________ place some restrictions on the firm in such a way as to improve the odds that the bondholders will be repaid. A) Bond ratings B) Bond covenants C) Bond rating agencies D) Bond exchanges ANSWER B
Tangshan Mining borrowed $10,000 for one year under a line of credit with a stated interest rate of 8 percent and a 10 percent compensating balance. Thus, the firm keeps a balance of about $800 in its checking account. Indicate whether the statement is true or false ANSWER FALSE
The ________ is a benchmark set by each financial institution as the rate at which interest is charged to its most-favored (i.e., least risky) customers. A) LIBOR B) prime rate C) discount window rate D) federal funds ANSWER B
________ results from the use of fixed-cost assets or funds to magnify returns to a firm’s owners. A) Long-term debt B) Equity C) Leverage D) Capital structure ANSWER C
Which of the following statements about inventory control is TRUE? A) Too little inventory may lead to opportunity costs in the form of missed sales. B) Too much inventory may reduce profitability due to increased financing and storage costs. C) Seasonality in sales may require a firm to hold different levels of inventory throughout the […]
PrintQuik Inc. has a cost of equity of 14% and a cost of debt of 6%. If the firm is financed with 70% equity and 30% debt, and they operate under the conditions of a perfect capital market, what is the firm’s average cost of capital? A) 9.80% B) 10.50% C) 11.60% D) 10.00% […]
Which of the following is NOT considered to be a factor that affects the industry in which a firm operates? A) Technology B) Credit conditions C) Interest rates D) Regulations ANSWER B
With ________ bonds a firm can choose to pay back the investor at a pre-specified date prior to the maturity date, usually at a pre-specified price above the face value, representing a premium to the bondholder A) callable B) convertible C) variable rate D) premium ANSWER A
The three basic types of leverage are ________. A) operating, production, and financial B) operating, production, and total C) production, financial, and total D) operating, financial, and total ANSWER D
“The Holiday Store” is a retail firm that is only open in the weeks prior to major American holidays. The rest of the year the store is closed to the public for in-store and on line sales. The store is well-managed and manages to sell a very high percentage of its inventory each holiday season. […]