The major real-world benefit of debt is that interest payments are: A) made after tax considerations. B) a tax-deductible expense. C) always less than 10% of the firm’s profit. D) smaller than the dividend payments. ANSWER B
Date: September 19th, 2020
Bond covenants place some restrictions on the firm in such a way as to improve the odds that the bondholders will be repaid. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Empirical evidence suggests that retail firms such as Safeway have a shorter working capital gap than a heavy manufacturing firm such as Boeing. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
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 […]
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
The beauty of the Modigliani and Miller model is that if you relax the restrictive assumptions, it still demonstrates that capital structure does not impact the value of the firm. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Earnings before interest and taxes (EBIT) is a descriptive label for ________. A) operating profits B) net profits before taxes C) earnings per share D) gross profits ANSWER A
Date: September 19th, 2020
Cull Incorporated recently borrowed $250,000 from Century Bank when the prime rate was 4%. The loan was for 90 days with interest to be paid at the end of the period with a rate fixed at 1.5% above the prime rate. What is the total interest paid on this loan and what is the effective […]
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
