Business Foundations Ch. 16

Dafina has been successful this year in the yogurt shop she owns and operates. In fact, Dafina has generated $9,500 in profit so far this year, and she chooses to deposit this money in the bank in case she needs it for her business in the future. In her arrangement with the bank, Dafina will leave her $9,500 on deposit for one year, and in return, the bank will pay her a specified rate of interest. The agreement between Dafina and the bank represents which of the following? A revolving credit agreement Collateral A line of credit A certificate of deposit (CD)

A certificate of deposit (CD)

Effia is the majority shareholder of a publicly traded manufacturing corporation. To obtain required operational funding, the company has issued a bond to investors that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock. Effia's company has issued which of the following? A convertible bond A term-loan agreement A mortgage bond A debenture bond

A convertible bond

Kemi is the principal owner of a home and office cleaning corporation. To obtain necessary operational capital, the company has issued a bond to investors backed only by its reputation. Which of the following did Kemi's corporation issue? A term-loan agreement A debenture bond A mortgage bond A convertible bond

A debenture bond

Ida is interested in pursuing a career in finance. Successful managers and employees in finance must have all but which of the following credentials or skills? Be an expert in both written and oral communication A strong background in accounting Knowledge of how to use a computer to analyze data A juris doctor degree

A juris doctor degree

Aditi is the majority shareholder of an industrial chemical supply corporation. To obtain much-needed operational capital, the company has issued a bond secured by its real estate holdings and equipment. Which of the following did Aditi's corporation issue? A mortgage bond A convertible bond A debenture bond A term-loan agreement

A mortgage bond

Rishaan, who owns a wholesale supply business, has just sold $8,200 in merchandise to Clara for inventory in her styling salon. In return, Clara has signed a pledge to Rishaan to pay the $8,200, plus a designated rate of interest, one year from the date of the sale. Which of the following represents the arrangement between Clara and Rishaan? Zero-base budgeting A revolving credit agreement A line of credit A promissory note

A promissory note

To obtain much-needed operational capital for her restaurant, Chiku recently signed a promissory note to repay a $10,000 loan from her lender in monthly installments over three years. Which of the following refers to the arrangement Chiku has with her lender? A corporate bond A registered bond A debenture bond A term-loan agreement

A term-loan agreement

Laqueta works as a certified public accountant (CPA) for a large accounting firm. The firm uses a network that transfers salaries directly into their employee's bank accounts, thus eliminating the need to make out individual paychecks. The accounting firm Laqueta works for uses which of the following for employee salary transfers? A point-of-sale terminal An automatic teller machine (ATM) Electronic check conversion An automated clearinghouse (ACH) network

An automated clearinghouse (ACH) network

Maria is the principal owner of an information technology firm in Carrollton, Texas. After having operated the business successfully for the last ten years, Maria and her co-owners are considering "taking the next step" in growing the business by selling common stock to the general public for the first time. This initiative is known as which of the following? Over-the-counter marketing An initial public offering A securities exchange Retained earnings

An initial public offering

Tereza is interested in obtaining short-term financing for her confectionary shop, primarily because she has heard from fellow entrepreneurs that short-term financing is usually easier to obtain than long-term debt financing. Which of the following is not a reason short-term debt financing is usually easier to obtain than long-term debt financing? The dollar amounts of short-term loans are usually smaller than those of long-term loans. A close working relationship normally exists between the short-term borrower and the lender. For the lender, the shorter repayment period means less risk of nonpayment. As an industry standard, banks ordinarily charge three times the interest rate for short-term loans compared to long-term loans.

As an industry standard, banks ordinarily charge three times the interest rate for short-term loans compared to long-term loans.

Last month, the seafood restaurant Mariana owns and operates took in $157,350 in total receipts, and spent $142, 575 in total fixed and variable costs. This movement of money into and out of Mariana's restaurant represents which of the following? Long-term financing Short-term financing Cash flow Speculative production

Cash flow

Ishara owns and operates a hardware store. She needs a $20,000 small business loan to purchase additional inventory for the store, and to do that, the local bank requires Ishara to pledge her home as security for the loan. In this transaction, Ishara's home represents which of the following? A revolving credit agreement A line of credit A certificate of deposit (CD) Collateral

Collateral

In her last lecture class for Introduction to Business, Janice learned about the two types of stock issued by a corporation: common stock and preferred stock. Which of the following is incorrect regarding common stock and preferred stock? Common stockholders have the first claim (after creditors) on assets if the corporation is dissolved. The owners of preferred stock must receive their dividends before holders of common stock receive theirs. Common stock represents the most basic form of corporate ownership. A corporation's board of directors must approve dividends on preferred stock.

