Place the following steps for developing a credit policy in the correct order of process:

• A: The company decides that it wants to minimize opportunity costs by having as much cash on hand as possible.
• B: The company decides that it will send out two notices of late payments to customers before pursuing other collection methods.
• C: The company decides that its payment terms will be Net 15.
• a) A, B, C
• b) C, B, A
• c) C, A, B
• d) A, C, B

A software company issues shares of stock to the public for the first time in order to raise funds for a planned product expansion.

What financial market is the company participating in?

• a) Secondary capital market
• b) Primary money market
• c) Secondary money market
• d) Primary capital market

Calculate a company's total leverage given the following information:

• Change in sales = 7%
• Change in earnings = 10%

• a) Cannot calculate without EBIT data
• b) 1.43
• c) 0.7
• d) Cannot calculate without net income data

You deposit $7,000 in a bank account that earns 2% compound interest annually.

What is the value of your $7,000 in four years?

• a) $6,423
• b) $6,440
• c) $7,577
• d) $7,560

Select the statement that correctly explains the relationship between interest rates and present or future value.

• a) Assuming other variables stay the same, if the interest rate increases, the present value of an investment increases.
• b) Assuming other variables stay the same, if the interest rate decreases, the present value of an investment decreases.
• c) The interest rate and the present value of an investment are inversely related.
• d) Assuming other variables stay the same, if the interest rate decreases, the future value of an investment increases.

What is one potential advantage of being a publicly-held company?

• a) A public company may have a more prominent reputation than a private company.
• b) A public company has fewer requirements to meet when it comes to shareholder communication and reporting.
• c) A public company always has a higher share price than a private company.
• d) A public company may gain from greater investor involvement than a private company.