Describe what an accounts receivable schedule might look like and why a firm may wish to prepare such a schedule. What will be an ideal response? ANSWER The author presents an accounts receivable aging schedule consisting of three columns: Days A/R outstanding (e.g., 1-30 days, 31-60 days, etc,), Amount of AR outstanding (e.g., […]
If a firm’s fixed operating costs decrease, the firm’s ________. A) operating breakeven point will decrease B) operating breakeven point will increase C) sale price per unit will decrease D) sale price per unit will increase ANSWER A
The bargaining power of suppliers and customers will impact the profitability of the industry because: A) powerful suppliers can exert pressure to raise prices. B) powerful customers can exert pressure by forcing down prices. C) powerful customers can exert pressure by demanding higher quality. D) All of the above. ANSWER D
Your firm issues 20-year bonds. This type of financing would be most appropriate for which of the following activities? A) The support of accounts receivable B) The construction of a new warehouse C) The support of accounts payable D) The financing of inventory ANSWER B
Intense rivalry among existing firms can result in: A) the introduction of new products or services. B) lower profit margins as competitors jockey for position. C) decreased capacity. D) Both A and B. ANSWER D
Which of the following have payments that are tax deductible for the corporation? A) bond interest payments B) preferred dividends C) common dividends D) retained earnings ANSWER A
What type of risk is assessed by credit rating agencies? Do these agencies generally assign individuals or teams to assess a firm’s risk? What are some of the ways the rating agencies are paid for their services? What will be an ideal response? ANSWER Credit agencies for the most part assess a firm’s […]
A single-payment note generally has a maturity of ________. A) 30 days to 9 months or more B) 10 to 12 months or more C) 12 to 24 months or more D) 10 to 24 months or more ANSWER A
At the operating breakeven point, ________ equals zero. A) sales revenue B) fixed operating costs C) variable operating costs D) earnings before interest and taxes ANSWER D
What is LIBOR, how are LIBOR interest rates determined, and for what are they used? What will be an ideal response? ANSWER LIBOR is the London Interbank Offered Rate and is a series of short-term interest rates estimated daily in London by a group of large international banks. Unfortunately, the LIBOR rates (currently […]
