What are the sources of cash outflows from a firm over any time frame?
> 1. An efficient market has which of the following characteristics? a. New information causes a quick price change followed by smaller price changes as the market adjusts. b. New information causes a large price change followed by price changes in the o
> Is commercial paper a reliable source of financing? Why or why not?
> What is commercial paper and how important is it as a source of financing?
> Under what circumstances would a business secure its financing through a commercial finance company?
> What are the primary reasons for using trade credit for short-term financing?
> What is meant by trade credit? Briefly describe some of the possible terms for trade credit.
> What is the JOBS Act and what is its purpose?
> How does the Small Business Administration provide financing to businesses?
> Describe the revolving credit agreement and compare it with the bank line of credit.
> What is meant by net working capital? Briefly describe the financing implications when net working capital is positive.
> Why might firms want to maintain minimum desired cash balances?
> 1. The long-term average effect of the real risk-free rate of return and inflation expectations is seen in what number in Table 12.4? a. 3.07 percent b. 3.11 percent c. 3.58 percent d. 5.23 percent 2. The statement that “risk drives expected return
> 1. A loan backed by real property in the form of buildings and houses is called a(n) a. mortgage loan b. equity loan c. stock loan d. corporate loan 2. A debt security created by pooling together a group of mortgage loans whose periodic payments be
> Three sets of information are needed to construct a cash budget. Explain what they are.
> What is a cash budget? How does the treasurer use forecasts of cash surpluses and cash deficits?
> What affects the amount of financing provided by accounts payable as viewed in terms of the cash conversion cycle?
> Explain how the length of the operating cycle affects the amount of funds invested in accounts receivable and inventories.
> Describe how the length of the cash conversion cycle is determined.
> How is technology changing inventory management?
> How is technology affecting cash management? Order processing?
> What is JIT II?
> What are the benefits to the firm of reducing working capital?
> How is the financial manager involved in the management of inventories?
> 1. What must the probabilities of the different states of nature sum to? a. 0.0 b. 1.0 c. 100.0 d. -1.0 2. How is the expected return computed? a. By multiplying the probability of each state of nature with its return and add them together b. By
> How do credit terms and collection efforts affect the investment in accounts receivable?
> What risks arise when a firm lowers its credit standards to try to increase sales volume?
> How can a firm control the risk of changing exchange rates when billing an overseas customer?
> Explain how the cash conversion cycle differs from the operating cycle.
> Describe various credit-reporting agencies that provide information on business credit applicants.
> What is credit analysis? Identify the five C’s of credit analysis.
> Besides lower expenses, explain another advantage of using electronic payments rather than paper checks.
> How does remote capture reduce float?
> Why can’t a firm that wants to increase disbursement float simply make payments after the stated due date?
> How can a firm use float to slow down its disbursements?
> 1. A firm’s sales decline while it is locked into a number of fixed cost leases for equipment. What is this an example of? a. Purchasing power risk b. Business risk c. Price risk d. Financial risk 2. In recent years some U.S. firms have merged with
> How can processing float be reduced?
> What are some strategies a firm can use to speed up its collections by reducing float?
> What are the three components of float? Which are under the control of the firm seeking to reduce collection float?
> What is float? Why is it important to cash management?
> Briefly describe a manufacturing firm’s operating cycle.
> Why is a short-term investment policy statement necessary?
> What are the three main concerns of a treasurer when investing a firm’s excess cash?
> Why would a corporation want to invest excess cash in securities issued by a municipality?
> Identify and briefly describe several financial instruments that are used as marketable securities.
> What characteristics should an investment have to qualify as an acceptable marketable security?
> 1. Which of the following statements is true? a. To compute variance, divide the sum of the squared deviations by the number of observations. b. To compute variance, divide the sum of the deviations by the number of observations minus one. c. The coeff
> Describe the four motives or reasons for holding cash.
> Describe what happens to a firm’s current asset accounts if the firm has seasonal sales and they use (a) level production, or (b) seasonal production.
> How does the choice of level or seasonal production affect a firm’s cash over the course of a year?
> What are the sources of cash inflows to a firm over any time frame?
> What is meant by working capital?
