One RISK of a line-of credit is that the borrower is only charged on the amount of the credit that is actually utilized. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
With a floating-rate note, the interest rate on the note changes ________. A) when the risk level of the borrower changes B) when the prime rate changes C) when the demand for loans changes D) when bank profits changes ANSWER B
Date: September 19th, 2020
The preferred approach to breakeven analysis for a multiproduct firm is the ________. A) breakeven point expressed in units B) breakeven point expressed in dollars C) cash breakeven point D) overall breakeven point ANSWER B
Date: September 19th, 2020
Firms must make regular payments to ________ but are under no contractual obligation to pay dividends to ________. A) common stockholders; preferred stockholders. B) preferred stockholders; bondholders. C) bondholders; common stockholders. D) common stockholders, bondholders. ANSWER C
Date: September 19th, 2020
We can interpret the optimal level of debt as the firm’s ________, or the highest amount the firm can borrow before the value of the firm begins to decline. A) equity capacity B) equity multiplier C) debt capacity D) interest tax shield ANSWER C
Date: September 19th, 2020
A firm has fixed operating costs of $150,000, total sales of $1,500,000, and total variable costs of $1,275,000. The firm’s operating breakeven point in dollars is ________. A) $150,000 B) $176,471 C) $1,000,000 D) $1,425,000 ANSWER D
Date: September 19th, 2020
A firm is considering whether to out source some aspects of the manufacturing of its products. Which one of the Six P’s of Operations is the firm addressing? A) Product quality B) Process C) Plant D) People ANSWER B
Date: September 19th, 2020
________ are the residual claimants of a firm’s cash flows. A) Preferred shareholders B) Common shareholders C) Bondholders D) Bankers ANSWER B
Date: September 19th, 2020
Most commercial paper is UNSECURED. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
One important principle that financial managers try to follow is to match short-term sources of funds with long-term uses of funds. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
