chapter 9 business

Sally Meadows works for Swictek Industries. Her primary responsibilities include management of the firm's working capital and the analysis of long-term investment opportunities for Swictek. Sally's job is in the area of:

The _____ forecasts the types and amounts of assets a firm will need to implement its future plans as well as the amount of additional financing the firm must arrange in order to acquire those assets.

_____ are companies that provide short-term financing to firms by purchasing their accounts receivables at a discount.

Timber Trails Inc. has just arranged a $300,000 line of credit with its banker for the next year. Which of the following statements is true of this scenario?

Firms can acquire the financial capital they need through newly-issued stocks or bonds.

Return on equity and earnings per share are both classified as _____ ratios.

As a financial manager, Lisa wants to know when her firm will need to arrange for short-term financing and when the firm is likely to have surplus cash available to pay off loans or to invest in short-term liquid assets. These concerns suggest that Lisa would want to develop a:

As a short-term credit arrangement, banks sometimes extend _____, which are guaranteed lines of credit in which the borrowing firm pays a commitment fee on the unused portions of the funds the bank has committed.

The financial planning process asks all of the following questions EXCEPT:

A commitment to meeting social responsibilities eventually results in a decrease in shareholder value.

_____ ratios measure the ability of an organization to convert assets into the cash it needs to pay off liabilities that come due in the next year.

Which of the following best describes a highly leveraged firm?

All of the following are common ways that firms raise short-term financing EXCEPT:

_____ are short-term unsecured, promissory notes issued by financial institutions and other major corporations.

A large, well-established company with an impeccable financial record is considering borrowing money to meet its short-term financing needs. The company hopes to borrow money using _____ since this form of financing typically carries a lower interest rate than that charged by commercial banks.

When a firm reinvests some of its net income rather than distributing it to owners, the result is an increase in the firm's:

Advantages of debt financing include all of the following EXCEPT:

The mix of equity and debt financing a firm uses to meet long-term financing needs is known as the firm's _____.

Tucker Enterprises has $100,000 worth of debt financing and $200,000 in equity financing. This year it paid $8,000 in interest on its debt and paid $8,000 in dividends to stockholders. As the CFO of Tucker Enterprises, you are considering raising more capital via debt financing. One reason why debt financing is more attractive than equity financing is that:

The main advantage of financial leverage is that it _____.

A revolving credit agreement is a guaranteed line of credit in which a bank makes a binding commitment to provide a business with funds up to a specified credit limit at any time during the term of the agreement. In exchange for the bank's commitment, the firm pays a commitment fee based on the unused funds.

Retained earnings are the profits a firm reinvests and are often a major source of long-term funds.

Covenants are terms included in long-term loan agreements that are intended to protect borrowers from unfair policies imposed by lenders.

Historically, commercial paper issued by corporations has been unsecured, which means it is not backed by a pledge of collateral.

The main disadvantage of financial leverage is that it _____.

Financing provided by a firm's owners is classified as _____ financing.

Sally McGregor sells lawn and garden products in bulk to various companies. She extends credit to her customers for 60 days, but she is worried about cash flow problems. This is a highly competitive business and most of her competitors also offer credit—some of them for up to 90 days. Sally is also concerned about collecting money from customers who make it a habit of paying late. She is willing to forego a small amount of the money, as long as she gets the rest of the amount immediately. Which of the following statements represents the most useful advice to Sally?

Funds for start-up firms are generally more limited than those available to mature firms. The main source of funds for start-ups generally comes from all of the following EXCEPT:

Harry Haddock is the Chief Financial Officer of a small construction company and has just been presented information from the sales budget and various other cost budgets. He is using this information to develop a forecast

In financial management, the degree of uncertainty related to the actual outcome of a decision is referred to as: