


Study with the several resources on Docsity
Earn points by helping other students or get them with a premium plan
Prepare for your exams
Study with the several resources on Docsity
Earn points to download
Earn points by helping other students or get them with a premium plan
Community
Ask the community for help and clear up your study doubts
Discover the best universities in your country according to Docsity users
Free resources
Download our free guides on studying techniques, anxiety management strategies, and thesis advice from Docsity tutors
VEE ACCOUNTING AND FINANCE 1 Which of the following are forms of debt financing? 1. factoring 2. hire purchase 3. retained earnings - CORRECT ANSWER -1 + 2 also debt securities, bank loans, bank overdrafts, accrued expenses, and trade credit In a ________ factoring, the factor takes over all responsibility for the accounts, including the payment collection and _________ loss. - CORRECT ANSWER -non-recourse, credit In a _________, the borrower makes regular payments for the goods rented and own the goods after all payments are made. - CORRECT ANSWER -hire purchase Bank overdraft is a _____-term debt financing. A bank _______ demand immediate repayment of an
Typology: Exams
1 / 4
This page cannot be seen from the preview
Don't miss anything!
Which of the following are forms of debt financing?
(ii) Corporate bond ratings are given by the Federal Reserve Bank in the US. (iii) Corporate bonds are always secured by assets. - CORRECT ANSWER - only (i) Corporate bond ratings are given by independent private rating services providers such as Moody's, Fitch and Standard & Poor's. Some corporate bonds are secured by assets (e.g. a mortgage bond is backed by mortgages). But some corporate bonds are unsecured. There are basically ____ types of bond covenants. A (An) _______ covenant depicts the action the bond issuer must take to service its debt. - CORRECT ANSWER - two, affirmative Which of the following statements about shareholders are false? (i) Shareholders can vote on annual general meetings to decide company's matters. (ii) When the company makes a profit, it has to distribute it in the form of dividend. (iii) Shareholders are lower priority on claims against the company's asset in case of liquidation. - CORRECT ANSWER - only (ii) Country U has just been hit by a tsunami. The government of Country U is accused of negligence and people start to protest. Which of the following is likely to happen? (i) Stock prices in most of the sectors in Country U will rise. (ii) Stock prices in most of the sectors in Country U will fall. (iii) Stock prices of insurance companies that sells homeowners' insurance that cover partially the damage from tsunami will fall. - CORRECT ANSWER - (ii) and (iii) Political instability generally causes stock prices to fall. Hence (ii) is correct. The insurance companies in (iii) will face claim payments in near future and its profitability is expected to be bad. So their stock prices will fall. Which of the following statements are true? (i) A company may only issue common stocks but not preferred stocks. (ii) A company may only issue debt but not stocks. (iii) A company may pay dividends to its shareholders in the form of stocks. - CORRECT ANSWER - (i) and (iii) because (ii) No company can have 100% debt. If such a company exists, then that company has no owner and there will be no vested interest among the company's management. (iii) Dividends can be distributed as cash or in stocks (that is, additional shares)
(2) Riskiness of the project: Does Joe know how to run a café? If he understands the risk of such an investment? What causes John to sell his café? Is it because of old age or fierce competition? Or is it because a customer got food poisoning before so that the café has a bad reputation? Jon chooses between two mutually exclusive projects based on the projects' payback periods. Explain two problems that may arise. - CORRECT ANSWER - (1) Payback period ignores the time value of money. (2) Payback period ignores the cash flow pattern after the project pays back. A project may have a rather short payback period but fails to generate large cash flows after it pays back. Another project may have a longer payback period but is able to generate large and consistent cash flows after it pays back. Using the payback period may lead to the rejection of the second project. Why is the payback period commonly used in practice for small business? State two reasons. - CORRECT ANSWER - (1) It is easy to compute and understand. (2) Small businesses often have certain time requirements in terms of how long to pay back loans. The payback period helps to identify which projects can tie up large amounts of money for long time periods. Which of the following statements is incorrect? (A) Problems can arise using the IRR rule to select mutually exclusive investment projects. (B) IRR is affected by the scale of investment opportunity. (C) Multiple IRR may exist. (D) IRR may not exist. - CORRECT ANSWER - B. IRR is affected by the scale of investment opportunity