Chapter 09 Quiz: Finance: Acquiring and Using Funds to Maximize Value

Lakukan tugas rumah & ujian kamu dengan baik sekarang menggunakan Quizwiz!

Arthur is a snack-foods distributor. He wants to purchase a new cold-storage facility so that he can start selling refrigerated snacks, like popsicles and yogurt. He worked with his financial manager to evaluate the potential revenues he could earn by adding refrigerated snacks to his sales catalogue. Based on the sum of the expected future cash flows, he calculates the net present value (NPV) of the facility to be −$1. Based on the information provided, how should Arthur proceed?

He should not proceed with his plan to purchase a cold-storage facility.

Sunil's online distribution company sold one of its facilities last year, and Sunil has been tasked with making a recommendation on how to use the proceeds of the sale. The director of operations has indicated that they may need the money in about six months to purchase new machinery, so Sunil needs a safe way to hold onto the funds. Ideally, he would find a way to save the money while still earning a small return. How should he hold the funds?

In U.S. Treasury bills

Scenario 9.3. Musa is the chief financial officer (CFO) of a retail farm supply company. He has been asked to consider different financing options for a new distribution center, which will involve a significant investment that will be used over a number of years. Refer to Scenario 9.3. Musa wants to help reduce the tax burden on the company, but he's worried about potential restrictions that lenders may place on the way the company spends its money in the interim. Despite these concerns, he believes that ____________ is the best option for the company.

Incorrect a revolving credit agreement

Carlito works in operations for a poultry processing plant. He has proposed that his company build a new manufacturing facility so that they no longer need to outsource the packaging process. He researched costs and used sales projections to come up with the net present value (NPV) of the project, which was $2. Based on this information, his company should ____________ the proposal.

accept

Scenario 9.2. Jesse is the chief financial officer (CFO) for an office supply distribution company that recently lost one of its biggest customers to a new online-only distributor. Refer to Scenario 9.2. Another tool that Jesse can use to help the company understand how the loss of revenues will affect their bottom line is the _____________, which shows the relationship between the company's budgeted sales and net income. Jesse will show how the net income from the original projections will differ now that projected revenues are down.

budgeted income statement

Lazlo is a management trainee at GSK. He recently sat in on a meeting where leadership discussed the company's long-term plans for investment. They heard presentations from different departments that proposed capital-intensive projects, and management approved projects that were expected to be profitable. Lazlo was observing a ______________ meeting.

capital budgeting

Scenario 9.3. Musa is the chief financial officer (CFO) of a retail farm supply company. He has been asked to consider different financing options for a new distribution center, which will involve a significant investment that will be used over a number of years. Refer to Scenario 9.3. Musa spends some time discussing different financing options with the company's CEO. They both agree that the company should strive for a more balanced approach in their ongoing fundraising efforts, including selling an ownership stake in the company, since they can only deduct interest expenses up to 30% of their earnings before interest, taxes, depreciation, and amortization (EBITDA). Musa and the company's CEO are discussing the firm's ____________.

capital structure

A large clothing retailer, King's Style, wants to introduce an entirely new line of children's clothing, but they don't have enough cash to pay for all of the new items up front. Their supplier has offered them __________, a kind of unofficial, short-term loan that King's Style has agreed to repay with interest in a few months.

commercial paper

The Ohio River Bank offers various financing options to small businesses across different industries. To reduce the risk involved in working with small businesses, the Ohio River Bank imposes ___________, which usually involve collateral and restrictions on bonuses.

covenants

Flavia manages accounts receivables for her family's catering company. When she started this job, she created a policy where all accounts that were 30 days past due would incur a late fee. The late fee would increase every 30 days, but once the account was 120 days past due, she would automatically send the bill to a collection agency. Flavia was proactive in _____________ for her family's business, which has helped incentivize customers to pay on time.

deciding on an appropriate collection policy

AMC Theatres went viral in 2021 after its stock prices jumped from below $2 to a five-year high of over $62. The company responded by announcing plans to issue 500 million new shares to raise funds, but these plans were eventually scrapped. This new stock issuance would have constituted ______________.

equity financing

Mo works as a landscape architect. He is the sole owner of his LLC, and he has to manage all accounts receivables. When he first started his business, he would agree to provide services for clients without doing any due diligence first. This led to some awkward situations where clients would agree to pay for services, but then they would later admit that they couldn't afford it. Mo should have spent time ________________ to help prevent this kind of situation.

establishing credit standards

Zahra manages accounts receivable for a medical billing company. Many of their customers struggle to pay their bills on time, which often leaves the company strapped for cash. When the company needs to generate quick cash to pay short-term debts, they rely on ________. Zahra and her team have fewer receivables to manage when the company uses this kind of financing.

