All of these questions are True or False:

1.sales occurring in the secondary markets increase the total stock of
financial assets that exist in the economy.

2.over-the-counter markets include all security markets, with the
exception of organized exchanges.

3. The commercial banker and the investment banker perform the same
functions in the market.

4. The central characteristic of a financial market is that it acts as
the vehicle through which the demand for and supply of financial claim
are brought together.

5. A "red herring" refers to the preliminary prospectus.

6. Financial structure includes long and short term sources of funds.

7. capital structure management strives to increase the expected
earnings per share of the firm.

8.the major implication of the independence hypothesis is that one
capital structure is as good as any other.

9. An EBIT-EPS analysis allows decision maker to visualize the impact
of different financing plans on EPS over a range of EBIT levels.

10. The NI theory of capital structure indicates that the firms
composite cost of capital and its common stock price will be affected
by the firms use of financial leverage, regardless of how little the
firm uses debt.

11.The moderate position of capital structure theory indicates that
there is a range of capital structures, rather than a single capital
structure, that is optimal.

12. The residual theory of dividends connects a firm's dividend policy
and its level of capital investments.

13. The ex-dividend date occurs prior to the declaration date.

14. The existance of taxes can directly affect a common shareholder's
preference for capital gains or dividend income.

15. Conceptually, stock dividends and stock splits may be expected to
increase the sharehoder's value.

16.The information effect of dividends suggests that dividends are an
important communication tool since management may have no other
credible way to inform investors about future earnings.

17. The dividend declaration date is the date at which the stock
transfer books are to be closed for determining the investor to
receive the next dividend payment.

18. Motives for holding stocks of cash include
transaction,precautionary, and speculative.

19. A bankers acceptance is a draft drawn on a specific bank by an
exporter in order to obtain payment for goods that he has shipped to a
customer who maintains an account with that specific bank.

20. Although CD's are slightly more risky than Treasury Bills, the
yield is usually slightly less.

21. Speculative cash balances are held to take advantage of uncertain,
profit-making opportunities.

22. Commercial paper can be described as a short-term corporate IOU.

23. The most important reason firms hold cash balances is the
transaction motive.

24. Generally, the speculative motive is the least important component
of a firm's preference for liquidity.

25.  Large cash investments minimize the chances of insolvency and
enhance the firm's profitability.

26. The lock-box system speeds up the conversion of receipts into
usable funds by reducing both mail and disbursing float.

27.To hedge against the price volatility caused by interest rate risk,
the firm's marketable securities portfolio will tend to be composed of
instruments that mature over short periods.

28. Since the 2% discount is so small, terms of credit such as 2/10
net 30 do not have much impact on accounts receivable management.

29. In the EOQ model optimal ordering quantity is the quantity for
which the sum of the costs of ordering and carrying inventory is
minimized.

30. One method used to monitor the collections of accounts receivable
is the aging schedule.

31. Credit scoring is a numerical procedure for evaluating the credit
worthiness of an individual.

32. The only true accounts receivable management decision variables
under the control of the financial manager are the terms of sale and
quality of customer.

33. Default costs vary inversely with the quality of the customer.

34. Inventory control and managment has the same importance for the
firms regardless of their industry.

35. The purpose of carrying inventories is to uncouple the operations
of the firm so that delays or shutdowns in one area do not affect the
production and sale of the final product.

Hi k9queen-ga,

Here are the answers to the questions and sources

1- True
THE SECONDARY MARKET
An investor who resells existing securities is participating in the
secondary market. These are markets where investors buy and sell
securities among themselves and the money generated here goes from the
buying investor to the selling investor. If there were no secondary
markets investors who bought securities from a company would have to
hang on to them or wait on the right opportunity to sell. They would
not be able recover their investment as easily as with the existence
of a secondary market. If investors can't make money by selling the
securities they bought in the primary market then it would be very
difficult for companies wanting to offer shares to do so .The
secondary market is very useful and important to investors. It
provides them with an avenue to buy and sell their securities at any
time that they desire. Being able to buy and sell at any time adds
liquidity to the market. An active secondary markets gives support to
the primary market.
www.caricom.org/archives/stockex1.htm

