Chapter 18 5 Mort Tishian feels it's necessary to predict revenues, costs, and expenses on a six-month basis. "It's the only way you get an idea of what to expect," explains Mort

299. (p. 500) One of the primary factors that influences the interest rate a firm pays on long-term loans is the:

A. intensity of competition the firm faces.

300. (p. 503) Venture capital firms look to invest their funds in firms that:

A. operate in established, mature industries.

301. (p. 500) Which of these statements about corporate bonds is correct?

A. Bonds provide equity financing.

302. (p. 504) Successful use of financial leverage requires a firm to:

A. negotiate with lenders to establish a line of credit.

303. (p. 504-505) To maximize the benefits of using financial leverage, a firm should:

D. incorporate in states with relatively low tax rates.

304. (p. 504) As John considers approaching a venture capital firm to provide funding for his new software firm,

he should realize that a venture capital firm will:

A. offer no more than 20 percent of the funding he needs.

305. (p. 503) By purchasing stock in Entertainment Today, Veronica has become a(n) ________ the company.

D. venture capitalist in

306. (p. 503) After earning $30 million in net income, Rolatrim Industries distributed $5 million in dividends to

their stockholders. The board of directors of the firm decided to invest the remaining $25 million back into the

business. This $25 million reinvestment of profits represents:

D. mutual funds.

307. (p. 503) After enjoying the increased sales and profits of several popular products, Braggs & Stritton plans to

expand their production facilities. The firm, a well-known producer of lawn care products, prefers financing this

project with a funding source that avoids interest and dividend payments as well as underwriting costs. Which

of the following best meets the needs of Braggs & Stritton?

A. venture capital

308. (p. 504-505) Which of the following situations represents a successful use of financial leverage?

D. A retail firm purchases merchandise at $10 and sells it for $15.

309. What is financial management? Identify the duties and responsibilities of financial managers.

310. Identify and describe the major steps involved in financial planning.

311. Explain the role the operating budget, the capital budget, and the cash budget play in financial planning.

312. Identify and describe three types of short-term financing.

313. What is equity financing? Identify and describe the major sources of this type of financing.

314. (p. 488) Mort Tishian feels it’s necessary to predict revenues, costs, and expenses on a six-month basis. “It’s

the only way you get an idea of what to expect,” explains Mort. In order to obtain these predictions, Mort needs

to develop a(n):

D. econometric model.

315. (p. 493) Mort is seriously considering a major expansion in the size of his funeral home. The money spent on

this type of project would be classified as a(n):

D. depreciation charge.

316. (p. 493) To raise the funds for the major improvements needed at the funeral home, Mort has talked to two

investors about incorporating his business and selling them shares of stock in the company. Mort is considering

the use of:

A. debt financing.

317. (p. 496) Mort approached the chief lending officer at First Virginia Bank about obtaining a $75,000 loan for

operating funds. The banker said she would approve the loan provided that the funeral home’s building was

pledged as collateral. The banker was offering a(n):

318. (p. 497) After much searching, Mort located an old banking friend of his father’s. The banker offered Mort up

to $25,000 in unsecured funds, which Mort’s firm could borrow any time within a year, as long as the bank has

the money available. Mort was offered a(n):

c18 Summary