Ch 16 INTRO TO BUSINESS

Phaedra bought 50 shares of stock in Biogen, Inc., an American multinational technology company. She received documents in the mail from the company inviting her to a meeting at the company's headquarters in San Diego, California. Out of curiosity about what the company had planned for the future and how its products had performed over the past year, she attended the meeting. During the meeting, she heard reports from different corporate officers outlining the accomplishments and failures in their particular areas of expertise. At the end of the meeting, Phaedra voted for the new president of the company, a director, and approved the accounting firm. What kind of stock does Phaedra own in Biogen, Inc.?

Common stock

_______ is the use of borrowed funds to increase the return on owners' equity.

Financial leverage

_______ is defined as all of the activities concerned with obtaining money and using it effectively.

Financial management

Arlo is the finance manager of TK Corporation and has been tasked with establishing the company's financial plan. The steps to effective financial planning are _____.

establishing organizational goals and objectives, budgeting for financial needs, and identifying sources of financing

When Affirm, a technology firm, sold common stock for the first time to whoever wanted to buy it, this _____ generated $11.9 billion for the company.

initial public offering

Mattress Barn needs short-term loans periodically to cover operating expenses prior to selling new shipments of mattresses. To cover its short-term capital needs, it uses a _______, which is a loan approved before the money is actually needed.

line of credit

Hillsboro Farm Supply provides a wide range of products for farmers in Hillsboro. The store carries fencing supplies, tractors, feed for livestock, and more. During harvest season, Hillsboro Farm Supply is one of the busiest places in town. As a result, the store often stocks up on certain supplies ahead of the harvest so the store doesn't run low on inventory. Hillsboro Farm Supply has a ______ with the local bank to ensure that funds are available when the store needs it to order excess inventory. For this, the store pays a small commitment fee.

revolving credit agreement

Cindy runs a chimpanzee sanctuary in Louisiana. The sanctuary receives money from donations, grants, and also from tours that Cindy gives to visitors multiple times per day. Unfortunately, during last year's hurricane season, the sanctuary sustained some minor damage. In addition, Cindy had to halt ticket sales for tours until the damages could be repaired. As a result, Cindy is short on cash to purchase food for the chimps. Cindy is likely to _____.

seek short-term financing to fix her cash flow problem

Alpha Corporation, an industrial chemical producer, has been very successful in the industrial chemical market. Its research and development team is working on products that will be used in farming. It needs $100 million to expand its production and develop its new products. It has agreed to issue written pledges that it will repay a specified amount of money with interest on a particular day. Because it is uncertain it will have sufficient funds available if all of the pledges should become due on the same day, none of the pledges will be paid during the first 15 years. After 15 years, 10 percent of the pledges will mature each year until all of them are retired at the end of the 25th year. What are the pledges?

Serial bonds

Vasilli sells used cars which he buys from rental agencies. The agencies usually require part of the payment upfront or proof that payment will be made on delivery. Because Vasilli has been in business for many years, and has used the same bank for his business for the entire time he has been in business, he works out an agreement with his banker that the bank will advance him funds for a short term at prime interest rate plus one percent without collateral because he has a good credit rating. What kind of transaction did Vasilli enter into with the bank?

Unsecured bank loan

Copper Penny Productions needs to purchase new equipment for the business. The owners of the company choose to fund this purchase with a bank loan. Copper Penny Productions is utilizing _____.

debt capital

Hy-Vee supermarkets use _____ to convert information from its customers' checks into an electronic payment for products.

electronic check conversion (ECC)

A(n) ______ is a promissory note that requires a borrower to repay a loan in monthly, quarterly, semiannual, or annual installments.

term-loan agreement

Grady owns a multi-use sports facility. He rents individual courts in his facility to basketball, futsal, and volleyball teams. Weekends at the sports facility are very busy—with all ten courts occupied from 9 a.m. to 5 p.m. for games and practices. Grady is considering converting two of the courts to an indoor soccer field which will allow him to attract even more sports teams. Grady decides to move forward with the indoor soccer field after considering the risk-return ratio. Grady must think ____.

the addition of the indoor soccer field, although high risk, will create high financial returns for the business

Equity financing provides two primary benefits for corporations. These benefits are that ________.

there is no obligation to pay dividends or to repay the money obtained from the sale of stock

Junction 35 Outfitters often uses ____ a sales arrangement in which a seller allows a buyer 30 to 60 days to pay for a purchase.

trade credit

Executive Transportation Services creates each new budget based on the dollar amounts budgeted in the preceding year. Executive Transportation is using a ____.

traditional approach

A firm is likely to seek long-term financing in all of the following situations except _____.

unexpected emergencies

A financial manager is an employee _______.

whose responsibility is to oversee all the activities concerned with obtaining money and using it effectively

Thrifty Car Rental follows a ______ budgeting process in which each department manager is required to provide documentation justifying every expected expense.

zero-based