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Exam 16: Mastering Financial Management

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Question 71

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Carol's Clothiers,LLP,sells women's business clothing designed by the world's top designers.The company also sells clothing from its own line which is priced just below the designer clothing,but is nonetheless of very high quality.Carol's has,throughout its history,been attentive to the financial needs of the company and the seasonal fluctuations in income and expenses,and has planned accordingly.Except for the initial start-up expenses which were paid by the partner's loaning funds to the company,Carol's has always paid its bills from the income generated by sales.During the second year in operation,the company repaid the loans made by the partners.What kind of financing has Carol's Clothiers,LLP,used as its primary source of funds?

A) Proceeds from sale of assets
B) Equity capital
C) Debt capital
D) Sales revenue

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Question 72

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Retained earnings are

A) the same as net profit.
B) interest earned on bond investments.
C) nontaxable income.
D) a form of equity financing.
E) the portion of the profit paid to stockholders.

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Question 73

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Describe corporate bonds.What affects the interest rate paid by a corporation?

What right do most common stockholders have that most preferred stockholders do not have?

All of the following are uses of long-term financing except

Erick's Transition Erick is currently a manager of a small financial planning firm.He is seeking a new career with a large corporation in the banking industry.He recently applied for the financial manager opening at G & T Bank.He is concerned that the transition from his small firm to a large corporation will be difficult.To better prepare himself for this change,he has decided to enroll in a few business classes to strengthen his understanding of corporate finance.The business classes have proven to be a valuable tool for learning the critical skills needed to fully understand a financial plan,equity financing,and debt financing.Erick now believes he has strengthened his competitive advantage in his quest for the job. -Refer to Erick's Transition.Having taken the classes,Erick should describe cash flow as which of the following?

Mia has been asked by top management to develop financial ____ that the company will achieve over the next one- to ten-year period.

Most small businesses can expect to obtain venture capital financing if they have a good credit history of paying their bills on time.

When a firm makes the decision to borrow money,it is a clear sign that the firm is in financial trouble.

Bill's Manufacturing needs $450,000 to build a new plant.It must also spend $200,000 on new equipment for the plant.Both of these needs are examples of

During 2010,Bedford Technology sold common stock for the first time to whoever wanted to buy it.This was the ____ for Bedford.

​Suppose Sears Roebuck & Company dissolved.After creditors are paid,what is the name of the next group to have claim on profits and assets?

As a stockholder in 3M,Randy knows that corporations are required by law to have a stockholder meeting

​A written order for a bank to pay a third party a stated amount of money on a specified date is a

An initial public offering occurs anytime that a corporation sells stock to the general public.

Venture capital firms invest in

The legal document detailing all the conditions relating to a bond issue is called a bond indenture.

The distribution of a corporation's earnings to the stockholders is called paying a dividend.

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

In a revolving credit agreement,the borrower typically pays ____ of the ____ portion of the agreement.