Chapter 17 financial management

Question 1

Capital structure

Answer 1

Mix of a company’s debt and equity capital

Question 2

Divestiture

Answer 2

Sale of assets by a company

Question 3

Finance

Answer 3

Planning, obtaining, and managing a company’s funds to accomplish its objectives as effectively and efficiently as possible.

Question 4

Financial managers

Answer 4

Executives who develop and implement the firm’s financial plan and determine the most appropriate sources and uses of funds

Question 5

Financial plan

Answer 5

Document that specifies the funds needed by a company for a period of time, the timing of inflow and outflows, and the most appropriate sources and uses funds.

Question 6

Leverage

Answer 6

Increase in the rate of return on funds invested by borrowing fund

Question 7

Leveraged buyout (LBO)

Answer 7

Transaction in which public shareholders are bought out and the company reverts to private status.

Question 8

Risk – return trade – off

Answer 8

Process of maximizing the wealth of a company’s shareholders by striking the optimal balance between risk and return

Question 9

Tender offer

Answer 9

Offer made by a company to the target company’s shareholders specifying a price and the form of payment

Question 10

Venture capitalist

Answer 10

Business firms or groups of individuals that invest in new and growing firms in exchange for an ownership share