False - profitable companies Historically junk bonds have...

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TRUE/FALSE QUIZ Indicate whether each of the following statements is true or false. Discounts offered to credit customers get cash flowing through the firm faster and increase profitability. Trade credit is an arrangement by which a bank agrees to lend a specified amount of money to an organization upon request. The Dow Jones Average is weighted by price. The par value of a stock is the price at which it is currently trading on the securities market. Bonds are issued only by corporations. Capital budgeting is the process of analyzing the needs of the business and selecting the assets that will maximize its value. Trade terms of "1/10 net 30" mean that a business may take a 1 percent discount if it makes payment by the tenth day after receiving the bill; otherwise, it must pay the whole amount within 30 days. Retained earnings are distributed to a company's owners in the form of dividends. More profitable businesses can attract lower-cost financing for the purchase of assets than can newer or less
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Unformatted text preview: profitable companies. Historically, junk bonds have been associated with companies in poor financial health and/or startup firms with limited track records. Secured loans are backed by the borrower's name and good reputation. If a bond quote gives a coupon rate of 8 3/8 on a $1,000 bond, the bond owner will receive $83.75 in annual interest for that bond. Lockboxes allow a business to have access to payments made by customers more quickly than if the payments were sent directly to the company. A new issue is the sale of the first shares of stock ever issued by a particular company. The longer the expected life of an asset, the less is its potential risk. Factors purchase other companies' accounts receivable. Commercial paper is issued by commercial banks and brokerage companies. Securities markets provide liquidity. Primary markets are the markets where publicly owned securities are traded. Optimal inventory levels are determined largely by the method of production....
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This note was uploaded on 03/12/2011 for the course BUSINESS 300 taught by Professor Reynolds during the Fall '10 term at Los Rios Colleges.

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False - profitable companies Historically junk bonds have...

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