2) True
OTC. A security which is not traded on an exchange, usually due to an
inability to meet listing requirements. For such securities,
broker/dealers negotiate directly with one another over computer
networks and by phone, and their activities are monitored by the NASD.
OTC stocks are usually very risky since they are the stocks that are
not considered large or stable enough to trade on a major exchange.
They also tend to trade infrequently, making the bid-ask spread
larger. Also, research about these stocks is more difficult to obtain.
also called unlisted.
http://www.investorwords.com

3) False
Investment banker
An individual or institution which acts as an underwriter or agent for
corporations and municipalities issuing securities. Most also maintain
broker/dealer operations, maintain markets for previously issued
securities, and offer advisory services to investors. investment banks
also have a large role in facilitating mergers and acquisitions,
private equity placements and corporate restructuring. Unlike
traditional banks, investment banks do not accept deposits from and
provide loans to individuals. also called investment banker.
commercial bank
An institution which accepts deposits, makes business loans, and
offers related services.
http://www.investorwords.com

4)True
financial market
A market for the exchange of capital and credit, including the money
markets and the capital markets.
http://www.investorwords.com

5) True
Prospectus - The prospectus contains the basic business and financial
information on an issuer of securities. A preliminary prospectus is
called a "red herring" due to the red warning along its spine.
http://www.wolfpopper.com/wolfpopper/stockfraud/secforms.cfm

6)True
financial structure
The right side of a firm's balance sheet, detailing how its assets are
financed, including debt and equity issues.
http://www.investorwords.com

7) True
capital structure
The permanent long-term financing of a company, including long-term
debt, common stock and preferred stock, and retained earnings. It
differs from financial structure, which includes short-term debt and
accounts payable.
http://www.investorwords.com

8) False
http://www.micheloud.com/FXM/COR/e/fonctio.htm

9) True
EBIT
Earnings Before Interest and Taxes. A measure of a company's earning
power from ongoing operations, equal to earnings before deduction of
interest payments and income taxes. EBIT excludes income and
expenditure from unusual, non-recurring or discontinued activities. In
the case of a company with minimal depreciation and amortization
activities, EBIT is watched closely by creditors, since it represents
the amount of cash that such a company will be able to use to pay off
creditors. also called operating profit.
EPS
Earnings per Share. Total earnings divided by the number of shares
outstanding. Companies often use a weighted average of shares
outstanding over the reporting term. EPS can be calculated for the
previous year ("trailing EPS"), for the current year ("current EPS"),
or for the coming year ("forward EPS"). Note that last year's EPS
would be actual, while current year and forward year EPS would be
estimates.
http://foba2.lakeheadu.ca/hartviksen/2039/tbay.doc

10)True
11) False
http://www.rje.org/abstracts/abstracts/1976/Spring_1976._pp._33_54.html

12)True
www.gsm.ucdavis.edu/Courses/Fall2002/260/fall2002_week6_wp.ppt


13) False 
ex-dividend date
The first day of the ex-dividend period. The ex-dividend date was
created to allow all pending transactions to be completed before the
record date. If an investor does not own the stock before the
ex-dividend date, he or she will be ineligible for the dividend
payout. Further, for all pending transactions that have not been
completed by the ex-dividend date, the exchanges automatically reduce
the price of the stock by the amount of the dividend. This is done
because a dividend payout automatically reduces the value of the
company (it comes from the company's cash reserves), and the investor
would have to absorb that reduction in value (because neither the
buyer nor the seller are eligible for the dividend). also called
reinvestment date.
declaration date
The date on which a company's directors meet to announce the date and
amount of the next dividend payment. Once the payment has been
authorized, it is called a declared dividend. also called announcement
date.