> What do market value ratios indicate? Identify some market value ratios.
> What do profitability ratios indicate? Identify some measures of profitability.
> What do financial leverage ratios indicate? Identify some measures of financial leverage.
> What do asset management ratios indicate? Identify some basic asset management ratios.
> 1. How is the dollar return for a stock over a given period computed? a. Change in price plus dividends received b. Last period’s price minus current price c. Last period’s price minus current price plus dividends received d. Change in price minus di
> What do liquidity ratios indicate? Identify some basic liquidity ratios.
> Which type or category of ratios relates stock market information to financial statement items?
> Identify the types of ratios that are used to analyze a firm’s financial performance based on its income statements and balance sheets.
> What is ratio analysis? Also briefly describe the three basic categories or ways that ratio analysis is used.
> Describe what would happen to the DOL if all costs are fixed? Variable?
> What does a firm’s degree of operating leverage (DOL) indicate?
> What will happen to the break-even point if the contribution margin rises (falls)?
> What is the purpose of knowing the break-even point?
> What is cost-volume-profit analysis? How can it be used by a firm?
> Explain how financial planning is used to determine a firm’s external financing requirements.
> 1. A market that can absorb large trades without large security price movements is said to have which of the following? a. Depth b. Breadth c. Electronic trading d. Many traders 2. A market with which of the following has attracted many participant
> Explain how internally generated funds are used to reduce the need for external financing to fund asset investments.
> How is the process of financial planning used to estimate asset investment requirements?
> How is the Du Pont system related to both the balance sheet and the income statement?
> Describe the Du Pont method or system of ratio analysis. What are the two major components of the system?
> List some reasons why financial statement analysis is conducted. Identify some of the participants that analyze firms’ financial statements.
> What is the purpose of the balance sheet? Briefly identify and describe the major types of assets and the claims of creditors and owners shown on the typical balance sheet.
> What is the purpose of the income statement? Also, briefly identify and describe the major types of expenses that are shown on the typical income statement.
> General accounting practice is based upon the accrual concept. Explain what this means and briefly describe how this compares with the financial manager’s focus on cash.
> What types of information are included in an annual report?
> Briefly describe the differences between a subchapter S corporation and a limited liability company.
> 1. Which of the following true of the OTC market? a. Stocks are traded in a physical location, over a counter in an office, on Wall Street. b. Primary market transactions are underwritten by investment banks. c. Only large institutional traders may par
> What are the differences in owner liability in proprietorships and partnerships versus corporations?
> Identify and briefly describe the three major forms of business ownership used in the United States.
> Briefly describe the financial responsibilities undertaken by a firm’s treasurer.
> What are the responsibilities of a firm’s controller?
> Describe four provisions of the Sarbanes-Oxley Act.
> What is restricted stock? How does it improve managerial incentives compared to the use of stock options?
> What are the two main solutions for reducing the adverse effects of agency problems?
> Discuss some ways agents can make self-serving decisions.
> What is meant by the principal-agent problem in the context of corporate governance?
> How do the financial markets accommodate the needs of both risky firms and very safe firms?
> 1. Traders wanting to buy a security make ______ prices; traders wanting to sell make ______ prices. a. Bid; ask b. Buy; sell c. Stop; limit d. Market; limit 2. Which type of order is executed immediately after a specified price target is hit? a.
> How are financial strategy and financial plans linked together?
> What does it mean when a firm’s MVA is negative?
> Briefly explain how shareholder wealth is measured.
> Describe the financial goal espoused by business firms.
> What steps did Ford take from 2008 to 2009, as seen by its balance sheet?
> What was GM’s financial position prior to its bailout in 2009? How did the bailout improve its financial position?
> How are industry-operating differences reflected in a firm’s financial statements?
> How can common-size financial statements be used?
> What is a statement of cash flows? What are the three standard sections contained in a statement of cash flows?
> Describe the three different accounts that comprise the owners’ equity section on a typical corporate balance sheet.
> 1. Participants on the floor of the New York Stock Exchange do not include which one of the following? a. House brokers b. Registered brokers c. Designated market makers d. Supplemental liquidity providers 2. The NYSE is an example of a(n) ___________
