, small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Managing Human Resources

Understanding Labourmanagement Relations

Motivating and Leading Employees

Producing Goods and Services

Increasing Productivity and Quality

Managing Information Systems and Communication Technology

Understanding Accounting Issues

Understanding Marketing Processes and Consumer Behaviour

Developing and Promoting Goods and Services

Pricing and Distributing Goods and Services

Understanding Money and Banking

Understanding Securities and Investments

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Exam 20: Financial Decisions and Risk Management

Which of the following is the method most commonly used to transfer risks?

Why is preferred stock referred to as hybrid financing?

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

Guy is very conservative in his investing and holds mostly government savings bonds and bank GICs.What type of investment would you recommend to Guy if he says he wants to move up one notch in risk?

If Sunshine Tanning's founders invested $10 000 by buying the original 500 shares at $20.00 per share in 1994 and then raised $50 000 by selling 500 more shares at $100 per share,the additional paid-in capital would bring shareholder's equity to

Acres Corp.is involved in the risk management process.They have just completed identifying the risks the company faces and the potential losses that might be incurred.Their next step should be to evaluate various alternatives and choose the techniques that will best handle the potential losses.

When managers at Kraft Foods anticipate how much cheddar cheese Safeway supermarkets will buy each month and when they will pay for those purchases,Kraft is managing its

What is a trade draft?

The most common form of trade credit is

Conserving the firm's earning power and assets by reducing the threat of losses due to uncontrollable events is known as ________ management.

Discuss the two forms of insurance that apply to the departure or death of key employees or owners.

What are the four responsibilities of finance (corporate finance)?

Claremont Corp.wants to buy insurance to protect itself against the possibility of financial loss if its new product line does not sell well.But Claremont will find that no company will sell it such insurance because new product development violates the verifiability criterion for insurable risks.

Fresh Foods needs some quick cash to pay some overdue bills.If the following facts were known,which one would support the idea of factoring to obtain the cash?

Credit terms of "2/10,net 30" mean that the selling company offers a 10 percent discount if the customer pays within 30 days.

You are managing a company that needs a quick injection of cash.Two ways of raising secured funds quickly are

What are the primary short-term sources of funds? How can the lender gain some sort of assurance that the borrower of funds will repay the debt?

Quick-X Corp.recently sent its delivery drivers to a defensive driving course in order to reduce accidents with company vehicles.This is an example of

Equity financing is obtained by borrowing funds from the corporation's shareholders.

Mountain Steel brings in graphite,carbon,iron ore,nickel,and sulphur to produce steel.These supplies are

Understanding the Canadian Business System

Understanding the Environments of Business

Conducting Business Ethically and Responsibly

Understanding Entrepreneurship, small Business, and New Venture Creation

The Global Context of Business

Managing the Business Enterprise

Managing Human Resources

Understanding Labourmanagement Relations

Motivating and Leading Employees

Producing Goods and Services

Increasing Productivity and Quality

Managing Information Systems and Communication Technology

Understanding Accounting Issues

Understanding Marketing Processes and Consumer Behaviour

Developing and Promoting Goods and Services

Pricing and Distributing Goods and Services

Understanding Money and Banking

Understanding Securities and Investments

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