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
________ 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
Date: September 19th, 2020
________ costs are a function of time, not sales, and are typically contractual. A) Fixed B) Semi-variable C) Variable D) Operating ANSWER A
Date: September 19th, 2020
Commitment fee is the fee that is normally charged on a revolving credit agreement. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
