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
Date: September 19th, 2020
Direct forms of bankruptcy costs include legal and administrative costs associated with the actual bankruptcy proceedings, as well as the money paid to lawyers. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The mandate of the board of directors is to ensure that management makes decisions that are consistent with maximizing the value of PREFERRED shares. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
When two groups have different access to information, there is then SYMMETRIC information for these two groups. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Operating leverage is present when a firm has fixed operating costs. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Currently in the United States, it is not legal to issue different classes of common stock. For instance, issuing two classes of common stock where one class has superior voting rights compared to the other. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Under conditions of asymmetric information, when a firm issues debt this is more likely to be a NEGATIVE signal, rather than a positive signal regarding the firm’s future prospects. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Demand risk refers to: A) the probability that actual supply for the products or services will exceed anticipated supply. B) the probability that actual supply for the products or services will fall short of anticipated supply. C) the probability that actual demand for the products or services will exceed anticipated demand. D) the probability that […]
Date: September 19th, 2020
Whenever the percentage change in earnings before interest and taxes resulting from a given percentage change in sales is greater than the percentage change in sales, operating leverage exists. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Common shares are perpetual instruments, lasting as long as the firm itself lasts. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
