What are the three shapes of the yield curve that tend to be associated with different stages of the business cycle? How would you categorize the current business cycle? Explain your answer. What will be an ideal response? ANSWER Periods of expansion are associated with upward-sloping yield curves, because inflation and interest rates […]
Lines of credit are non-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 TRUE
Since the sales price per unit generally decreases with volume and the cost per unit generally increases with volume, the true breakeven point may be different from those obtained using linear revenue and cost functions as assumed in the breakeven analysis. Indicate whether the statement is true or false ANSWER TRUE
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
The breakeven point in dollars can be computed by dividing the contribution margin into the variable operating costs. Indicate whether the statement is true or false ANSWER FALSE
Which of the following actions could DECREASE a firm’s working capital gap? A) reduce the age of inventory B) reduce the age of accounts payable C) increase the age of accounts receivable D) All actions listed would decrease a firm’s working capital gap. ANSWER A
What is the percentage cost of foregoing the payable discounts when the terms are 1/15 net 45 (rounded to the nearest whole percentage point)? A) 8% B) 10% C) 12% D) 14% ANSWER C
Describe the four stages of the business cycle. What are the characteristics of each stage and how would a financial manager adjust their strategic and tactical planning for changes in the business cycle? What will be an ideal response? ANSWER Peaks in the business cycle tend to occur when the capacity-to-output gap is […]
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
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
