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 […]
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
The major type of loan made by banks to businesses is the ________. A) fixed-asset-based loan B) short-term secured loan C) short-term, self-liquidating loan D) capital improvement loan ANSWER C
Stage 2 of the industry life cycle is characterized by all of the following EXCEPT: A) there is little demand for the company’s products and services. B) the firm’s revenue tends to grow rapidly. C) positive profits begin to materialize. D) private firms begin to “go public.” ANSWER A
Other things equal, it is more desirable to have a larger working capital gap. Indicate whether the statement is true or false ANSWER FALSE
Bond rating agencies: A) assess the credit worthiness of the firm. B) assess the possibility of default by a firm on the payment of its bonds. C) include firm’s such a Moody’s and Fitch. D) all of the statements above are true. ANSWER D