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(1)As the owner of Kingdom's Treasures, Jerry negotiates with suppliers who hope to place their products in his high volume retail gift store.

. (1)As the owner of Kingdom's Treasures, Jerry negotiates with suppliers who hope to place their products in his high volume retail gift store. Jerry finances his inventory through the ________ credit offered by suppliers who delay his payments for up to 60 days after the merchandise has been delivered to his business.

2. (1)A major concern for firms selling on credit is:
the realization that many credit customers always pay their bills.
the large amount of assets tied up in accounts receivable.
the resulting increase in the debt ratio for the firm.
the inability to utilize factoring as a source of financing.

3. (1)Liberty Electronics wants to predict how much money it can make this coming year. Liberty would benefit from developing a:
master budget.
consolidated income statement.
short-term forecast.
statement of cash flows.

4. (1)__________ represent a favorable source of meeting long-term financing needs because there are no interest payments, dividends, or underwriting fees required when using this source.
Secured bonds
Retained earnings

5. (1)To secure financing for a planned expansion, Ohio Electronics borrowed $400,000 from King Finance. The ________ loan agreement requires that Ohio Electronics provide the title to their factory as collateral.

6. (1)A promissory note that requires the borrower to repay the loan in specified installments is called a(n):
repayment scheduling.
term loan agreement.
amortization installment.
revolving line of credit

7. (1)The managers of Dakota Clothing regularly compare their actual profits with the firm's projected profits. When deviations occur, the managers use the feedback to take corrective action when necessary. The management of Dakota Clothing is exercising financial:

8. (1)By borrowing $10 million from First Dayton Bank, Hi-Lo Industries is utilizing _________.
equity financing.
debt financing.
liability funding.
asset funding.

9. (1)In order to assist in revenue realization, a(n) ________ allocates resources throughout the firm.
balance sheet
income statement

10. (1)Which of the following shows a firm's spending plans on fixed assets such as large equipment?
Capital budget
Operating budget
Cash budget
Surplus budget

11. (1)Some suppliers hesitate to offer trade credit to firms with a poor credit history. In these cases, the supplier may insist that the customer sign a(n):
indenture agreement.
promissory note.
line of credit.
factoring agreement.

12. (1)As a finance manager at AllSports Communication, Charlie worries about the firm's borrowing requirements for the upcoming year. He knows the benefit of estimating AllSports' cash disbursements and short-term investment expectations. Facing these concerns, a(n) ________ would provide Charlie with valuable information by providing a good estimation of whether the firm will need to do short-term borrowing.
operating budget
cash budget
capital budget
line item budget

13. (1)Which of these is backed only by the reputation of the issuer?
Venture capital
Secured bonds
Debenture bonds
Long-term financing

14. (1)_____________ is the function in business that is responsible for acquiring funds for the firm, and managing funds within the firm.
Managerial accounting
Financial accounting

15. (1)The owner of a Mountain Cycle Shop worries that cash flows may be insufficient to pay his current operating expenses. While he anticipates a surplus of cash inflows as warm weather approaches, he needs to borrow funds now to meet his immediate obligations. He can best resolve his cash flow concerns by obtaining ________ financing.

16. (1)Which of the following represents a capital expenditure?
issuing paychecks to workers
paying for advertising on a local radio station
purchasing raw materials to be used in the production of a firm's product
purchasing a building to be used for office space

17. (1)An effective budget requires:
a successful advertising campaign.
accurate forecasts.
management approval.
stakeholder consensus.

18. (1)________ examine the data prepared by ________ and then make recommendations to top management regarding strategies for improving the firm.
Accountants; financial managers
Accountants; bankers
Financial managers; accountants
Financial managers; bankers

19. (1)Admiral Electric is a widely known, successful manufacturer of industrial motors and related equipment. When Admiral Electric anticipates a need for short-term funds, it offers unsecured promissory notes to investors for 180 days. To obtain short-term financing, Admiral Electric utilizes:
revolving credit.
inventory financing.
mutual funds.
commercial paper.

