Question 1

Which of the following statements is FALSE?

Accepted Answer

A)  By relying on short-term debt, the firm exposes itself to funding risk, which is the risk of incurring financial distress costs if it cannot refinance its debt in a timely manner or at a reasonable rate. 
B)  An ultra-conservative policy would involve financing even some of the plant, property, and equipment with short-term sources of funds. 
C)  With a conservative financing policy, the firm would use short-term debt very sparingly to meet its peak seasonal needs. 
D)  Short-term debt can have lower agency and lemons costs than long-term debt, and an aggressive financing policy can benefit shareholders. 
A)  By relying on short-term debt, the firm exposes itself to funding risk, which is the risk of incurring financial distress costs if it cannot refinance its debt in a timely manner or at a reasonable rate. 
B)  An ultra-conservative policy would involve financing even some of the plant, property, and equipment with short-term sources of funds. 
C)  With a conservative financing policy, the firm would use short-term debt very sparingly to meet its peak seasonal needs. 
D)  Short-term debt can have lower agency and lemons costs than long-term debt, and an aggressive financing policy can benefit shareholders.

Question 2

An uncommitted line of credit is obtained through a nonbinding, informal agreement.

Accepted Answer

A) True 
 B)False

Question 3

According to the matching principle, short-term needs for funds should be financed by short-term sources of funds; long-term need for funds should be financed by long-term sources of funds.

Accepted Answer

A) True 
 B)False

Question 4

Carborundum Metals issues commercial paper with a face value of $1,000,000 and a maturity of three months. Carborundum receives net proceeds of $992,000 when it sells the paper. If the prime rate is 8% APR compounded quarterly, how much savings in interest did Carborundum realize by accessing the commercial paper market?

Accepted Answer

A)  $8,000 
B)  $9,800 
C)  $10,200 
D)  $11,840 
A)  $8,000 
B)  $9,800 
C)  $10,200 
D)  $11,840

Question 5

A short-term financial plan tracks a firm's cash balance and new and existing short-term financing, enabling managers to forecast shortfalls and plan to fund them in the least costly manner.

Accepted Answer

A) True 
 B)False

Question 6

In a single, end-of-period payment loan, firms ________.

Accepted Answer

A)  pay no interest on the loan and pay back the principal in one lump sum at the beginning of the loan 
B)  pay no interest on the loan and pay back the principal in one lump sum at the end of the loan 
C)  pay interest on the loan and pay back the principal in one lump sum in the beginning of the loan 
D)  pay interest on the loan and pay back the principal in one lump sum at the end of the loan 
A)  pay no interest on the loan and pay back the principal in one lump sum at the beginning of the loan 
B)  pay no interest on the loan and pay back the principal in one lump sum at the end of the loan 
C)  pay interest on the loan and pay back the principal in one lump sum in the beginning of the loan 
D)  pay interest on the loan and pay back the principal in one lump sum at the end of the loan

Question 7

Which of the following statements is FALSE?

Accepted Answer

A)  With a discount loan, the borrower is required to pay the interest at the end of the loan period. 
B)  Bridge loans are often quoted as discount loans with fixed interest rates. 
C)  A bridge loan is another type of short-term bank loan that is often used to "bridge the gap" until a firm can arrange for long-term financing. 
D)  After a natural disaster, lenders may provide businesses with short-term loans to serve as bridges until they receive insurance payments or long-term disaster relief. 
A)  With a discount loan, the borrower is required to pay the interest at the end of the loan period. 
B)  Bridge loans are often quoted as discount loans with fixed interest rates. 
C)  A bridge loan is another type of short-term bank loan that is often used to "bridge the gap" until a firm can arrange for long-term financing. 
D)  After a natural disaster, lenders may provide businesses with short-term loans to serve as bridges until they receive insurance payments or long-term disaster relief.

Question 8

Use the table for the question(s) below.
The quarterly working capital levels for Hasbeen Toys are presented in the following table (in $ millions):
  
-The permanent working capital needs for Hasbeen Toys is closest to ________.

Accepted Answer

A)  $1,100 million 
B)  $2,435 million 
C)  $1,275 million 
D)  $770 million 
A)  $1,100 million 
B)  $2,435 million 
C)  $1,275 million 
D)  $770 million

Which of the following statements is FALSE?

An uncommitted line of credit is obtained through a nonbinding, informal agreement.

According to the matching principle, short-term needs for funds should be financed by short-term sources of funds; long-term need for funds should be financed by long-term sources of funds.

A short-term financial plan tracks a firm's cash balance and new and existing short-term financing, enabling managers to forecast shortfalls and plan to fund them in the least costly manner.

In a single, end-of-period payment loan, firms ________.

Which of the following statements is FALSE?

Use the table for the question(s) below. The quarterly working capital levels for Hasbeen Toys are presented in the following table (in $ millions): -The permanent working capital needs for Hasbeen Toys is closest to ________.

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters

Exam 20: Short-Term Financial Planning

Which of the following statements is FALSE?

An uncommitted line of credit is obtained through a nonbinding, informal agreement.

According to the matching principle, short-term needs for funds should be financed by short-term sources of funds; long-term need for funds should be financed by long-term sources of funds.

A short-term financial plan tracks a firm's cash balance and new and existing short-term financing, enabling managers to forecast shortfalls and plan to fund them in the least costly manner.

In a single, end-of-period payment loan, firms ________.

Which of the following statements is FALSE?

Use the table for the question(s) below. The quarterly working capital levels for Hasbeen Toys are presented in the following table (in $ millions): -The permanent working capital needs for Hasbeen Toys is closest to ________.

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: an Introduction

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters