Major Sources Of Corporate Finance

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Major Sources Of Corporate Finance
Forms of Short term and long term financing. Characteristics of equity, debt and hybrid financing.

  
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  • 1. 
    Which of the following is NOT a source of short term finance:
    • A. 

      Trade Credit

    • B. 

      Accounts Receivable

    • C. 

      Accrued Wages

    • D. 

      Commercial Bills

    • E. 

      Factoring of Accounts Receivable


  • 2. 
    Which of the following would be classified as a finance decision:
    • A. 

      Spending money on revenue expenditure.

    • B. 

      Raising equity finance or long term borrowings to buy non-current assets.

    • C. 

      Selling off a segment of the business because it is unprofitable.

    • D. 

      Raising short term finance to improve working capital.

    • E. 

      Determining what proportion of profits will be retained by the company.


  • 3. 
    A long term borrowing NOT backed by a legal charge over the assets of the borrower is called a(n):
    • A. 

      Debenture.

    • B. 

      Mortgage.

    • C. 

      Unsecured Note.

    • D. 

      Bank Bill.

    • E. 

      None of the above.


  • 4. 
    Long term debt can be obtained with ALL BUT which of the following:
    • A. 

      Term Loan

    • B. 

      Convertible Notes

    • C. 

      Mortgage Debentures

    • D. 

      Preference Shares

    • E. 

      Commercial Bills


  • 5. 
    Which of the following describe the characteristics of short term liabilities:
    • A. 

      Represent contractual claims on a firms income and assets.

    • B. 

      Can arise spontaneously from a firm's operations.

    • C. 

      Are sources of funds for a firm.

    • D. 

      Grow in line with an increase in trading operations.

    • E. 

      Should be used to finance temporary movements in current assets.


  • 6. 
    Credit extended in connection with goods purchased for resale is called:
    • A. 

      Bank Overdraft.

    • B. 

      Mortgage Finance.

    • C. 

      Commercial Bills.

    • D. 

      Trade Credit.

    • E. 

      Unsecured Notes.


  • 7. 
    Which of the following best describe trade credit:
    • A. 

      Trade credit has an implicit interest cost.

    • B. 

      Large firms tend to use trade credit more than small firms.

    • C. 

      The total trade creit owed by a company at any point of time is termed "accounts receivable".

    • D. 

      Trade credit arises from the time differential between receipt and payment for goods purchased by the business.

    • E. 

      Trade credit is usually secured by a floating charge over the company's assets.


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