Quiz Chp 15 BA 1301

_____ is the process of selecting the capital expenditures that offer the best returns and meet the goal of maximizing the firm's value.

Capital budgeting

Which of the following statements does NOT describe an advantage inherent in equity financing?

Equity owners have residual claim on income.(wrong)

" Which of the following businesses would be most likely to require an unsecured bank loan, such as a line of credit or a revolving credit agreement?"

a Christmas tree farm

"Treasury bills, certificates of deposit, and mortgage loans are the most popular marketable securities."

false

Lines of credit are short-term loans that are secured by collateral.

false

Preferred stock is a form of debt financing because the dividend must be paid before dividends can be paid to the equity owners.

false

A secured loan requires that the borrower pledge specific assets to secure the loan. These assets are called:

collateral

"Of all the forms of equity capital, venture capital is the easiest to obtain."

false

The funds that are reinvested in the firm out of profits and after dividends are paid are called:

retained earnings

"In finance, the opportunity for profit is called:"

return

Capital budgeting:

selects asset proposals for maximum profitability

Financial managers constantly strive for a balance between:

the opportunity for profit and the potential for loss

Securities are investment certificates issued by corporations or governments.

true

The NYSE and NASDAQ are vying for supremacy in the U.S. securities markets.

true

Tracy Lefteroff is the global managing partner for PricewaterhouseCoopers. She said that her company is eager to invest in newly created biotech companies because the U.S. has an aging population that will need new medications and treatments. What kind of equity capital would Lefteroff be likely to provide?

venture capital