Sombre Is a Toy Manufacturer That Orders the Components Required

question 47

Multiple Choice

Sombre is a toy manufacturer that orders the components required to make toys way before its customers make a purchase. They make modules with those components and later, upon receiving customer requests, make toys using those modules. They do this to make sure they are able to cater to the demands of the customers. It is evident that Sombre has adopted a(n) _____.

• A) assemble-to-stock operation
• B) make-to-stock operation
• C) make-to-order operation
• D) assemble-to-order operation

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Definitions:

Green Shoe Provision

A clause in an underwriting agreement that allows underwriters to buy and sell additional shares than originally planned.

Protective Covenant

Part of the indenture limiting certain transactions that can be taken during the term of the loan, usually to protect the lender’s interest.

Preemptive Right Provision

A clause in a contract that gives existing shareholders the right to buy new shares before the company offers them to the public, in order to maintain their fractional ownership.

Private Placements

The sale of securities directly to a limited number of private investors rather than through a public offering in the open market.