20. (1)Undercapitalization refers to the problem of:
insufficient start-up funds.
inadequate control of expenses.
inappropriate cash flows.
under-valued capital stock.

21. (1)The terms of the agreement in a bond issue are referred to as the:
articles of the issue.
terms of indebtedness.
bond specifications.
indenture terms.

22. (1)__________ provide financing to new or emerging companies with high profit potential. In return, these organizations expect a share of ownership in the company.
Commercial banks
Venture capital firms
Federal Reserve banks
Investment bankers

23. (1)Arborview Plant Science Company has invented a drought resistant grass seed that only needs watering three times each year. In order to expand distribution world wide, the company whose product produces lush green foliage needs a large amount of funding - fast! The handful of seed scientists that own the company decides to offer shares of stock to general investors. This first-time offering is a(n):
Stock Equity Commission (SEC)
Stock Fund Offering (SFO)
Broad Based Offering (BBO)
Initial Public Offering (IPO)

24. (1)Which of the following statements is most accurate?
Accounting and finance are not related.
Financial managers keep the books for a firm.
Financial managers need to understand accounting.
Nonprofit organizations must choose between accounting and finance.

25. (1)Which of the following commonly results in the financial failure of a firm?
Control of expenses
Management of cash flows

26. (1)Carlos wants to know the income potential for his computer consulting business during the next five years. Which of the following would be most helpful?
cash flow forecast
long-term forecast
short-term forecast
capital budget forecast

27. (1)The overall objective of financial planning is to:
forecast the impact of technological trends.
prepare financial statements for managers.
optimize the firm's profitability.
establish budgets for financial control.

28. (1)The first step in the financial planning process is:
forecasting financial needs.
preparing financial statements.
developing budgets.
establishing financial control.

29. (1)Farmers Savings and Loan agreed to extend Eckert's Orchards $200,000 of unsecured short-term funds, contingent upon the bank having the funds available. This arrangement represents a:
line of credit.
pledge agreement.
factoring agreement.
trade voucher.

30. (1)With plans to build a $50 million theme park, Extreme Entertainment, Inc. intends to finance this project through the sale of additional shares of ownership in their firm. Selling new shares of stock represents ___________ financing.
initial offering

Which of the following accurately describes an advantage of selling bonds to raise long-term capital?
Interest is a legal obligation.
Face value must be repaid.
Bondholders have voting rights.
Interest is a tax-deductible expense.

2. (1)Which of the following represents a disadvantage of issuing bonds?
Bonds are permanent debt on the firm's balance sheet.
Dividends are legally required.
Bonds increase the firm's debt.
Bondholders receive voting rights.

3. (1)The disadvantages of selling stock to obtain long-term financing include:
the legal obligation to pay dividends if the company is profitable.
the funds contributed by stockholders must be repaid from after tax profits.
a reduction in the market value of the firm's products.
a possible change in management and policies in the company.

4. (1)Bonds perceived as high risk typically pay ________ interest rates.
more volatile
less volatile

5. (1)Greg purchased 2000 shares of common stock of the Rite Track Corporation last year. He learned several months later that the stock does not pay a dividend. Greg should proceed to:
Hire an attorney and file a lawsuit.
Hire an attorney and go after the registered representative that brokered the trade.
Do the proper research before he invests.
Immediately proceed to sell the shares.

6. (1)Mark impresses his friends by stating that he just cast four votes in the election of the board of directors of Microsoft, indicating that Mark owns __________ stock in Microsoft.
cumulative preferred

7. (1)After many years as a privately held corporation, Connecticut Industries decided to offer stock to the general public. Connecticut may discover that stockholders:
expect to be repaid at a future date.
can legally demand dividend payments if the corporation maintains profitability.
adversely affect the company's debt level.
can exercise a significant impact on company management and policies.