factors

Angela owns and operates an independent gas station. She continually evaluates how her business leverages debt versus equity to achieve the long-term plans she has set out for the business, like an eventual expansion of the grab-and-go food section and a bathroom remodel. This approach to evaluation illustrates how Angela manages her business's ____________.

finances

Patty is planning to expand her retail shop, and she needs to decide whether to borrow money or seek out investors. She spends time evaluating the pros and cons of taking out a loan from a bank versus selling an ownership stake in the business. Both options would constitute ___________ for the business.

financial capital

Scenario 9.1. Dario works in finance at a healthcare start-up that has a higher-than-average tax burden. The chief financial officer (CFO) has asked Dario to make some recommendations on how the company can reduce taxes without sacrificing their access to financial resources. Refer to Scenario 9.1. After reviewing the firm's current capital structure, Dario recommends that they increase the amount of debt they have versus the amount of assets. Dario is advocating that they increase their _____________.

financial leverage

Susana has been very purposeful in how she manages the current assets for her clothing company. She doesn't feel comfortable having her assets held by an outside entity, so she keeps most of it in the form of finished goods that she knows she can sell quickly if needed. Susana is holding her current assets ______________.

in inventories

Scenario 9.1. Dario works in finance at a healthcare start-up that has a higher-than-average tax burden. The chief financial officer (CFO) has asked Dario to make some recommendations on how the company can reduce taxes without sacrificing their access to financial resources. Refer to Scenario 9.1. Dario points to some important key metrics that he used to arrive at his recommendation to increase the company's debt. One metric is the company's current _____________. If the company can increase this ratio, they can decrease their tax burden.

interest coverage

Vado works in finance at a large bank. Before the Great Recession, his company relied heavily on debt financing to maximize their tax savings on the resulting interested payments. The Dodd-Frank Act, along with subsequent corporate tax laws that were passed in response to the financial crisis of 2008-2009, ________ the tax benefit from debt financing.

limited

Scenario 9.2. Jesse is the chief financial officer (CFO) for an office supply distribution company that recently lost one of its biggest customers to a new online-only distributor. Refer to Scenario 9.2. Knowing that revenues will be significantly lower until the sales team can bring in new customers, Jesse takes a hard look at the company's ___________ to ensure that they can cover salaries, taxes, and fixed debt payments in the near-term.

liquidity ratios

Scenario 9.1 Dario works in finance at a healthcare start-up that has a higher-than-average tax burden. The chief financial officer (CFO) has asked Dario to make some recommendations on how the company can reduce taxes without sacrificing their access to financial resources. In his recommendations, Dario was sure to call out how certain ratios will be affected by changes in the company's financial structure. He has highlighted how a decrease in the company's tax burden will also increase the company's __________, which could help assure investors that the company is doing a better job of maximizing its earnings.

net profit margin

Chao's electronics repair business has turned a profit for a number of years. When he decided to start offering cell phone repair, he wanted to run an extensive marketing campaign. Instead of taking on debt or diluting his ownership share, Chao chooses to use his profits, in this case known as ___________, to pay for the campaign.

retained earnings

Muhamad is preparing to submit projections for his IT company's master budget. He is requesting a substantial increase in his operational budget to ensure the successful launch of a new security software product. Although there is no guarantee that this product will be profitable, Muhamad hopes that leadership understands the importance of putting forth their best effort on a product with a larger-than-average potential payoff. This way of thinking illustrates what is known as the _________ of a financial opportunity.

risk-return trade-off

Benji has been asked to work with her colleagues in finance to determine the NPV of a proposed capital project. She knows how much of an investment the project requires and how much the company expects for the project to pay out. She needs her team in finance to help determine the discount rate—without this information, she won't be able to demonstrate the appropriate ___________ over the course of the project.

time value of money Incorrect cost of the investment Incorrect future cash flows

Aoife earned a Doctor of Pharmacy degree and then opened a small drug store where she fills prescriptions and also sells toiletries, over-the-counter medications, candy, and other sundries. As a new business, many of her suppliers require that she pay all invoices up-front. Aoife hopes that as her business credit rating improves, they will begin to offer her _________ so that she has a chance to earn revenues on items before she pays invoices.

trade credits


Set pelajaran terkait

Newton's Second Law Physics Quiz retake

View Set

sociology test chp. 4, sociology test chp. 5, sociology test chp. 6

View Set

Oxford Word Skills, English Vocabulary, Advanced by Ruth Gairns & Redman (complete set), Oxford Word Skills Advanced - Units 14-26

View Set

PSYCH 4035 Chapter 15 (Schizophrenia)

View Set

ECON101 EXAM 1: Principles of Economics

View Set