Internally Generated Funds Assignment

26. Firms need cash flow for capital spending and new net working capital investments. Increasing the internally generated funds has the advantage of:

a) Reducing financial risk

b) Increasing debt capacity

c) Sending a good signal to the investors: The company is generating cash.

d) All of the above

27. Assuming asymmetric information between firm’s managers and investors (i.e. managers know more about firm’s prospects than does the typical investor), a firm needing new capital:

a) Should issue debt, whenever the manager thinks the equity is overvalued in the market (price>value)

b) Should issue stocks before debt, if outside financing is required.

c) Should use internal financing first.

d) Should issue debt, if the firm’s debt capacity is reached.

28. Markets for SME’s bank credits and loans are characterized by:

a) Strong asymmetric information between lenders and borrowers.

b) Equilibrium asset prices that are equal to their present value.

c) Repeated assets.

d) All of the above.

29. Reward-based crowdfunding:

a) Is a new way of financing entrepreneurial projects, through the Internet.

b) Many individuals-the crowd-provide funds directly to the entrepreneur, not through financial intermediary

c) Provides the enterprise with clients, and with the cash from those sales, prior to the goods delivery, and even prior to starting the production process.

d) All of the above. Get Finance homework help today

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