What is a callable bond, who “calls” a bond, and under what circumstances? What will be an ideal response? ANSWER Callable bonds have the added feature that at contractually specified times and prices the issuer can repurchase or “call” the bonds away from the owners. In effect, a callable bond is the combination […]
Date: September 19th, 2020
In a line of credit arrangement, a firm pays interest on ________. A) the full line of credit B) the total line of credit C) only the amount actually borrowed D) only the amount actually borrowed and commitment fees on any unused portion of the loan ANSWER C
Date: September 19th, 2020
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., […]
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
The operating cash flow cycle compares the combined age of inventory and receivables with the age of payables in order to identify a funding gap. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Short-term, self-liquidating loans are intended to ________. A) provide one-time loan to the borrower who needs funds for a specific purpose B) cover seasonal peaks in financing caused by inventory and receivable buildups C) provide maximum amount to the firm that it can owe to the bank D) recapitalize the firm ANSWER B
Date: September 19th, 2020
A firm’s ________ is the level of sales necessary to cover all operating costs, i.e., the point at which EBIT equals zero. A) cash breakeven point B) financial breakeven point C) operating breakeven point D) total breakeven point ANSWER C
Date: September 19th, 2020
A bond rated AAA is perceived to have GREATER default risk than a bond rated BBB. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