Common stockholders have the first claim (after creditors) on assets if the corporation is dissolved.

In her Introduction to Business class, Catarina is learning about the four primary sources of funds available to a business. Which of the following is not one of those sources? Debt capital Proceeds from the sale of assets Dividend distributions Equity capital

Dividend distributions

Luiz and Naroa have decided to form a law partnership. To get their practice started, Luiz and Naroa have agreed to provide $25,000 each from their personal funds. These contributions from Luiz and Naroa to their partnership represent which of the following? Sales revenues Equity capital Proceeds from the sale of assets Debt capital

Equity capital

As a young entrepreneur who operates a recently launched landscaping business, Vicente would like to learn more about the traditional banking services provided to business clients. Which of the following is not one of those services? Providing professional advice Savings accounts Processing debit-card transactions Issuing business bankruptcy insurance

Issuing business bankruptcy insurance

As an executive manager for a paint manufacturing company, Patrick understands the importance of effective financial management to the success of his company. Which of the following is incorrect regarding proper financial management? It must ensure that the company "go public" with an initial public offering within the first ten years of the firm's existence. It must ensure that bills the firm owes are paid promptly. It must ensure that the number of past due accounts owing money to the firm is reduced. It must ensure that the funds required for paying the firm's taxes are available.

It must ensure that the company "go public" with an initial public offering within the first ten years of the firm's existence.

As a budding entrepreneur, Haji is interested in the importance of effective financial management to the success of a business. Which of the following is incorrect regarding proper financial management? It must ensure that the firm's financing priorities are established in line with organizational goals and objectives. It must ensure that the firm's credit customers pay their bills on time. It must ensure that the firm's spending is planned and controlled. It must ensure that the firm pays dividends to its shareholders.

It must ensure that the firm pays dividends to its shareholders.

Darius recently provided $25,000 in financial backing for his nephew Demond's start-up computer repair shop. Demond refers to his uncle Darius as his "angel" investor. Which of the following is incorrect regarding an angel investor? Angel investors can become an owner with equity in the business. Like venture capitalists, angel investors are often more focused on helping a business or an entrepreneur succeed rather than earning huge profits. An angel investor is often a wealthy investor who provides financial backing for small business startups or entrepreneurs. Angel investors may provide more favorable financial terms when compared with venture capitalists.

Like venture capitalists, angel investors are often more focused on helping a business or an entrepreneur succeed rather than earning huge profits.

Batini plans to start up a new tattoo parlor in town. To open her parlor, Batini takes out a three-year, $20,000 small business loan from a local bank. She uses the money to lease a building and purchase necessary equipment. This loan represents which of the following? Long-term financing Speculative production Short-term financing The risk-return ratio

Long-term financing

As a Master of Business Administration (MBA) student, Ingrid is learning about corporate retained earnings. Which of the following is incorrect regarding retained earnings? They are considered a form of equity financing. Reinvestment of retained earnings tends to increase the value of a firm's stock. The amount of retained earnings in any year is determined by corporate management. Most large corporations distribute all their after-tax earnings to stockholders.

Most large corporations distribute all their after-tax earnings to stockholders.

Rin owns and operates a residential kitchen cabinet manufacturing company. Based on previous experience, Rin knows that although she will have a production run of cabinets in January, those cabinets may not sell until April, when the weather for home construction improves. This time lag between Rin's actual production of cabinetry in January and when it is sold in April is which of the following? Speculative production Short-term financing Cash flow Long-term financing

Speculative production

Advik just took out a short-term loan from the local bank for his alien novelty shop in Roswell, New Mexico. Due to his outstanding credit, Advik was fortunate enough to receive the lowest interest rate charged by the bank for a short-term loan. Advik received which of the following? The private placement rate The financial leverage rate The angel investor rate The prime rate

The prime rate

Riko owns and operates a furniture wholesaling business. To facilitate sales to retailers, Riko often provides financial assistance to his retail customers by allowing them up to 60 days to pay for the furniture they purchase. Which of the following describes the arrangement Riko has with his customers? Speculative production Trade credit Zero-based budgeting Long-term financing

Trade credit

Marlon operates a textile manufacturing business in Birmingham, Alabama. Due to the highly competitive nature of the industry both domestically and internationally, Marlon micromanages every penny of his company's expenses. He specifically requires that every expense in his company's budget must be justified. Marlon's approach to budgeting is known as which of the following? Equity capitalization Debt capitalization Capital budgeting Zero-base budgeting

Zero-base budgeting