194. A factor is a financial firm that specializes in buying other firms’ accounts receivables.
a. True
b. False
195. The most expensive form of short-term financing is factoring of accounts receivable.
a. True
b. False
196. Short-term business loans must be repaid within 5 years.
a. True
b. False
197. Long-term loans and the sale of corporate bonds are common sources of equity financing.
a. True
b. False
198. An initial public offering occurs anytime that a corporation sells stock to the general public.
a. True
b. False
199. The Nasdaq is the largest and probably best-known securities exchange market in the world.
a. True
b. False
200. A POS terminal is a computerized cash register located in a retail store and connected to a bank’s computer.
a. True
b. False
201. The Nasdaq only carries small company’s stocks; by regulation, large firms’ stock must trade on the NYSE, not on
the Nasdaq.
a. True
b. False
202. The Electronic Funds Transfer Act protects the customer in case a bank makes an error or the customer’s credit
or debit card is stolen.
a. True
b. False
203. The costs of selling stock to the general public are referred to as flotation costs.
a. True
b. False
204. The distribution of a corporation‘s earnings to the stockholders is called paying a dividend.
a. True
b. False
205. The most basic form of corporate ownership is common stock.
a. True
b. False
206. While common stockholders have the right to receive dividends, holders of preferred stock elect the board of
directors and approve or disapprove major corporate actions.
a. True
b. False
207. Although a corporation does not have to pay dividends on common stock, it is required to pay dividends on
preferred stock.
a. True
b. False
208. When compared to common stockholders, preferred stockholders have a priority claim on corporate assets.
a. True
b. False
209. Corporate profits reinvested in the business are called retained earnings.
a. True
b. False
210. Venture capital is money invested in small firms that have the potential to become very successful.
a. True
b. False
211. Most small businesses can expect to obtain venture capital financing if they have a good credit history of paying
their bills on time.
a. True
b. False
212. Private placements are used to sell stock to individual investors.
a. True
b. False
213. Financial leverage is the use of borrowed funds to increase the return on owners‘ equity.
a. True
b. False
214. If a firm‘s earnings should drop below the interest cost of borrowed money, the return on owners‘ equity will
increase.
a. True
b. False
215. A term-loan agreement is a promissory note that requires a borrower to repay a loan in monthly, quarterly,
semiannual, or annual installments.
a. True
b. False
216. The interest rate and repayment terms for term loans often are based on such factors as the reasons for borrowing,
the borrowing firm’s credit rating, and the value of collateral.
a. True
b. False
217. It is not necessary to give most lenders a current business plan or audited financial statements when requesting a
long-term business loan.
a. True
b. False
218. The denominations for corporate bonds range from $1,000 to $50,000.
a. True
b. False
219. The maturity date is the date on which the corporation is to repay the money borrowed from bondholders.
a. True
b. False
220. Interest on corporate bonds is paid quarterly.
a. True
b. False
221. Bonds that are secured by various assets of the issuing corporation are called debenture bonds.
a. True
b. False
222. Bonds that can be exchanged for a specified number of shares of common stock are called convertible bonds.
a. True
b. False
223. The legal document detailing all the conditions relating to a bond issue is called a bond indenture.
a. True
b. False
224. Bonds from a single issue that have staggered maturity dates are called serial bonds.
a. True
b. False
225. In order to repay some corporate bonds, a firm may be required to deposit a specified sum of money each year until
the bond’s maturity in a sinking fund.
a. True
b. False
226. With regard to ongoing expenses, the most expensive type of long-term financing is the sale of common stock.
a. True
b. False