Short-Term Business Financing 31. Which of the following is NOT a characteristic

Question

Short-Term Business Financing

31. Which of the following is NOT a characteristic of a current asset?

a. cash

b. marketable securities

c. accounts payable

d. accounts receivable

32. The balanced approach is also referred to as the ___ ___ ___.

a. maturity matching approach

b. immature matching approach

c. permanent matching approach

d. primary matching approach

33. What is a line of credit?

a. a loan limit established by the consumer to payback a loan

b. a loan limit established by a bank for each business customer

c. a loan limit established by a bank for each student loan

d. a loan limit established by a bank for each consumer

34. Who established the Small Business Administration (SBA)?

a. the federal government

b. OSHA

c. it is a private owned entity

d. it is owned by a foreign firm

35. What is commercial paper?

a. a long-term promissory note

b. a short-term promissory note

c. a long-term secured loan

d. a short-term secured loan

Chapter 17: Capital Budget Analysis

36. Which of the following is true about an independent project?

a. it is not in direct competition with another project

b. they are in direct competition with one another

c. they are not evaluated based on shareholder wealth

d. they are never evaluated

37. What is a SWOT analysis?

a. a review of the stock strategies

b. a review of the firm

Explanation / Answer

31C. accounts payable is a current liability

32a. maturity matching approach

33b. line of credit is loan limit established by bank for each business customer

34c. its a private owned entity

35b. its a short term promissory note. they have maturity of less than 1 year

36b. they are in direct competition with one another as the company will invest in a project giving maximum returns

37b. analysis of internal SW - strength, weakness and external OT - opportunities, threats

38c. lower returns reflected through negative NPV will erode capital and eventually lead to firm's failure

39c. years

40d. tracking of spending and firm's current capital budgeting process

41a. higher costs - a non optimal capital structure will always entail higher cost

42d. its also called the hurdle rate

43b. from pre tax income i.e from EBIT

44b. operating risk as they are related to operations of the company

45c. standard deviation

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