chapter 15

Question 1

responsible for planning and overseeing the financial resources of a firm

Answer 1

financial manager

Question 2

managing the pattern of cash inflows (revenues) and outflows (debt payments)

Answer 2

cash-flow management

Question 3

checking performance against strategic plans, making adjustments, preparing budgets to ensure that sufficient cash is on hand to meet operational and debt-service needs

Answer 3

financial control

Question 4

a plan to achieve a desired financial status

Answer 4

financial planning

Question 5

accounts payable, accounts receivable, invetory

Answer 5

short-term operating expenses

Question 6

inventories + (accounts receivable - account payable)

Answer 6

working capital

Question 7

funding fixed assets that have a long life and a lasting value: lands, buildings, machinery

Answer 7

long-term capital expenditures

Question 8

allows firms to cover operational expenses and implement short-term plans

Answer 8

short-term funds

Question 9

the granting of credit by a selling firm to a buying firm

Answer 9

trade credit

Question 10

ship now and pay after

Answer 10

open-book credit

Question 11

sign agreement and then ship

Answer 11

promissory note

Question 12

signed statement of payment terms attached

Answer 12

trade draft

Question 13

the borrower is required to put up collateral

Answer 13

secured short-term loans

Question 14

banks do not ensure that the funds will always be available as needed

Answer 14

line of credit

Question 15

banks guarantee availability of the funds

Answer 15

revolving credit agreements

Question 16

a firm sells unsecured notes for less than their face value. then repurchases them in 30-72 days for the face value

Answer 16

commercial paper

Question 17

borrowing money for 3-10 years at a fixed or floating rate

Answer 17

long-term loans

Question 18

a promise by the borrower to pay the lender an amount of money on the maturity date

Answer 18

corporate bonds

Question 19

assets are pledged as security for the bond

Answer 19

secured bonds

Question 20

not backed by any security and only sold financially by strong corporations that carry lower risk for investors

Answer 20

unsecured bonds

Question 21

certificates are only of value to registered holders

Answer 21

registered bonds

Question 22

holders clip coupons from the bond to receive interest payments- anyone with the coupon can redeem it

Answer 22

bearer bonds

Question 23

may be called at anytime or after a minimum period of time, and paid off for a specified call price

Answer 23

callable bonds

Question 24

redemption rates are staggered so that the bond is paid off gradually ove time

Answer 24

serial bonds

Question 25

option of receiving common stock instead of cash

Answer 25

convertible bonds

Question 26

a firm sells ownership rights by issuing shares

Answer 26

common stock

Question 27

financing by retaining profits in the firm and not paying dividends to shareholders

Answer 27

retained earnings

Question 28

current price of a share on the secondary securities market

Answer 28

market value

Question 29

shareholders' equity divided by the number of shares outstanding

Answer 29

book value

Question 30

arbitrary value set by the company's board of directors and stated on stock certificates

Answer 30

par value

Question 31

require fixed payments, as do bonds

Answer 31

preferred shares

Question 32

the mix of debt vs equity

Answer 32

capital structure

Question 33

sale and purchase of newly issued stocks or bonds

Answer 33

primary securities market

Question 34

sale and purchase of previously issued stocks and bonds

Answer 34

secondary securities market

Question 35

financial specialists who issue new securities

Answer 35

investment bankers

Question 36

organizations that provide a setting for members to buy and sell stock in accordance with the rules of the exchange

Answer 36

stock exchanges

Question 37

individuals licenses to buy and sell securities for customers in the secondary market

Answer 37

stockbrockers

Question 38

the largest exchange in Canada with 110 members

Answer 38

Toronto stock exchange

Question 39

numerous dealers who trade among themselves for smaller firms and those not listed on exchanges

Answer 39

the over-the-counter market

Question 40

the worlds first electronic stock market

Answer 40

national association of securities dealers automated quotation

Question 41

summarize trends in the stock market and specific industries

Answer 41

market indexes

Question 42

a period of falling stock prices

Answer 42

bear market

Question 43

a period of rising stock prices

Answer 43

bull market

Question 44

an order to a broker to buy or sell a certain security at the current market price

Answer 44

market order

Question 45

an order to a broker to buy a certain security only if its price is less than or equal to a given limit

Answer 45

limit order

Question 46

an order to a broker to sell a certain security if its price falls to a certain level or below

Answer 46

stop order

Question 47

the purchase or sale of sock in units of 100 shares

Answer 47

round lot

Question 48

the purchase or sale of stock in units of other than 100 shares

Answer 48

odd lot

Question 49

investor makes a down payment on a portion of the price with the rest financed by the broker

Answer 49

margin trading

Question 50

a invester "borrows" shares from the broker and sells them

Answer 50

short sale

Question 51

a company that pools the resources of many investors and uses funds to purchase various types of securities

Answer 51

mutual fund

Question 52

a bundle of stock and/ or bonds that is in an index tracking the overall movement of a market

Answer 52

exchange- traded fund

Question 53

private pools of money that try to give positive returns, regardless of stock-market performance

Answer 53

hedge funds

Question 54

undifferentiated products

Answer 54

commodities

Question 55

the purchased right to buy a particular stock at a certain price until a specified date

Answer 55

call option

Question 56

the purchases right to sell a particular stock at a certain price until a specified date

Answer 56

put option

Question 57

laws regulating how firms back up securities

Answer 57

blue-sky-law

Question 58

detailed registration statement about a new stock filed with a provincial securities exchange

Answer 58

prospectus

Question 59

conserving a firms financial power or assets by minimizing the financial effect of accidental losses

Answer 59

risk management

Question 60

uncertainty about future events

Answer 60

risk

Question 61

the chance for gain or loss

Answer 61

speculative risk

Question 62

only the change of loss

Answer 62

pure risk

Question 63

transfer a risk to another individual or firm via contract

Answer 63

risk transfer

Question 64

prevent, reduce or minimize losses

Answer 64

risk control

Question 65

cover losses with its own funds

Answer 65

risk retention