Which of the following is TRUE about the threat of new entrants? A) New entrants often increase capacity within the industry. B) The easier to enter an industry, the higher the profit margins and growth potential. C) If competitors are strong, existing competitors will not react strongly to any new entrants. D) If there are […]
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
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
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
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
For a retail firm, it is unlikely that the working capital gap would change from period to period as a function of cyclical sales. Indicate whether the statement is true or false ANSWER FALSE
Which of the following is NOT considered to be one of Michael Porter’s Five Forces? A) Threat of new entrants B) Bargaining power of suppliers C) Threat of substitute products or services D) Diminished rivalry among current competitors ANSWER D
________ refers to the effects that fixed costs have on the returns that shareholders earn. A) Purchase power parity B) Leverage C) Business risk D) Pecking order theory ANSWER B
________ costs are a function of time, not sales, and are typically contractual. A) Fixed B) Semi-variable C) Variable D) Operating ANSWER A
Commitment fee is the fee that is normally charged on a revolving credit agreement. Indicate whether the statement is true or false ANSWER TRUE
