WorksheetsKaplan Business Finance C5
Total questions: 11
Worksheet time: 6mins
The main way of distinguishing between capital and money markets is by:
Transaction costs
The amounts involved
The time to maturity
The amount of risk
Generally, debt is seen as a cheaper source of long-term finance than equity.
True
False
H Co is planning to raise additional debt finance to help it finance a new project.
Which of the following statements regarding this decision is correct?
Debt is typically more expensive than equity.
Raising finance through equity would allow H to use its assets as security.
Raising debt finance is likely to change the ownership structure of the company.
Equity would be a better source of finance if the project returns are uncertain.
In the country of Gargantua, the general attitude of the population towards risk in financial matters is a preference for bearing as little risk as possible.
It should not be surprising, therefore, that the financial system in Gargantua is a:
Market-based system
Stakeholder system
Bank-based system
Public policy system
Which ONE of the following is a characteristic of ordinary shares?
They provide the same rate of dividend each year.
They can increase and decrease in value.
They will be repurchased by the company after a given amount of time (normally 25 years).
They can be sold easily.
A company faces seasonal demand for its products.
Short-term borrowing will be required to help the company:
Pay the annual dividend
Finance its existing loans
Purchase new machinery
Increase its stock levels
Company G is considering raising finance to invest in new premises. It believes that it should raise debt finance by way of a bank loan.
Which of the following statements is correct regarding debt and equity finance?
Interest payments tend to be cheaper than dividends.
Interest payments can be suspended in the future if H is unable to afford them.
Dividends are an allowable deduction against H's profits.
H will likely need to provide asset security to investors whether it chooses to raise debt or equity finance.
In the banking system, secondary banks may also be known as:
Clearing banks
Commercial banks
Retail banks
Merchant bank
Which of the following is a NOT a function of a financial intermediary?
Bringing those with surplus funds and those with a deficit of funds together
Allowing borrowers to borrow large amounts in one transaction
Reducing the risk of lending money
Encouraging depositors to lend for the same time periods as borrowers borrow
What is the minimum investment required for members of the public to invest in treasury bills?
£500,000
£50,000
£5,000
£500
Which of the following statements are true?
(i) A bonus issue is the issue of additional shares, typically fully paid up, to existing shareholders in proportion to their holdings.
(ii) By making a rights issue, a company requires shareholders to subscribe for additional shares in proportion to their holdings.
(i) only
(ii) only
Both (i) and (ii)
Neither (i) or (ii)
