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Which of the following describes equity securities, rather than debt securities or derivatives? a) They are best for hedging against changes in currency exchange rates.

Which of the following describes equity securities, rather than debt securities or derivatives?

  • a) They are best for hedging against changes in currency exchange rates.
  • b) They offer a fixed rate of return.
  • c) They typically generate the highest returns of the three types of marketable securities.
  • d) They carry more risk than debt securities, but less than derivatives.

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

  • A: The company decides that it will contact customers by phone if they are late on a payment.
  • B: The company decides that it will not require customers to undergo a credit check.
  • C: The company decides that it will reward loyal customers with a discount for early payment.

  • a) B, C, A
  • b) B, A, C
  • c) C, B, A
  • d) C, A, B

Seed money is a type of financing appropriate for a company in what stage of development?

  • a) Maturity
  • b) Decline
  • c) Growth
  • d) Introduction

Jerome needs funding to help start a business selling school supplies. He uses a website that connects him directly with a lender who charges a below-market interest rate.

What type of financing resource is Jerome using?

  • a) Factoring
  • b) Trade credit
  • c) Peer-to-peer lending
  • d) Commercial lending

What does the residual dividend model mean for a company?

  • a) It helps a company attract investors who seek a low dividend payout ratio.
  • b) It allows a company to maintain a consistent dividend yield.
  • c) It helps a company attract investors who seek a high dividend payout ratio.
  • d) It prioritizes the company's growth over shareholder dividends.

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

  • a) If managers also own the company, they are strongly incentivized to succeed.
  • b) A private company has access to less expensive sources of capital than a public company.
  • c) If a company is private, it is better positioned to pursue acquisitions.
  • d) Risk is spread among a larger pool of investors in a private company.

Aneeka owns 40 shares of stock in Company A that are valued at $15/share.

After Company A repurchases 5% of its outstanding shares on the open market, what does Aneeka own?

  • a) 38 shares of stock valued at a higher price/share
  • b) 40 shares valued at a higher price/share
  • c) 40 shares valued at a lower price/share
  • d) 38 shares of stock valued at a lower price/share

Which of the following is true of a market maker?

  • a) Market makers assist with market liquidity by facilitating the exchange of securities.
  • b) Market makers purchase a company's securities before an IPO and then resell them at a premium.
  • c) Market makers rate the creditworthiness of the issuer.
  • d) Market makers help companies to negotiate mergers and acquisitions.

Which inventory technique is most useful when a business has inventory that varies greatly in value?

  • a) FIFO
  • b) ABC
  • c) Average cost
  • d) LIFO

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