14)True
http://www.heritage.org/Research/Taxes/WM47.cfm
http://www.vote.com/vote/60011078/
http://www.ncpa.org/iss/eco/2003/pd010803a.html

15)True
http://investsmart.coe.uga.edu/C001759/guide/basics4.htm
http://investsmart.coe.uga.edu/C001759/guide/basics3.htm

16) True
http://www.optionvue.com/Articles/ArticleDividendsandRates.htm

17)False
18)True
www.commerce.usask.ca/classes/comm363/ppt/rwjr19.ppt

19)True
http://www.speculativebubble.com/terms/moneymi.shtml
http://www.toerien.com/neg_financial_instruments/type_of_instruments.htm

 20) False
http://www.forecasts.org/interest-rate/6-month-cd-rate.htm
http://www.forecasts.org/interest-rate/6-month-treasury-bill-yield.htm

21)True
http://www.drfurfero.com/books/231book/ch01n.html

22)True
commercial paper
An unsecured obligation issued by a corporation or bank to finance its
short-term credit needs, such as accounts receivable and inventory.
Maturities typically range from 2 to 270 days. Commercial paper is
available in a wide range of denominations, can be either discounted
or interest-bearing, and usually have a limited or nonexistent
secondary market. Commercial paper is usually issued by companies with
high credit ratings, meaning that the investment is almost always
relatively low risk.
http://www.investorwords.com/cgi-bin/getword.cgi?961

23)True
http://www.drfurfero.com/books/231book/ch01n.html

24)False
http://www.drfurfero.com/books/231book/ch01n.html

25)false
insolvent
Unable to meet debt obligations. opposite of solvent.
http://www.investorwords.com/cgi-bin/getword.cgi?2495

26)True

lockbox
A service offered by banks to companies in which the company receives
payments by mail to a post office box and the bank picks up the
payments several times a day, deposits them into the company's
account, and notifies the company of the deposit. This enables the
company to put the money to work as soon as it's received, but the
amounts must be large in order for the value obtained to exceed the
cost of the service.
http://www.investorwords.com/cgi-bin/getword.cgi?2868

27)True
http://www.investorwords.com/cgi-bin/getword.cgi?5257

28)False
http://www.lcd.gov.uk/risk/pdrria.htm

29)True
EOQ
Economic Order Quantity. The amount of orders that minimizes total
variable costs required to order and hold inventory.
http://www.investorwords.com/cgi-bin/getword.cgi?1718

30)True
aging schedule
A list of accounts receivable broken down by number of days until due
or past due.
http://www.investorwords.com/cgi-bin/getword.cgi?164

31)True
credit scoring
A statistical technique used to determine whether to extend credit
(and if so, how much) to a borrower. Credit scoring is often
considered more accurate than a qualitative assessment of a person's
credit worthiness, since it is based on actual data. When performing
credit scoring, a creditor will analyze a relevant sample of people
(either selected from current debtors, or a similar set of people) to
see what factors have the most effect on credit worthiness. Once these
factors and their relative importances are established, a model is
developed to calculate a credit score (a number indicating how
credit-worthy the applicant is) for new applicants. The officer inputs
applicant-specific information for each variable in the model, and can
thus find out how credit-worthy he/she is. Developing a credit scoring
model is usually a time-consuming, complicated process given that
creditors often have to look at a large sample and consider many
different variables. Thus, these models are usually developed at the
firm level as opposed to the individual credit office level. Some of
the factors considered when developing a credit scoring model are
outstanding debt, the number of credit accounts maintained, age,
income, credit history, etc. As required by the Equal Credit
Opportunity Act, a credit scoring model cannot consider race, sex,
marital status, national origin, or religion. If age is considered,
the analysis should be such that older people are given equal
consideration in a credit application.
http://www.investorwords.com/cgi-bin/getword.cgi?1211

32)False

33)False
default
Failure to make required debt payments on a timely basis or to comply
with other conditions of an obligation or agreement.
http://www.investorwords.com/cgi-bin/getword.cgi?1350

34)True
35)True
http://www.investorwords.com/cgi-bin/getword.cgi?2589

If you have any  questions please contact me.

Hope this helps

jeanwil-ga

Thank you, I appreciate the explanations!