Lines of credit are guaranteed loans that specify the maximum amount that a firm can owe the bank at any point in time. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
One of the limitations of breakeven analysis is its short-term time horizon. A large outlay in the current financial period could significantly raise the firm’s breakeven point, while the benefits may occur over a period of years. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
In M&M Proposition II the cost of equity changes with changes in the amount of debt financing. Which of the following is the correct formula for Proposition II? A) Ke = Ku + (Ku – Kd) / ( ) B) Ke = Ku + (Ku – Kd) ( ) C) Ke = Ku + (Ku […]
Date: September 19th, 2020
The ultimate goal of sizing up the industry is to: A) identify the industry life cycle. B) identify the key success factors that are necessary for the firm to successfully compete in the industry. C) monitor the nature and intensity of the competition. D) All of the above. ANSWER C
Date: September 19th, 2020
If one borrows $1,000 at 8 percent interest on a discount basis, the effective rate of interest is 7.2 percent. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The effective interest rate for a discount loan is greater than the loan’s stated interest rate. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Modigliani and Miller (M&M) Proposition I states: A) overall market value of the firm = market value of equity – market value of debt. B) overall market value of equity = market value of the firm+ market value of debt. C) overall market value of the firm = market value of equity + market value […]
Date: September 19th, 2020
A compensating balance is a balance in checking account that is equal to a certain percentage of the borrower’s short-term unsecured loan. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Due to the difficulty of allocating costs to products in a multiproduct firm, the breakeven model may fail to determine breakeven points for each product line. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The use of a dollar breakeven point is important when a firm has more than one product, especially when each product is selling at a different price. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
