Finc. 301 final study guide

Kelly just completed compiling a listing of her firm's accounts receivables with each invoice segregated according to the length of time the invoice has been outstanding. What is he name given to this listing?

Aging schedule

Farmer's Supply is considering opening a clothing store, which would be a new line of business for the firm. Management has decided to use the cost of capital of a similar clothing store as the discount rate to evaluate this proposed expansion. Which one of the following terms describes this evaluation approach?

pure play approach

The payback period is the length on the it takes an investment to generate sufficient cash flows to enable the project to:

recoup its initial cost

Caitlyn is interested in purchasing 1,500 shares of ABC, Inc., when the shares are issued. Her broker just gave her a preliminary prospectus to review as she waits for the shares to be cleared for sale. What is the name of this prospectus?

red herring

Modern Art Online is preparing to sell new shares of stock to the general public. As part of this process, the firm just filed the required paperwork with the SEC that contains the material information related to this issue of stock. What is the name associated with this paperwork?

registration statement

Currently, you own 1.2% of the outstanding shares of home security. the firm has decided to issue additional shares of stock and has given you the first option to purchase 1.2% of those additional shares. What type of offer is this?

rights offer

which of these is the best example of a raw material?

set of tires of an automaker

which one of the following principles refers to the assumption that a project will be evaluated based on its incremental cash flows?

stand alone principle

Which of these is a non cash payment made by a firm to its shareholders that lessens the value of each outstanding share?

stock dividend

Which of the following could cause the total return on an investment to be a negative rate?

stock price that declines over the investment period

Normal cash dividends that are increased regularly tend to send which message?

the firms expects to be profitable

which statement is true?

the inventory period is he average number of days a firm holds inventory on its shelves

Which statement is true?

venture capitalists generally have an exit strategy

which one of the following is used the pretax cost of debt?

weighted average yield to maturity on the firm's outstanding debt

sunk cost

weston steel purchased a new coal furnace six years ago at a cost of $2.2 million. Last year, the government changed the emission requirement and this furnace cannot meet those standards. Thus, the company can no longer use the furnace, nor has it ben able to locate alone willing to purchase the furnace. Given the current situation, the furnace is set described as what type of cost?

which one of the following will reduce the disbursement float of a firm?

writing checks on a zero balance account rather than on the master account

which one of these favors a high-dividend payout?

Corporate shareholders

Which of the following are sources of cash

Decreasing accounts receivable, increasing accounts payable, increasing common stock

Which one of the following terms is defined as an underwriting for which the underwriters assume full responsibility for any unsold shares?

Firm commitment underwriting

Accounts receivable financing is the term used to describe which one of the following types of loans that involve either the assignment or the factoring of a fir's accounts receivables?

Secured short-term loan

A registration of securities under SEC 415 which permits a firm to issue the securities over a two year period is which type of registration?

Shelf registration

over the period of 1926-2014, which one of the following investment classes had the highest volatility of returns?

Small- company stocks

GW Underwriters retains the difference between its buying price and its offering price on new securities. What is this amount called?

Spread

Davidson interiors declared a dividend to holders of record on thursday, october 15, that is payable on monday November 2. Suenette purchased 200 shares of davidson interiors stock on monday, october 12, and jake purchased 100 shares of this stock on the following day. Which one of the following statements is correct given this information?

Suenette will receive the dividend but jake will not.

The rate of return on which one of the following has a risk premium of 0%?

U.s Treasury bills

All else constant, which of these is correct concerning the accounts payable period?

an increase in the accounts payable period will decrease the cash cycle

A firm has multiple divisions of similar nature, yet varying degrees of risk. which one of the following would be the most appropriate, yet relatively easy, means of assigning discount rates to each of it's numerous proposed investments?

assign every project a rate equal to the firm's WACC plus or minus a subjective adjustment

which one of the following is directly related to increases in a firm's current assets?

carrying costs

which of the following will increase the operating cycle?

decreasing the accounts receivable turnover rate

The internal rate of return is the:

discount rate that results in a zero net present value for the project

the basic factors that are reviewed hen evaluating the creditworthiness of a potential customer are called the:

five Cs of credit

lockboxes should be located:

geographically close to a firm's primary customers

a share repurchase will:

increase both earnings per share and the PE ratio.

a stock repurchase will:

increase the market value per share

The primary purpose of a cash discount is to:

induce customers to pay promptly

Float is defined as the difference between the:

ledger balance and the available balance

which of the following costs will tend to increase if a firm switches to a restrictive short term financial policy from a flexible short-term policy?

lost sales due to out-of-stock items, cash outs, total annual order costs

The optimal credit policy of any firm will:

minimize the total costs of granting credit

Which of these actions is indicative of a restrictive short term policy?

minimizing the cash balances held by a firm

Alicia wrote a check for $18 on friday, may 6. The check cleared the bank on wednesday, may 11. There were no other checks or deposits outstanding during the month, Given this, which one of the following statutes is correct?

on may 10, the ledger balance was $18 less than the available balance.

which one of the following terms refers to the best option that was foregone when a particular investment is selected?

opportunity cost

which one of the following methods of analysis has the greatest bias toward short-term projects?

payback

which of these is the most ethical practice related to cash disbursement management?

paying a supplier from a zero-balance account

What can be defined as a benefit-cost ratio

profitability index

which one of the following indicates that a project should be a rejected? assume the cash flows are normal, i.e., the initial cash flow is negative.

profitability index less than 1.0