BUSN 11 Chapter 9 Test Questions and Answers All Correct
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Course
BUSN 11
Institution
BUSN 11
BUSN 11 Chapter 9 Test Questions and Answers All Correct
Revolving Credit Agreement - Answer-Bank makes a binding commitment to provide funds up to a specified credit limit at any time during the term of the agreement. Guaranteed line of credit.
Commercial Paper - Answer-short-term promissor...
BUSN 11 Chapter 9 Test Questions
and Answers All Correct
Revolving Credit Agreement - Answer-Bank makes a binding commitment to provide
funds up to a specified credit limit at any time during the term of the agreement.
Guaranteed line of credit.
Commercial Paper - Answer-short-term promissory notes issued by large corporations
Direct Investment from Owners - Answer-investments can be obtained by selling new
stock and by reinvesting earnings
Retained Earnings - Answer-part of a firm's net income that is reinvested
Long-Term Debt - Answer-Borrowing from banks and other lenders. Issuing bonds.
Term Loans - Answer-lenders can impose requirements and covenants to ensure
repayment of loans
Corporate Bonds - Answer-corporations' own formal IOUs, which they sell to investors
Equity Financing - Answer-funds provided by the owners of a company
Debt Financing - Answer-funds provided by lenders (creditors)
Capital Structure - Answer-the mix of equity and debt financing a firm uses to meet its
permanent financing needs
Pros of Debt Financing - Answer-Interest payments are a tax-deductible expense. Firms
can acquire additional funds without requiring existing stockholders to invest more of
their own money or sale of stock to new investors
Cons of Debt Financing - Answer-Requirement to make fixed payments. Creditors often
impose covenants on the borrower.
Pros of Equity Financing - Answer-more flexible and less risky than debt financing,
imposes no required payments
Cons of Equity Financing - Answer--doesn't yield the same tax benefits as debt
financing
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