________ costs require the payment of a specified amount in each accounting period. A) Operating B) Variable C) Semi-variable D) Fixed ANSWER D
Date: September 19th, 2020
In case of a manufacturing organization, which of the following is a variable cost that varies directly with the sales volume? A) interest cost B) dividend cost C) shipping cost D) rental cost ANSWER C
Date: September 19th, 2020
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
Under conditions of perfect capital markets, M&M suggest that the average cost of capital for the firm will increase with the addition of debt. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Because the bank guarantees the availability of funds, a commitment fee is normally charged on a simple line of credit agreement. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Bond yields move inversely to bond price changes. 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
