A firm arranges a discount loan at a 12 percent interest rate, and borrows $100,000 for one year. The stated interest rate is ________ and the effective interest rate is ________. A) 12.00%; 12.00% B) 13.64%; 12.00% C) 12.00%; 13.64% D) 12.00%; 10.71% ANSWER C
Date: September 19th, 2020
In a revolving credit agreement, the firm pays interest on ________. A) the full line of credit B) the unused portion of the line of credit C) the amount actually borrowed and compensating balance D) the amount actually borrowed and commitment fees on any unused portion of the loan ANSWER D
Date: September 19th, 2020
Under U.S. Bankruptcy code, claims against the firm are prioritized along the lines of secured creditors followed in order by: A) preferred stock holders, common stock holders, and then unsecured creditors after all others have been compensated. B) unsecured creditors, preferred stock holders, and then common stock holders after all others have been compensated. C) […]
Date: September 19th, 2020
Which of the following statements is most accurate in the M&M world including taxes and financial distress? A) Overall market value of the firm = market value of all-equity firm – value of interest tax shield — costs of financial distress B) Overall market value of the firm = market value of all-equity firm + […]
Date: September 19th, 2020
One definition of LIBOR, is that it is the rate at which banks can borrow from one another. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
One function of breakeven analysis is to ________. A) determine the profit attributable to each stockholder B) evaluate the effect of leverage on a firm’s risks and returns C) evaluate the profitability of various sales levels D) determine the amount of financing needed by the firm ANSWER C
Date: September 19th, 2020
If the firm has earnings available to common shareholders, it has two choices of what to do with these earnings: it can either ________ or ________. A) pay dividends to the common shareholders; retain the earnings to finance future projects and investments. B) pay dividends to the preferred shareholders; repurchase common stock. C) pay dividends […]
Date: September 19th, 2020
All operating systems involved what is known as the Six P’s of Operations, which include: A) product quality, profitability, and people. B) process, plant, and profitability. C) product quality, process, and people. D) product potential, plant, and partners. ANSWER C
Date: September 19th, 2020
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
