Introduction to Business Chapter 9 Review
True or False: A financial arrangement between a firm and a bank in which the bank pre-approves credit up to a specified limit, provided that the firm maintains an acceptable credit rating is called a "lay-away loan".
False
True or False: a corporation can raise additional equity financing by taking out a long-term loan from a bank.
False
Financial management includes all of the following functions EXCEPT... a)making decisions about the appropriate way to promote products b)managing the firm's working capital c)evaluating a firm's long-term investment opportunities d)evaluating a firm's recent financial performance
a
When financial managers are concerned about the ability to pay off debts that will come due in the next year, they are likely to focus on... a)liquidity ratios b)capital budgets c) incremental analysis d)leverage ratios
a
A(n)_____ measures how effectively a firm uses its assets to generate revenue. a)liquidity ratio b)asset management ratio c)leverage ratio d)profitability ratio
b
The principle that a dollar received today is worth more more than a dollar received in the future is known as the______________________. a)value principle b)time value of money principle c)amortization principle d)inflation principle
b
the basic financial ratios are... a)current, turnover, asset, and earnings b)liquidity, asset management, leverage and profitability c)current, inventory, equity, and debt d)liquidity, leverage, turnover, and debt
b
Equity financing is provided by ____ while debt financing is provided by ____. a)creditors, lenders b)lenders, owners c)owners, creditors d)owners provide both equity and debt financing
c
Disadvantages of debt financing include all of the following EXCEPT... a)the requirement to make fixed payments b)creditors often impose covenants on the borrower c)higher risk than equity financing d)double taxation of interest payment
d
When a firm reinvests some of its net income rather than distributing it to owners, the result is an increase in the firm's... a)dividends b)covenants c)net liabilities d)retained earnings
d
