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 […]
What are taxes payable for the Equity and Debt firm? A) $240,000 B) $560,000 C) $300,000 D) $0 ANSWER A Explanation: A) Taxes payable = EBT * Tax rate = $800,000 * .30 = $240,000.
The least frequently issued capital financial instruments listed herein are: A) preferred shares. B) common shares. C) bonds. D) In reality, these instruments are issued in similar magnitude. ANSWER A
A PEST analysis involves an analysis of which of these factors? A) Technological, societal, economic factors, and potential threats B) Societal, technological, political, and economic factors C) Strengths, threats, economic and political factors D) Strengths, threats, potential opportunities, and external environment factors ANSWER B
Breakeven analysis is used by a firm ________. A) to determine the level of operations necessary to cover all fixed operating costs B) to determine the least cost of producing goods and services C) to evaluate the profitability associated with various levels of sales D) to determine the demand of a product ANSWER […]
What are the Earnings after tax for the Equity and Debt firm? A) $240,000 B) $300,000 C) $560,000 D) $0 ANSWER C Explanation: C) EAT = EBT – Taxes Payable = $800,000 – $240,000 = $560,000.
Under conditions of perfect capital markets, M&M insist that the value of the levered firm is greater than the value of the unlevered firm. Indicate whether the statement is true or false ANSWER FALSE
A bond rated “D” by Standard and Poor’s rating service is in default on its financial commitments. Indicate whether the statement is true or false ANSWER TRUE
Short-term loans that businesses obtain from banks and through commercial paper are ________. A) negotiated and secured B) negotiated and unsecured C) spontaneous and secured D) spontaneous and unsecured ANSWER B
________ costs require the payment of a specified amount in each accounting period. A) Operating B) Variable C) Semi-variable D) Fixed ANSWER D
