BUSN ch. 9 Exam Questions and Answers Already Passed Latest Update 2025-2026
covenants - Answersconditions lenders place on firms that seek long-term debt financing
retained earnings - Answersthe part of net income that a firm reinvests
financial leverage - Answersthe use of debt in a firm's capital structure
discounting - Answersthe process of converting a future cash flow to its present value
discount rate - Answersthe rate of interest used when computing the present value of some future cash
flow
net present value (NPV) - Answersthe sum of the present values of expected future cash flows from an
investment minus the net cost of that investment
capital structure - Answersthe mix of equity and debt financing a firm uses to meet its permanent
financing needs
time value of money - Answersthe principle that a dollar received today is worth more than a dollar
received in the future
compounding - Answersearning interest in the current time period on top of interest from previous
periods
present value - Answersthe amount of money, that if invested today at a given rate of interest, would
grow to become some future amount in a specified number of time periods
revolving credit agreement - Answersa guaranteed line of credit in which a bank makes a binding
commitment to provide a business with funds up to a specified credit limit at any time during the term
of agreement
capital budgeting - Answersthe process a firm uses to evaluate long term investment proposals
T-Bills (U.S. Treasury Bills) - Answersshort-term IOU's issued by the U.S. federal government
spontaneous financing - Answersfunds that arise as a result of a firm's business operations without the
need for special arrangements
trade credit - Answerscredit granted by sellers when they provide customers with goods and services for
a period of time before requiring payment
line of credit - Answersa financial arrangement between a firm and a bank in which the bank pre
approves credit up to a specified limit
cash budget - Answersa detailed projection of cash flows that financial managers use to identify when a
firm is likely to experience temporary shortages of surpluses of cash
covenants - Answersconditions lenders place on firms that seek long-term debt financing
retained earnings - Answersthe part of net income that a firm reinvests
financial leverage - Answersthe use of debt in a firm's capital structure
discounting - Answersthe process of converting a future cash flow to its present value
discount rate - Answersthe rate of interest used when computing the present value of some future cash
flow
net present value (NPV) - Answersthe sum of the present values of expected future cash flows from an
investment minus the net cost of that investment
capital structure - Answersthe mix of equity and debt financing a firm uses to meet its permanent
financing needs
time value of money - Answersthe principle that a dollar received today is worth more than a dollar
received in the future
compounding - Answersearning interest in the current time period on top of interest from previous
periods
present value - Answersthe amount of money, that if invested today at a given rate of interest, would
grow to become some future amount in a specified number of time periods
revolving credit agreement - Answersa guaranteed line of credit in which a bank makes a binding
commitment to provide a business with funds up to a specified credit limit at any time during the term
of agreement
capital budgeting - Answersthe process a firm uses to evaluate long term investment proposals
T-Bills (U.S. Treasury Bills) - Answersshort-term IOU's issued by the U.S. federal government
spontaneous financing - Answersfunds that arise as a result of a firm's business operations without the
need for special arrangements
trade credit - Answerscredit granted by sellers when they provide customers with goods and services for
a period of time before requiring payment
line of credit - Answersa financial arrangement between a firm and a bank in which the bank pre
approves credit up to a specified limit
cash budget - Answersa detailed projection of cash flows that financial managers use to identify when a
firm is likely to experience temporary shortages of surpluses of cash
