BUSN 1003: Ch.9 Quiz

line of credit

A _____ is a financial arrangement in which a bank agrees to provide a firm with funds up to some specified limit, as long as the borrower's financial situation does not deteriorate, and the bank has sufficient funds.

budgeted income statement

A _____ is a projection showing how a firm's budgeted sales and costs will affect expected net earnings.

factor

A(n) _____ is a company that provides short-term financing to firms by purchasing their accounts receivables at a discount.

covenant

A(n) _____ is a restriction lenders impose on borrowers as a condition of providing long-term debt financing.

dividing net income of a firm minus preferred dividends by the average number of shares of common stock outstanding.

Earnings per share (EPS) is calculated by:

pro forma financial statements

In the context of basic financial planning tools, the budgeted income statement and budgeted balance sheet are referred to as _____.

Inventory turnover ratio

The _____ is computed by dividing a firm's cost of goods sold by average inventory levels.

Debt ratio

The _____ is computed by dividing a firm's total liabilities by its total assets.

Fiduciary duty

The legal and ethical obligation of financial managers to make decisions consistent with the financial interests of their firm's owners is called their _____.

covenants

The purpose of _____ is to protect creditors by preventing the borrower from pursuing policies that might undermine its ability to repay the loan.

promissory note

When a firm negotiates a loan with a bank, it signs a(n) _____, which specifies the length of the loan, the rate of interest the firm must pay, and other terms and conditions of the loan.

Social responsibility

Which of the following is a major issue that confronts financial managers as they seek to maximize the market price of stock?

Treasury bills

_____ are short-term IOUs issued by the U.S. government that typically mature in 4, 13, or 26 weeks.

Retained earnings

_____ are the part of a firm's net income it reinvests.

Return-on-equity

_____ is calculated by dividing net income (profit) by owners' equity.

Trade credit

_____ is one of the most important sources of short-term financing for many firms and arises when suppliers ship materials, parts, or goods to a firm without requiring payment at the time of delivery.

Finance

_____ is the functional area of business that is responsible for finding the best sources of funds and the best ways to use them.

Capital structure

_____ is the mix of equity and debt financing a firm uses to meet its permanent financing needs.

Capital budgeting

_____ is the process a firm uses to evaluate long-term investment proposals.

pro forma financial statements

_____ provide a framework for analyzing the impact of a firm's plans on the financing needs of the company.

Equity financing

_____ refers to funds provided by the owners of a company.