Over the years 1981-2000, 4,770 nonfinancial firms exited the U.S. markets for publicly traded equity. Which of the following was the most frequent reason for a firm’s exit? a. Merger or acquisition b. Bankruptcy or liquidation c. The firm reverted to private equity ownership d. The firm changed its listing to a foreign stock exchange […]
Which of the following is NOT generally considered to be a dividend clientele? A) Clients who are middle-aged and just entering the market. B) Clients in low tax brackets who desire high dividends. C) Clients in high tax brackets who desire low or no dividends. D) Clients who prefer high and reliable streams of investment […]
Capital budgeting decisions are typically long-term decisions. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Advantages to going public with a firm include all but WHICH of the following? A) The ability for management to offer stock options as a recruiting tool for key employees. B) A greater ability for the firm to raise capital. C) A more liquid market for owners to sell their ownership shares. This liquidity typically […]
Through the effects of financial leverage, when EBIT increases, ________. A) earnings per share will increase B) earnings per share will decrease C) fixed operating costs will decrease D) fixed operating costs will increase ANSWER A
The relationship between operating and financial leverage is additive rather than multiplicative. Indicate whether the statement is true or false ANSWER FALSE
Consider the following four-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The future after-tax cash inflows for years 1, 2, 3 and 4 are: $400,000, $300,000, $200,000 and $200,000, respectively. What is the payback period without discounting cash flows? A) 2.5 years B) 3.0 years C) 3.5 years D) 4.0 years […]
There are a number of key management attributes that are required to improve a firm’s chances of business success which include: A) managers with expertise and technical knowledge in the functional areas. B) middle managers with leadership potential. C) managers with experience in the industry in which the firm operates. D) All of the above. […]
Consider the following ten-year project. The initial after-tax outlay or after-tax cost is $1,000,000. The future after-tax cash inflows each year for years 1 through 10 are $200,000 per year. What is the payback period without discounting cash flows? A) 10 years B) 5 years C) 2.5 years D) 0.5 years ANSWER Answer: […]
The degree of financial leverage is the ratio of ________ to percentage change in EBIT. A) operating profit B) percentage change in sales C) percentage change in EPS D) long-term debt ANSWER C
