Final BADM Part 5: Finance

True or False: "Bonds issued by states, cities, counties, and other state and local government agencies are government securities"

False

True or False: "Sales made, but for which payment has not yet been collected, are called accounts payable."

False

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

False

True or False: Equity has no maturity date.

False

True or False: The relative size of the investment is generally smaller in equity finance.

False

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

Interest is tax-deductible.

Which of the following statements about preferred stock is true?

Preferred stock produces a fixed-amount dividend.

Describe the difference between the primary and secondary securities markets

Primary security markets are where new securities are sold to the public and secondary security markets are where old securities are bought and sold.

What are the sources of equity financing?

The sources of equity financing are common stock, retained earnings, and preferred stock.

True or False: "In finance, the opportunity for a profit is called a return."

True

True or False: "Municipal bonds are issued by states, cities, and counties."

True

The Securities Exchange Act of 1934 gave the SEC the power to:

control the organized exchanges

Financial managers often shift temporary funds from checking accounts to _____ securities to earn higher interest returns.

marketable

Dividends are:

payments to the shareholders from company earnings

Commercial paper is:

a type of IOU

What are the types of bonds available to investors?

The types of bonds available to investors include corporate bonds, government securities, and municipal bonds.

True or False: Debt financing may have tax benefits

True

True or False: Sales for which a firm has not yet been paid are accounts receivable.

True

The primary goal of the financial manager is to:

maximize the value of the firm to its owners

"How do production, marketing, and finance managers view inventory?"

Production managers want lots of raw materials on hand to avoid production delays. Marketing managers want lots of finished goods on hand so customer orders can be filled quickly. Finance managers want the least inventory possible without harming production efficiency or sales.

What may be some advantages of debt financing over equity financing?

Some advantages of debt financing over equity financing is interest payments are deductible; stockholders' control will not be diluted

"Funds invested in long-lived assets, such as land, buildings, machinery, and equipment, are called:"

capital expenditures

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

collateral

The major advantage of debt financing is:

deductibility of interest expenses

"In seeking a balance between the opportunity for profit and the potential for loss, a financial manager is dealing with the concept of _____ trade-off."

risk-return

The cost of inventory to the firm includes all the following EXCEPT:

selling costs