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
In the United States, a corporation’s board of directors is elected by: A) bondholders only. B) bondholders and preferred stockholders C) bondholders, preferred stockholders, and common stockholders. D) common stockholders only. ANSWER D
A firm has fixed operating costs of $253,750, a sales price per unit of $100, and a variable cost per unit of $65. The firm’s operating breakeven point in dollars is ________. A) $725,000 B) $700,000 C) $906,250 D) $390,385 ANSWER A
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
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
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) […]
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 + […]
The firm’s supply risk can best be analyzed by examining: A) the components of the firm’s operations management. B) the components of the firm’s operations management compared with the key industry success factors. C) the key industry success factors and their impact on profitability. D) the behavior of the firm’s major competitors. ANSWER […]
________ would be a common source of financing in international trade. A) Commercial paper B) Negotiable CDs C) Treasury bonds D) Banker’s acceptances ANSWER D
The cumulative feature of preferred stock means that preferred dividends cannot be paid until all common dividends have been paid. Indicate whether the statement is true or false ANSWER FALSE