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Business Management: Chapter 16 Review

Total questions: 38

Worksheet time: 19mins

Name
Class
Date
1.

A partner's personal contribution in a business is equity capital.

a)

True

b)

False

2.

Retained earnings are a type of equity capital.

a)

True

b)

False

3.

Businesses in financial difficulty often have trouble getting debt capital.

a)

True

b)

False

4.

Common stock is a type of security, but bonds are not.

a)

True

b)

False

5.

Preferred stockholders usually have voting privileges at the stockholders' meetings.

a)

True

b)

False

6.

When a corporation ceases operations, preferred and common stockholders usually get all their investment back from the sale of assets.

a)

True

b)

False

7.

When starting a business, it is usually desirable to issue only common stock.

a)

True

b)

False

8.

Retained earnings are kept in the business in the form of cash only.

a)

True

b)

False

9.

Equipment maintenance and insurance are usually included in a leasing agreement.

a)

True

b)

False

10.

The original cost of obtaining long-term capital is usually higher than that of short-term capital.

a)

True

b)

False

11.

The investment made in a business by its owners is called

a)

working capital

b)

equity capital

c)

creditor capital

d)

cash flow

12.

Retained earnings refer to

a)

money from the sale of bonds

b)

money from the sale of stocks

c)

profits that owners do not save for used in the business

d)

profits that owners do not take out of the business

13.

Banks and other types of lending institutions usually will not loan money to a business unless

a)

debt capital exceeds owner capital

b)

owner capital exceeds debt capital

c)

debt capital and owner capital are nearly equal

d)

borrowed capital exceeds owner capital

14.

If a sole proprietorship fails, which of the owner's assets may be lost.

a)

personal assets invested in the business

b)

personal assets not invested in the business

c)

mortgaged personal property

d)

All of these

15.

Which statement is true of common stockholders?

a)

They have the right to vote at annual meetings, at one vote per share of stock owned.

b)

If the corporation makes a profit, they are paid before creditors.

c)

They are guaranteed dividends every year.

d)

They must purchase stock at its par value.

16.

Which statement is true about preferred stockholders?

a)

Holders are guaranteed dividends.

b)

Holders receive profits of the business before creditors.

c)

Holders typically do not have voting privileges

d)

Holders receive profits after common stockholders.

17.

If the ABC Corporation's net worth is $48,000,000 and there are 3,000,000 shares of stock outstanding, the book value of each share is

a)

$144

b)

$8

c)

$16

d)

$12

18.

The dollar value printed on the stock certificate is known as the

a)

market value

b)

book value

c)

par value

d)

purchase value

19.

Earnings reinvested in the business to replace equipment, add new facilities, or serve as financial protection are called

a)

profits

b)

debt capital

c)

retained earnings

d)

dividends

20.

Short-term debt must be repaid to the lender with interest within

a)

30 days

b)

60 days

c)

90 days

d)

one year

21.

Long-term debt capital is obtained by

a)

purchasing merchandise on credit

b)

getting a commercial loan from a bank

c)

issuing bonds

d)

lending money to businesses

22.

Which statement is true about trade credit?

a)

it is a form of short-term financing

b)

it requires immediate payment

c)

it is a common type of bank credit

d)

it is a form of long-term financing

23.

A common method used to purchase expensive equipment is with

a)

debentures

b)

term loans

c)

bonds

d)

factors

24.

Bonds that are based upon the faith and credit of the corporation that issues them are

a)

mortgage bonds

b)

debentures

c)

coupon bonds

d)

registered bonds

25.

Which statement is true about venture capitalists?

a)

They are protected against losses.

b)

They pass all risks to the company in return for their investment.

c)

They take over management of any company they invest in.

d)

They may get a percentage of ownership in the company in return for their investment.

26.

An organization that assists a business to raise capital through the sales of stocks and bonds is a(n)

a)

factor

b)

underwriter

c)

venture capitalist

d)

sales finance company

27.

When deciding how to get the capital they need, companies consider all of the following EXCEPT

a)

the influence of capital contributors

b)

the cost of capital

c)

interest rates

d)

the foreign exchange rate

28.

The credit terms offered by a business indicate that a bill must be paid in full within 30 days and offers a two percent discount for paying a bill within 10 days. This can be stated on the invoice as

a)

2% on 10

b)

2/10, net 30

c)

2-10-30

d)

30 days or 2/10

29.

A bond secured by specific long-term assets of the issuer.

a)

mortgage bond

b)

debenture

c)

ESOP

d)

security

30.

A bond that allows a bondholder to exchange bonds for a prescribed number of shares of common stock.

a)

convertible bond

b)

mortgage bond

c)

debenture

d)

factor

31.

A firm that specializes in lending money to businesses based on the business's accounts receivables.

a)

factor

b)

sales finance company

c)

ESOP

d)

venture capitalists

32.

A plan that allows employees to become owners of the company they work for through the purchase of stock.

a)

ESOP

b)

convertible bond

c)

crowdfunding

d)

security

33.

A strategy for funding a business idea with small amounts of money from many people.

a)

crowdfunding

b)

investment bank

c)

factor

d)

sales finance company

34.

An organization that helps businesses raise capital through the sale of stocks and bonds.

a)

investment bank

b)

sales finance company

c)

factor

d)

security

35.

A bond that is not secured by assets but based upon the faith and credit of the corporation that issues it.

a)

debenture

b)

mortgage bond

c)

convertible bond

d)

security

36.

Firm that provides capital to a business based on installment sales contracts.

a)

sales finance company

b)

investment bank

c)

factor

d)

ESOP

37.

Something of value pledged as assurance of the fulfillment of an obligation.

a)

security

b)

factor

c)

line of credit

d)

debenture

38.

The authorization to borrow up to a maximum amount for a specified period of time.

a)

line of credit

b)

security

c)

mortgage bond

d)

factor