Question 1

The most basic form of ownership in a corporation is

Accepted Answer

A)   common stock.
B)   bonds.
C)   preferred stock.
D)   debentures.
E)   dividends.F) A) and B)
G) A) and D)

Question 2

Which of the following statements is incorrect?

Accepted Answer

A)   The size of the investment banker's commission depends on the financial health of the corporation issuing stock.
B)   Although a corporation can have only one IPO,it can sell additional stock after the IPO.
C)   The cost of selling stock is referred to as flotation costs.
D)   The ongoing costs associated with selling stock are low.
E)   All of these statements are correct.F) C) and D)
G) A) and E)

Question 3

Which of the following might be considered the most drastic step in securing funding,often a last resort for a corporation?

Accepted Answer

A)   Using sales revenue
B)   Equity capital funding
C)   Short-term borrowing from a bank
D)   Debt capital funding
E)   Sale of assetsF) B) and D)
G) B) and E)

Question 4

Tidewater Distributors is successfully using short-term financing to buy inventory for resale.As sales climb,the managers realize that they must decide what to do with the money.Since you are the financial manager,they ask for your advice.You advise them to first

Accepted Answer

A)   repay the short-term obligations out of the sales revenue.
B)   use the money to buy a yacht for the managers.
C)   increase all employees' wages.
D)   enroll all the salespeople in a sales training course.
E)   borrow more money.F) A) and E)
G) A) and D)

Question 5

Although a corporation does not have to pay dividends on common stock,it is required to pay dividends on preferred stock.

Accepted Answer

A) True 
 B)False

Question 6

For a corporation such as AT&T,what are the two primary advantages of equity financing?

Accepted Answer

A)   It never has to be paid back and flotation costs are low.
B)   There is no obligation to pay dividends or to repay the money obtained from the sale of stock.
C)   Interest payments are less than debt financing and principal does not have to be repaid.
D)   Ownership is spread among many individuals and no interest payments are required.
E)   Investors pay top dollar for stock issues and the corporation has higher ongoing expenses.F) A) and D)
G) B) and E)

Question 7

Which of the following is not a financial reform regulation proposed by the U.S.House of Representatives and Senate as a reaction to the economic crisis?

Accepted Answer

A)   End taxpayer bailouts.
B)   Tighten access to long-term financing by large corporations.
C)   Tighten regulations for major financial firms.
D)   Increase government oversight.
E)   Make Wall Street firms accountable for their actions.F) C) and E)
G) C) and D)

Question 8

The cost of borrowing money that is reserved for large corporations with excellent credit ratings is called the

Accepted Answer

A)   prime interest rate.
B)   bank discount.
C)   discount factor.
D)   add-on interest rate.
E)   compound interest rate.F) B) and C)
G) C) and E)

Question 9

The lowest rate of interest charged by a bank for a short-term loan is known as

Accepted Answer

A)   the discount rate.
B)   dividends.
C)   add-on interest.
D)   the compound interest rate.
E)   the prime interest rate.F) B) and E)
G) A) and E)

Question 10

With regard to the ongoing expense of long-term corporate financing,which of the following would be the least expensive?

Accepted Answer

A)   Long-term loans
B)   Corporate bonds
C)   Debenture bonds
D)   Common stock
E)   Trade creditF) C) and D)
G) B) and E) D

Question 11

Slater Co.has very old computers and manufacturing equipment and knows it needs to upgrade them or risk losing much of its business.Slater does not have the money to purchase the computers,so it will most likely need

Accepted Answer

A)   a short-term loan.
B)   to keep using the old computers.
C)   to deduct the cost from employees' salaries.
D)   long-term financing.
E)   to use increased cash flow from sales.F) C) and D)
G) A) and E)

Question 12

When would a company be likely to call its preferred stock?

Accepted Answer

A)   If it decides it would rather have corporate bonds
B)   When it needs additional long-term financing
C)   As the preferred stock matures and must be redeemed
D)   When the call premium becomes high enough to justify the call
E)   When it can issue new common stock to replace the preferred stockF) A) and B)
G) All of the above

Question 13

In order to catch problems before they get out of hand,a business firm should compare its financial performance against various budgets.

Accepted Answer

A) True 
 B)False

Question 14

Of the following,only ___ would not be considered proper financial management during both good and bad times.

Accepted Answer

A)   investing excess cash in CDs,government securities,or conservative securities
B)   making sure that funds are available to meet tax deadlines
C)   paying bills promptly
D)   investing all excess cash in long-term securities
E)   planning for sufficient financing when neededF) C) and D)
G) A) and B)

Question 15

When each new budget is based on the dollar amounts contained in the budget from the preceding year,a company is using ____ budgeting.

