Quiz on Financing

What is the dominant source for new financing for corporations across the world?

• Common stock

• Long-term debt

• Internally generated cash flows

• Preferred stock

Which of the following is NOT a factor that affects the choice of financing?

• Management’s decision on working capital

• Dividend policy

• Market competition

• Legal and transaction costs

What is a key disadvantage of an Initial Public Offering (IPO)?

• High financial costs

• Enhanced firm visibility

• Increased liquidity

• Access to a larger investor base

Which type of lease can be cancelled after a certain period?

• Direct lease

• Financial lease

• Operating lease

• Leveraged lease

What is the primary role of financial intermediaries for corporations?

• To provide legal advice

• To conduct market research

• To raise funds by selling claims

• To manage corporate governance

What is a characteristic of a syndicated loan?

• Issued by a single bank

• Is always secured

• Involves multiple lenders

• Has a fixed interest rate

Which of the following is a type of long-term debt security?

• Preferred stock

• Corporate bonds

• Common stock

• Treasury bills

What is a negative covenant in a debt agreement?

• Maintain a minimum level of net working capital

• Avoid selling accounts receivable

• Spend borrowed funds on a proven need

• Maintain satisfactory accounting records

What is a primary benefit of leasing for a firm?

• Ownership of the asset

• No maintenance responsibilities

• Tax-deductible payments

• Guaranteed salvage value

Which law governs the procedures for security issuance?

• Securities Regulation Code

• Securities Act

• Corporate Governance Act

• Investment Banking Act