8. (1)Georgia Corporation, known for its very generous dividend policy, easily attracts investors. These dividend payments basically represent:
a part of the firm's profit distributed to stockholders.
the increase in market share the company has earned.
current value of the firm's stock holdings.
income that is sheltered from taxes.

9. (1)When issuing stock to obtain long-term funding, dividend payments are:
tax deductible.
legally required.
intended to discourage firms from issuing an excessive number of shares.
not tax deductible.

10. (1)Dividends are paid out of a corporation's:
Profit, before taxes.
Profit, after taxes.
Sales revenue.
Capital contributed by bondholders.

1. (1)Which of the following would be classified as an institutional investor?
Pension funds
Federal Reserve banks
Stock exchanges
Commodity brokers

2. (1)Some analysts refer to ___________ stocks as issues that sell for less than $2 (others say: for less than $5).

3. (1)Corporations benefit from securities markets primarily by:
creating an efficient mechanism to invest in stocks and bonds.
obtaining the capital they need to finance their operations.
securing memberships on various stock exchanges.
participating in the mutual funds of investment bankers.

4. (1)On-line trading services target those investors who:
require the research and advice of a licensed stockbroker.
are interested in purchasing government bonds.
are willing to do their own research.
trade the securities of foreign firms.

5. (1)Private investors benefit from securities markets primarily by:
having a place to buy and sell stocks and bonds.
obtaining the capital they need to finance their operations.
securing memberships on various stock exchanges.
participating in the primary markets of investment bankers.

6. (1)Which of the following federal government agencies has responsibility for regulating the various stock exchanges in the U.S.?

7. (1)Bondholders can sell their bonds:
on the secondary market prior to the maturity date.
early if the bonds were issued with a callable option.
after the bonds are converted into common stock.
after receiving the written permission of other stakeholders.

8. (1)Which of the following describes a benefit enjoyed by investors in mutual funds?
Guaranteed dividends payments are received annually.
Investment risk is eliminated.
Investors buy an ownership interest in many different companies.
Investors exercise managerial authority in many different companies.

9. (1)Which of the following securities guarantees preferred stockholders payment of missed dividends before any dividends are paid to common stockholders?
Call provision
Cumulative preferred
Participating preferred
Convertible preferred

10. (1)As the chief financial officer (CFO), you identify that your firm needs to raise additional funds by selling new shares of stock. Which of the following refers to a specialist that assists corporations in the issue and sale of new securities?
An investment banker
A commodities broker
An officer of the Securities and Exchanges Commission (SEC)
An institutional investor advisor

11. (1)An organization whose members can buy and sell securities for companies and investors is known as a:
public securities dealer.
securities facilitator.
transfer medium.
stock exchange.

12. (1)The corporate certificate issued to an investor that has loaned money to the corporation or government is called a:
common stock.
preferred stock.
debt document.

13. (1)When stock prices decline steadily, investors refer to the market as a ________ market.

14. (1)Another name for the fixed rate of interest attached to a bond is the:
Yield to maturity
Coupon rate
Security rate

15. (1)Which of the following securities are historically considered high quality and usually pay dividends?
Dollar stocks
Growth stocks
Preferred stocks
Blue chip stocks

16. (1)Trading in newly issued securities takes place in the:
primary market.
secondary market.
initial offerings market.
corporate trading market.

17. (1)A ________ is a registered representative acting as an intermediary to buy and sell securities for clients.
certified stock underwriter
securities banker
trading accountant

18. (1)Which of the following securities provides the owner the right to vote for the corporate board of directors?
Common stock
Preferred stock
Callable bonds

19. (1)Most businesses prefer to meet their long-term financial needs through:
debt financing.
capital from the sale of stock.
retained earnings.
capital from the sale of bonds.

20. (1)A(n) ________ represents a condensed version of the registration statement that enables prospective investors to evaluate a stock for possible purchase.
insider report
securities disclosure
evaluative report

21. (1)Similar to bond investments, preferred shares can be _________, meaning the firm may buy them back.