Accepted Answer

A)   zero-base
B)   traditional
C)   cash
D)   capital
E)   productionF) C) and E)
G) B) and C) B

Question 16

Interest paid on outstanding bonds is usually paid

Accepted Answer

A)   once every two years.
B)   once a year.
C)   semiannually,or every six months.
D)   quarterly,or every three months.
E)   on a monthly basis.F) All of the above
G) B) and E)

Question 17

Although Hargrove Co.makes enough money to pay for everything it needs,it still chooses to have some debt and pay a larger portion of retained earnings back to the stockholders.What is likely the best explanation for this decision?

Accepted Answer

A)   Reduced interest rate
B)   Financial leverage
C)   Return multiplier
D)   Equity leverage
E)   Debt multiplierF) C) and E)
G) C) and D) B

Question 18

Jenny Osborne was told that when she sold her corporate bonds she must endorse her bonds before transferring ownership to the new owner.This means that Jenny sold

Accepted Answer

A)   bond indentures.
B)   registered bonds.
C)   trust agreements.
D)   corporate savings bonds.
E)   convertible bonds.F) A) and B)
G) C) and E)

Question 19

​When stock and other corporate securities are sold directly to insurance companies,pension funds,or large institutional investors it is said that a(n) ____ has been made.

Accepted Answer

A)   ​private placement
B)   ​initial public offering
C)   ​discrete sale
D)   ​private transactionE) A) and B)
F) C) and D)

Question 20

If Sunbelt Computers were to take out a short-term loan from Chase for $5 million and were required to keep $500,000 of that in its Chase account,this would be called a(n)

Accepted Answer

A)   compensating balance.
B)   security deposit.
C)   commercial-paper arrangement.
D)   reserve requirement.
E)   insurance policy.F) D) and E)
G) A) and B)

Exam 16: Mastering Financial Management

The most basic form of ownership in a corporation is

Correct AnswerverifiedShow Answer

Which of the following statements is incorrect?

Correct AnswerverifiedShow Answer

Which of the following might be considered the most drastic step in securing funding,often a last resort for a corporation?

Correct AnswerverifiedShow Answer

Tidewater Distributors is successfully using short-term financing to buy inventory for resale.As sales climb,the managers realize that they must decide what to do with the money.Since you are the financial manager,they ask for your advice.You advise them to first

Correct AnswerverifiedShow Answer

Although a corporation does not have to pay dividends on common stock,it is required to pay dividends on preferred stock.

Correct AnswerverifiedShow Answer

For a corporation such as AT&T,what are the two primary advantages of equity financing?

Correct AnswerverifiedShow Answer

Which of the following is not a financial reform regulation proposed by the U.S.House of Representatives and Senate as a reaction to the economic crisis?

Correct AnswerverifiedShow Answer

The cost of borrowing money that is reserved for large corporations with excellent credit ratings is called the

Correct AnswerverifiedShow Answer

The lowest rate of interest charged by a bank for a short-term loan is known as

Correct AnswerverifiedShow Answer

With regard to the ongoing expense of long-term corporate financing,which of the following would be the least expensive?

Correct AnswerverifiedD

Slater Co.has very old computers and manufacturing equipment and knows it needs to upgrade them or risk losing much of its business.Slater does not have the money to purchase the computers,so it will most likely need

Correct AnswerverifiedShow Answer

When would a company be likely to call its preferred stock?

Correct AnswerverifiedShow Answer

In order to catch problems before they get out of hand,a business firm should compare its financial performance against various budgets.

Correct AnswerverifiedShow Answer

Of the following,only ___ would not be considered proper financial management during both good and bad times.

Correct AnswerverifiedShow Answer

When each new budget is based on the dollar amounts contained in the budget from the preceding year,a company is using ____ budgeting.

Correct AnswerverifiedB

Interest paid on outstanding bonds is usually paid

Correct AnswerverifiedShow Answer

Although Hargrove Co.makes enough money to pay for everything it needs,it still chooses to have some debt and pay a larger portion of retained earnings back to the stockholders.What is likely the best explanation for this decision?

Correct AnswerverifiedB

Jenny Osborne was told that when she sold her corporate bonds she must endorse her bonds before transferring ownership to the new owner.This means that Jenny sold

Correct AnswerverifiedShow Answer

​When stock and other corporate securities are sold directly to insurance companies,pension funds,or large institutional investors it is said that a(n) ____ has been made.

Correct AnswerverifiedShow Answer

If Sunbelt Computers were to take out a short-term loan from Chase for $5 million and were required to keep $500,000 of that in its Chase account,this would be called a(n)

Correct AnswerverifiedShow Answer

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D

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B

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B

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When stock and other corporate securities are sold directly to insurance companies,pension funds,or large institutional investors it is said that a(n) ____ has been made.

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