Chapter 16 Marketing & Management

d. Profits that owners do not take out of the business

Retained earnings refer to a. Money from the sale of bonds b. Money from the sale of stock c. Profits that owners do not save for use in the business d. Profits that owners do not take out of the business

True

True or False A partner's personal contribution in a business is equity capital

Par value

Arbitrarily assigned amount shown on a stock certificate that is used for bookkeeping purposes

Long-term debt

Capital borrowed for longer than a year

Debt capital

Capital loaned to a business by others

a. All of the responses

If a sole proprietorship fails, which of the owner's assets may be lost? a. All of the responses b. Personal assets not invested in the business c. Mortgaged personal property d. Personal assets invested in the business

Retained earnings

Profits that are saved for use by the business rather than taken out by the owners

d. 1 year

Short-term debt must be repaid to the lender with interest within a. 30 days b. 60 days c. 90 days d. 1 year

Preferred stock

Stock that gives the holders preference when dividends are distributed

Book value

Stock value that is calculated by dividing the corporation's net worth by the total number of outstanding shares

b. Book value

The dollar value printed on the stock certificate is known as the a. Market value b. Book value c. Par value d. Purchase value

b. Equity capital

The investment made in a business by its owner is called a. Working capital b. Equity capital c. Creditor capital d. Cash flow

a. Debentures

A common method to purchase expensive equipment is with a. Debentures b. Term loans c. Bonds d. Factors

b. Owner capital exceeds debt capital

Banks and other types of lending institutions usually will not loan money to a business unless a. Debt capital exceeds owner capital b. Owner capital exceeds debt capital c. Debt capital and owner capital are nearly equal d. Borrowed capital exceeds owner capital

d. Are a type of debt equity

Bonds are long-term financial instruments that a. Represent a share of ownership in the corporation b. Cannot be bought or sold by investors c. Have a fixed value that does not change d. Are a type of debt equity

Short-term debt

Debt capital that must be repaid with interest within a year

True

True or False A supplier who allows a business 90 days to pay for merchandise is actually providing short-term capital

True

True or False Bondholders must be paid before stockholders share in the earnings

True

True or False Even if this business is not making a profit, it should plan to replace assets that depreciate

False

True or False If the par value of a share of stock is $100, the market value cannot be below $100

True

True or False The original cost of obtaining long-term capital is usually higher than that of short-term capital

True

True or False Businesses in financial difficulty often have trouble getting debt capital

True

True or False Retained earnings are a type of equity capital

d. They may get a percentage of ownership in the company in return for their investment

Which statement is true about venture capitalist? a. They are protected against losses b. They pass all risks to the company in return for their investment c. They take over management of any company they invest in d. They may get a percentage of ownership in the company in return for their investment

a. They have the right to vote at annual meetings, at one vote per share of stock owned

Which statement is true of common stockholders? a. They have the right to vote at annual meetings, at one vote per share of stock owned b. If the corporation makes a profit, they are paid before creditors c. They are guaranteed dividends every year d. They must purchase stock at its par value