22. (1)When investors purchase ________ stock, they receive a priority claim in the payment of dividends, as well as assets, if the business is liquidated. However, these investors do not have voting rights.

23. (1)When an investor sells a security for more than the purchase price, the investor earns a(n):
dividend payment.
appreciated interest receipt.
corporate benefit.
capital gain.

24. (1)An investment that pools together investors' money in order to buy securities in many different companies or governments is a ___________.
commercial fund
mutual fund
holding company
Public Investment Corporation

25. (1)The market price of a share of common stock depends heavily on:
the number of stocks traded on the New York Stock Exchange.
the default rate on U.S. government bonds.
the overall performance of the company.
the relative value of the U.S. dollar compared to the euro.

26. (1)Stocks offering investors a high dividend yield are called:
growth stocks.
blue chip stocks.
income stocks.
penny stocks.

27. (1)Two kinds of equity financing are:
common and preferred stock.
convertible and superior stock.
fixed and variable stock.
common and superior stock.

28. (1)The trading of previously issued securities from one investor to another takes place in the:
primary market.
secondary market.
initial offerings market.
corporate trading market.

29. (1)Firms establish a ________ so that sufficient funds are available to repay bondholders on the maturity date.
mutual fund
sinking fund
retirement account
encumbered account

30. (1)Corporations that want to attract more investors by lowering the selling price of their common stock might consider declaring a:
bankruptcy filing.
cash dividend.
margin call.
stock split

31. (1)Stocks of corporations with earnings expected to increase faster than other stocks are called ________ stocks.
blue sky

32. (1)Which of the following offers low risk, guaranteed income, backed by the full faith and credit of the federal government?
Municipal bonds
U.S. government preferred stocks
Common stock in the U.S. postal service
U.S. government bonds

33. (1)___________ are the firm's after tax profits that are distributed to stockholders.
Equity capital
Interest payments
Retained earnings

34. (1)Buying several different investment alternatives to spread the risk helps an investor achieve:
lower rates of return.
lower commission fees.

35. (1)Issuing bonds to obtain long-term funds legally compels a firm to pay regular ________ payments and repay the ________ at the maturity date.
dividend; par value
interest; bond premium
dividend; maturity value
interest; principal

)When the value of the U.S. dollar increases relative to other currencies:
the rate of inflation increases.
the size of the national debt decreases.
foreign goods become less expensive to U.S. consumers.
U.S. goods become less expensive to foreign buyers.

2. (1)Which of the following statements best summarizes the difference between M-1 and M-2?
The M-1 definition of the money supply considers only domestic currencies while the M-2 definition includes foreign currencies.
The M-1 definition consists of "hard" currencies which are backed by gold and silver, while M-2 consists of "soft" currencies which are not backed by gold and silver.
The M-2 definition includes everything in the M-1 definition, plus additional components such as money in savings accounts, money market accounts, and certificates of deposit.
The M-1 money supply consists only of the currency (coins and paper money) that circulates in our economy, while the M-2 includes traveler's checks and funds in demand deposits.

3. (1)The Fed Chairman is in control of:
the world's money supply.
the U.S. money supply.
fiscal policy.
the IMF.

4. (1)The problem with bartering is:
one person in the trade does not feel he/she got a fair shake.
there is a significant amount of corruption in the process, and things get stolen before they are traded.
it is not an easy process, and often cumbersome to carry goods to the place of trade.
it has no place in today's international trading operations.

5. (1)The redesign and new colors added to U.S. paper money is intended to:
make the currency more difficult to counterfeit.
increase the use of the barter system.
improve the durability of our monetary system.
increase the portability of our money.

6. (1)__________ represents the most commonly used definition of the money supply.

7. (1)The strength of the U.S. dollar relative to other currencies depends mainly on:
the rate of inflation in the United States.
the performance of the U.S. economy relative to other economies.
how much gold backs the money supply.
exchange rate decisions made by the International Monetary Fund.

8. (1)The ______ definition of money supply only includes money that is quickly and easily accessed.

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