Which type of firm described is likely to have a high dividend payout ratio policy? A) A younger firm with uncertain income but significant growth opportunities. B) An older firm with steady earnings but few growth opportunities.. C) An older firm with irregular income and significant growth opportunities. D) A younger firm with significant income […]
Tangshan Mining issued $10,000 of commercial paper for $9,925 for 60 days. Based on this information, the effective annual rate of interest on the commercial paper would be about 10 percent. Indicate whether the statement is true or false ANSWER FALSE
When a firm needs to raise money via a bond issue, one of the quickest ways is through a ________. This activity involves the purchase of a large block of securities by a large institutional investor such as a pension fund, an endowment fund, or an insurance company. A) private placement. B) public placement. C) […]
The empirical evidence from various and historical U.S. financial asset classes reported by the author DOES NOT support the financial axiom that to achieve greater return an investor must take greater risk. Indicate whether the statement is true or false ANSWER FALSE
Exchange rate risk can often be hedged by using currency forward, futures, or options markets. Indicate whether the statement is true or false ANSWER TRUE
Assume perfect capital markets except that taxes DO exist. Why does the value of the interest tax shield accrue entirely to the shareholders and none of the value goes to the bondholders? What will be an ideal response? ANSWER The value of the firm increases by the value of the interest tax shield […]
The size and current growth stage of the firm must also be considered as a part of the marketing analysis. Indicate whether the statement is true or false ANSWER TRUE
A firm is evaluating the best means to have a positive impact on potential buyers; which one of the four P’s is the firm addressing? A) Product B) Price C) Place D) Promotion ANSWER D
When a firm has fixed operating costs, operating leverage is present. In that case, an increase in sales results in a more-than-proportional increase in EBIT, and a decrease in sales results in a more-than-proportional decrease in EBIT. Indicate whether the statement is true or false ANSWER TRUE
Operating leverage may be defined as the potential use of fixed operating costs to magnify the effects of changes in sales on a firm’s earnings before interest and taxes (EBIT). Indicate whether the statement is true or false ANSWER TRUE
