D076 Finance Skills study test

20 years ago Mateo started an investment account with $2000. He then invested $100 into the account every month at the end of each month. Today, he has $46,528 I. The same account. What is the term for the $100 monthly cash flows? - Annuity A company calculated variances of a budget and actual cash flows that indicate the firm's strengths and weaknesses in cash flows and its budgeting process. Which major use of cash budgeting is this an example of? - performance evaluation A company is developing a financial forecast for the next year. The company plans to implement a new factory that will increase production and resulting sales by 20%. Since the company's assets are increasing significantly what else must increase? - Financing A company is planning to have an initial public offering (IPO), in which type of market will its stock first be sold to the public? - Primary market A company is trying to finance a project with a mortgage loan from a bank. The company's assessment of the project indicates that the company may experience several years of loss until the project becomes profitable. This means that the company might lose its ability to pay back the loan and the interest on the mortgage. What action might the bank take to protect its interest? - Set strict covenants that the company cannot easily achieve. By setting a strict covenant there is a risk that the company may not meet its obligation, which would deter the company from taking on risky projects. A company that manufactures televisions must obtain financing to increase the company's inventory levels. A manager at the company knows that current investment markets are tight and may be difficult for the company to obtain additional financing for the next year. The manager wants to propose a way for the firm to reduce its discretionary financing needs (DFN). What should the manager suggest to reduce next year's DFN? - Lower the amount of dividends that are paid out to shareholders next year