Chapter 16 Marketing & Management
d. Profits that owners do not take out of the business
Retained earnings refer to a. Money from the sale of bonds b. Money from the sale of stock c. Profits that owners do not save for use in the business d. Profits that owners do not take out of the business
True
True or False A partner's personal contribution in a business is equity capital
Par value
Arbitrarily assigned amount shown on a stock certificate that is used for bookkeeping purposes
Long-term debt
Capital borrowed for longer than a year
Debt capital
Capital loaned to a business by others
a. All of the responses
If a sole proprietorship fails, which of the owner's assets may be lost? a. All of the responses b. Personal assets not invested in the business c. Mortgaged personal property d. Personal assets invested in the business
Retained earnings
Profits that are saved for use by the business rather than taken out by the owners
d. 1 year
Short-term debt must be repaid to the lender with interest within a. 30 days b. 60 days c. 90 days d. 1 year
Preferred stock
Stock that gives the holders preference when dividends are distributed
Book value
Stock value that is calculated by dividing the corporation's net worth by the total number of outstanding shares
b. Book value
The dollar value printed on the stock certificate is known as the a. Market value b. Book value c. Par value d. Purchase value
b. Equity capital
The investment made in a business by its owner is called a. Working capital b. Equity capital c. Creditor capital d. Cash flow
a. Debentures
A common method to purchase expensive equipment is with a. Debentures b. Term loans c. Bonds d. Factors
b. Owner capital exceeds debt capital
Banks and other types of lending institutions usually will not loan money to a business unless a. Debt capital exceeds owner capital b. Owner capital exceeds debt capital c. Debt capital and owner capital are nearly equal d. Borrowed capital exceeds owner capital
d. Are a type of debt equity
Bonds are long-term financial instruments that a. Represent a share of ownership in the corporation b. Cannot be bought or sold by investors c. Have a fixed value that does not change d. Are a type of debt equity
Short-term debt
Debt capital that must be repaid with interest within a year
True
True or False A supplier who allows a business 90 days to pay for merchandise is actually providing short-term capital
True
True or False Bondholders must be paid before stockholders share in the earnings
True
True or False Even if this business is not making a profit, it should plan to replace assets that depreciate
False
True or False If the par value of a share of stock is $100, the market value cannot be below $100
True
True or False The original cost of obtaining long-term capital is usually higher than that of short-term capital
True
True or False Businesses in financial difficulty often have trouble getting debt capital
True
True or False Retained earnings are a type of equity capital
d. They may get a percentage of ownership in the company in return for their investment
Which statement is true about venture capitalist? a. They are protected against losses b. They pass all risks to the company in return for their investment c. They take over management of any company they invest in d. They may get a percentage of ownership in the company in return for their investment
a. They have the right to vote at annual meetings, at one vote per share of stock owned
Which statement is true of common stockholders? a. They have the right to vote at annual meetings, at one vote per share of stock owned b. If the corporation makes a profit, they are paid before creditors c. They are guaranteed dividends every year d. They must purchase stock at its par value
