Which of the following statements are NOT true? A) Peaks in the business cycle tend to occur when the capacity-to-output gap is the largest. B) Peaks in the business cycle tend to occur when the capacity-to-output gap is the smallest. C) Troughs occur when the capacity-to-output gap is the largest. D) None of the above. […]
A firm’s capital structure combines all forms of financing on which the firm relies including: A) preferred shares. B) common equity. C) long-term debt. D) All of the above. ANSWER D
Ending cash = Sources of cash – Uses of cash + beginning cash balance Indicate whether the statement is true or false ANSWER TRUE
The dollar breakeven sales level can be solved for by dividing fixed costs by the dollar contribution margin. Indicate whether the statement is true or false ANSWER FALSE
Managers wishing to add value to the firm can do this by adding projects with a ________ net present value. A) positive B) negative C) zero D) none of the above ANSWER A
The prime rate of interest fluctuates with changing supply-and-demand relationships for short-term funds. Indicate whether the statement is true or false ANSWER TRUE
________ refers to the difficulties experienced by firms as they attempt to meet financial commitments to their creditors. A) Financial distress B) Capital structure C) Capital budgeting D) Working capital management ANSWER A
The practice of extending credit to customers is known as: A) float. B) trade credit. C) forfaiting. D) discounting. ANSWER B
What are the two most popular forms of capital budgeting decision rules in practice? A) IRR and payback period B) profitability index and payback period C) IRR and NPV D) NPV and profitability index ANSWER C
A discount loan is a loan on which interest is paid in advance by deducting it from the loan so that the borrower actually receives less money than is requested. Indicate whether the statement is true or false ANSWER TRUE
