1. A (n) ___Corporation _______ is a legal entity created by a state, and it is separated from its owners and managers.
2. The __Balance sheet______ _____ lists the firm's assets as well as claims against those assets.
3. The debt ratio, which is the ratio of ___long term debt ___ ___ to ____total term capital ____ ________, measures proportion of funds supplied by creditors.
4. _______ ________ are markets for short-term debt securities, those securities that mature in less than a month.
5. _______ ______ are the markets for long-term debt and corporate stocks.
6. Firms raise capital by selling newly issued securities in the _________ markets, while existing, outstanding securities are traded in the _______________ market.
7. A (n)____________ firm facilitates the transfer of capital between savers and borrowers by acting as the middleman.
9. To prepare the statement of cash flows, we must have comparative __________ ___________ and an ______________ statement.
10. The ____ _____ allows the firm to plan investments of cash surpluses and to arrange for adequate borrowing to meet forecast cash shortages.
True of False
1. Financial planning is a process of deciding which risks to take. False
2. Financial planning is concerned with possible surprises as well as the most likely outcomes.
3. Financial planning considers both the financing and investment decisions. This is one (but not the only) reason that financial planning is necessary.
4. A typical horizon for long-term planning is five years.
5. Investments are usually aggregated by category.
6. Perfect accuracy is unlikely to be obtainable, but the firm needs to produce the most accurate possible consistent forecasts.
7. Excessive detail distracts attention from the crucial decisions.
8. Short-term funds could be raised through a public offering.
9. Best efforts basis is a public offering in which the investment banker uses its resources to sell the security issue without taking on the risk of underwriting and is compensated on the basis of the number of securities sold.
Problems: 10 fill in the blank plus 10 true false questions about legal form, financial planning, capital markets, cash flow, cash budgeting are answered in the solution.