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Exam 9: Finance: Acquiring Using Funds to Maximize Value

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Question 1

Multiple Choice

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_____ consists of short-term (and usually unsecured) promissory notes issued by large corporations.

A) Line of credit
B) Factoring
C) Commercial paper
D) Trade credit

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Question 2

Multiple Choice

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Yennex Inc., a textile company, planned to sell its stock products in two months' time. The company was able to sell those products within a month's time. Therefore, it was able to sell double the estimated amount in a year. Given the scenario, which of the following ratio analyses is most likely to have been analyzed by Yennex Inc. to achieve this success?

A) Leverage ratios
B) Asset management ratios
C) Liquidity ratios
D) Profitability ratios

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Question 3

Multiple Choice

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Umbero Nix, a garment manufacturing company, produces twenty thousand units of sweaters. These units are sold within three months and replenished with another twenty thousand units. In one year, Umbero Nix replaces its inventory of sweaters four times over. Umbero Nix most likely analyzes _____ to measure how many times its inventory is sold and replaced each year.

The _____ is a common measure of leverage that compares liabilities to assets.

Which of the following statements is true of angel investors?

Under the terms of _____, a firm will pay interest on any funds it borrows, and a commitment fee on any funds it does not borrow.

Leverage ratios measure the extent to which a firm uses _____.

Renita works as a freelancer. She wants to start her own business, but she does not have the required funding. To meet the working capital for her business, she takes a short-term loan from a bank. The bank agrees to provide her funding up to $50,000, as and when she needs it. However, she can repay the amount immediately or over a pre-specified period of time. Which of the following short-term financing sources does Renita utilize to fund her business in the given scenario?

The extent to which a firm relies on various forms of debt and equity to satisfy its financing needs is called that firm's _____.

Vironi Mave, a designer clothing company, wants to hire fashion designers to start a new clothing line for men. To obtain funds for the project, Vironi Mave issues several formal IOUs to sell them to its investors, with a maturation period of ten years. Which of the following sources of long-term funds is being used by Vironi Mave in the given scenario?

An advantage of offering lenient credit terms is that it can help a firm:

Timoth Steels, a steel manufacturing company, wants to install a new factory in Temenia. The company decides to use funds from its own account and refrain from borrowing money from banks. Which of the following sources of long-term funds is being used by Timoth Steels in the given scenario?

Duk Yu, a beverage company, buys its raw materials from Nessange, a fruits and vegetables exporting company, without making any payment at the time of purchase. Instead, Nessange allows Duk Yu to pay the total purchase amount within a period of six months. Which of the following short-term financing options is being used by Duk Yu in the given scenario?

A budgeted income statement is a detailed forecast of future cash flows that helps financial managers identify when their firm is likely to experience temporary shortages or surpluses of cash.

Tobit Financing offers short-term financing plans to other companies. It buys the accounts of other companies at a discount and collects the full amount from the customers of those companies. Which of the following short-term financing options is being provided by Tobit Financing in this scenario?

The extent to which retained earnings are used as a source of long-term capital for a firm, depends on the state of the economy.

When a company takes out a bank loan, or issues and sells corporate bonds, it is relying on _____.

Which of the following is a leverage ratio?

Juxiplex, an electronics company, introduced a new range of smart phones. It bought the required raw materials from Gunplet Inc. without making payment at the time of purchase. Instead, Gunplet Inc. allowed Juxiplex to pay within fifteen days from the time of purchase. Which of the following short-term financing options was used by Juxiplex in the given scenario?

Describe the two major types of pro forma financial statements, and explain the role they play in financial planning.