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 + […]
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
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
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
When sizing up the operations of the firm, it is important to examine: A) the quality of the firm’s products or services. B) how effective the processes are that the firm employs to operate the business. C) the capacity of the firm’s plant or facilities. D) All of the above. ANSWER D
In the event of bankruptcy and liquidation by a firm, all preferred shareholders receive any claims before common shareholders but after both secured and unsecured creditors. Indicate whether the statement is true or false ANSWER TRUE
For an exporter to lose money after accepting a banker’s acceptance, A) both the importer and the importer’s bank would need to default on the agreement. B) the importer would have to default on the agreement. C) the exporter would have to default on the agreement. D) the federal government would need to step into […]
