Debt Financing WOB Test 3

Question 1

Financial Management

Answer 1

Planning for a firms money needs

Question 2

What is the goal of a Financial Manager?

Answer 2

Maximize value of firm to its owners

Question 3

What is another term that means - Maximize value of firm to its owners

Answer 3

Maximize shareholder value

Question 4

What are the 3 fundamental concepts of financial management?

Answer 4

• balancing short term and long term demands
• balancing potential risks and rewards
• balancing leverage and flexibility

Question 5

Debt Financing

Answer 5

Arrange funding of borrowed money

Question 6

Equity Financing

Answer 6

Arrange funding by selling other shares

Question 7

Short term Financing

Answer 7

Covers current expenses repaid within a year

Question 8

Long term Financing

Answer 8

Covers long term expenses repaid over a period more than a year

Question 9

Leverage

Answer 9

Increasing rate of return by financing with borrowed funds

Question 10

Capital Structure

Answer 10

Firms mix of debt and equity financing

Question 11

What are the 5 Cs of credit scores?

Answer 11

Character
Capacity 
Capital 
Conditions 
Collateral

Question 12

Bonds

Answer 12

Form of debt that has interest

Question 13

Coupon interest rate

Answer 13

Percentage of par value paid out annually

Question 14

Par value

Answer 14

Amount returned to bond owner at time of maturity

Question 15

Maturity

Answer 15

Length of time until bond issuer returns value to bond holder

Question 16

Why would you issue debt

Answer 16

To generate cash