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 […]
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
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
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
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
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
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
________ is 100 percent minus total variable operating costs as a percentage of total sales. A) Profit margin B) Contribution margin C) Expense ratio D) Fixed coverage ratio ANSWER B
Preferred shares are a form of SHORT-TERM financing available to the firm. Indicate whether the statement is true or false ANSWER FALSE
What are Michael Porter’s Five Forces that govern the competition within an industry? How do these forces impact overall growth opportunities within an industry? What will be an ideal response? ANSWER Porter Five Forces are: 1. The threat of new entrants, 2. The threat of substitute products or services, 3. The bargaining power […]
