Assignment: Chapter 16 Mastering Financial Management
Ida is interested in pursuing a career in finance. Successful managers and employees in finance must have all but which of the following credentials or skills?
A juris doctor degree
Ishara owns and operates a hardware store. She needs a $20,000 small business loan to purchase additional inventory for the store, and to do that, the local bank requires Ishara to pledge her home as security for the loan. In this transaction, Ishara's home represents which of the following?
Collateral
Luiz and Naroa have decided to form a law partnership. To get their practice started, Luiz and Naroa have agreed to provide $25,000 each from their personal funds. These contributions from Luiz and Naroa to their partnership represent which of the following?
Equity capital
Dafina has been successful this year in the yogurt shop she owns and operates. In fact, Dafina has generated $9,500 in profit so far this year, and she chooses to deposit this money in the bank in case she needs it for her business in the future. In her arrangement with the bank, Dafina will leave her $9,500 on deposit for one year, and in return, the bank will pay her a specified rate of interest. The agreement between Dafina and the bank represents which of the following?
A certificate of deposit (CD)
Effia is the majority shareholder of a publicly traded manufacturing corporation. To obtain required operational funding, the company has issued a bond to investors that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock. Effia's company has issued which of the following?
A convertible bond
As an executive manager for a paint manufacturing company, Patrick understands the importance of effective financial management to the success of his company. Which of the following is incorrect regarding proper financial management?
It must ensure that the company "go public" with an initial public offering within the first ten years of the firm's existence.
Laqueta works as a certified public accountant (CPA) for a large accounting firm. The firm uses a network that transfers salaries directly into their employee's bank accounts, thus eliminating the need to make out individual paychecks. The accounting firm Laqueta works for uses which of the following for employee salary transfers?
An automated clearinghouse (ACH) network
Kemi is the principal owner of a home and office cleaning corporation. To obtain necessary operational capital, the company has issued a bond to investors backed only by its reputation. Which of the following did Kemi's corporation issue?
A debenture bond
Aditi is the majority shareholder of an industrial chemical supply corporation. To obtain much-needed operational capital, the company has issued a bond secured by its real estate holdings and equipment. Which of the following did Aditi's corporation issue?
A mortgage bond
Rishaan, who owns a wholesale supply business, has just sold $8,200 in merchandise to Clara for inventory in her styling salon. In return, Clara has signed a pledge to Rishaan to pay the $8,200, plus a designated rate of interest, one year from the date of the sale. Which of the following represents the arrangement between Clara and Rishaan?
A promissory note
To obtain much-needed operational capital for her restaurant, Chiku recently signed a promissory note to repay a $10,000 loan from her lender in monthly installments over three years. Which of the following refers to the arrangement Chiku has with her lender?
A term-loan agreement
Maria is the principal owner of an information technology firm in Carrollton, Texas. After having operated the business successfully for the last ten years, Maria and her co-owners are considering "taking the next step" in growing the business by selling common stock to the general public for the first time. This initiative is known as which of the following?
An initial public offering
Tereza is interested in obtaining short-term financing for her confectionary shop, primarily because she has heard from fellow entrepreneurs that short-term financing is usually easier to obtain than long-term debt financing. Which of the following is not a reason short-term debt financing is usually easier to obtain than long-term debt financing?
As an industry standard, banks ordinarily charge three times the interest rate for short-term loans compared to long-term loans.
Last month, the seafood restaurant Mariana owns and operates took in $157,350 in total receipts, and spent $142, 575 in total fixed and variable costs. This movement of money into and out of Mariana's restaurant represents which of the following?
Cash flow
In her last lecture class for Introduction to Business, Janice learned about the two types of stock issued by a corporation: common stock and preferred stock. Which of the following is incorrect regarding common stock and preferred stock?
Common stockholders have the first claim (after creditors) on assets if the corporation is dissolved.
In her Introduction to Business class, Catarina is learning about the four primary sources of funds available to a business. Which of the following is not one of those sources?
Dividend distributions
As a young entrepreneur who operates a recently launched landscaping business, Vicente would like to learn more about the traditional banking services provided to business clients. Which of the following is not one of those services?
Issuing business bankruptcy insurance
As a budding entrepreneur, Haji is interested in the importance of effective financial management to the success of a business. Which of the following is incorrect regarding proper financial management?
It must ensure that the firm pays dividends to its shareholders.
Darius recently provided $25,000 in financial backing for his nephew Demond's start-up computer repair shop. Demond refers to his uncle Darius as his "angel" investor. Which of the following is incorrect regarding an angel investor?
Like venture capitalists, angel investors are often more focused on helping a business or an entrepreneur succeed rather than earning huge profits.
Batini plans to start up a new tattoo parlor in town. To open her parlor, Batini takes out a three-year, $20,000 small business loan from a local bank. She uses the money to lease a building and purchase necessary equipment. This loan represents which of the following?
Long-term financing
As a Master of Business Administration (MBA) student, Ingrid is learning about corporate retained earnings. Which of the following is incorrect regarding retained earnings?
Most large corporations distribute all their after-tax earnings to stockholders.
Rin owns and operates a residential kitchen cabinet manufacturing company. Based on previous experience, Rin knows that although she will have a production run of cabinets in January, those cabinets may not sell until April, when the weather for home construction improves. This time lag between Rin's actual production of cabinetry in January and when it is sold in April is which of the following?
Speculative production
Advik just took out a short-term loan from the local bank for his alien novelty shop in Roswell, New Mexico. Due to his outstanding credit, Advik was fortunate enough to receive the lowest interest rate charged by the bank for a short-term loan. Advik received which of the following?
The prime rate
Riko owns and operates a furniture wholesaling business. To facilitate sales to retailers, Riko often provides financial assistance to his retail customers by allowing them up to 60 days to pay for the furniture they purchase. Which of the following describes the arrangement Riko has with his customers?
Trade credit
Marlon operates a textile manufacturing business in Birmingham, Alabama. Due to the highly competitive nature of the industry both domestically and internationally, Marlon micromanages every penny of his company's expenses. He specifically requires that every expense in his company's budget must be justified. Marlon's approach to budgeting is known as which of the following?
Zero-base budgeting
