Question

Which of the following describes equity securities, rather than debt securities or derivatives?

• a) They are best for hedging against changes in currency exchange rates.
• b) They offer a fixed rate of return.
• c) They typically generate the highest returns of the three types of marketable securities.
• d) They carry more risk than debt securities, but less than derivatives.

Place the following steps for developing a credit policy in the correct order of process:

• A: The company decides that it will contact customers by phone if they are late on a payment.
• B: The company decides that it will not require customers to undergo a credit check.
• C: The company decides that it will reward loyal customers with a discount for early payment.

• a) B, C, A
• b) B, A, C
• c) C, B, A
• d) C, A, B

Seed money is a type of financing appropriate for a company in what stage of development?

• a) Maturity
• b) Decline
• c) Growth
• d) Introduction

Jerome needs funding to help start a business selling school supplies. He uses a website that connects him directly with a lender who charges a below-market interest rate.

What type of financing resource is Jerome using?

• a) Factoring
• b) Trade credit
• c) Peer-to-peer lending
• d) Commercial lending

What does the residual dividend model mean for a company?

• a) It helps a company attract investors who seek a low dividend payout ratio.
• b) It allows a company to maintain a consistent dividend yield.
• c) It helps a company attract investors who seek a high dividend payout ratio.
• d) It prioritizes the company's growth over shareholder dividends.

What is one potential advantage of being a privately-held company?

• a) If managers also own the company, they are strongly incentivized to succeed.
• b) A private company has access to less expensive sources of capital than a public company.
• c) If a company is private, it is better positioned to pursue acquisitions.
• d) Risk is spread among a larger pool of investors in a private company.

Aneeka owns 40 shares of stock in Company A that are valued at $15/share.

After Company A repurchases 5% of its outstanding shares on the open market, what does Aneeka own?

• a) 38 shares of stock valued at a higher price/share
• b) 40 shares valued at a higher price/share
• c) 40 shares valued at a lower price/share
• d) 38 shares of stock valued at a lower price/share

Which of the following is true of a market maker?

• a) Market makers assist with market liquidity by facilitating the exchange of securities.
• b) Market makers purchase a company's securities before an IPO and then resell them at a premium.
• c) Market makers rate the creditworthiness of the issuer.
• d) Market makers help companies to negotiate mergers and acquisitions.

Which inventory technique is most useful when a business has inventory that varies greatly in value?

• a) FIFO
• b) ABC
• c) Average cost
• d) LIFO

Answer 1

Answer 1)

Debt are the most recured securities among the Debt, Stock and Derivative. While Derivatives are the most risky securities as they involve trading on margin.

Therefore, OPtion D is correct. They carry more risk than debt securities, but less than derivatives