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
Date: September 19th, 2020
The amount of leverage in a firm’s capital structure—the mix of long-term debt and equity maintained by the firm—can significantly affect its value by affecting return and risk. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
One of the most important reasons for understanding the overall economy is: A) changing economic activity will impact the current business cycle stage. B) changing economic activity will directly impact revenues. C) changing economic activity will increase profits. D) All of the above. ANSWER B
Date: September 19th, 2020
The risk-free rate is the lowest rate of interest charged by the nation’s leading banks on business loans to their most important and reliable business borrowers. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
________ occurs when a firm puts a limit on the amount of its investments. A) Capital structure B) Capital rationing C) Working capital management D) Marginal structure ANSWER B
Date: September 19th, 2020
Hurdle rates depend on the perceived riskiness of divisions or projects and are used to evaluate different types of potential investments. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A firm’s capital structure is the mix of the current liabilities, long-term debt, and equity maintained by the firm. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Both operating and financial leverage result in the magnification of return as well as risk. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A line of credit is an agreement between a commercial bank and a business, specifying the amount of unsecured short-term borrowing the bank will make available to the firm over a given period of time. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Operating change restrictions are contractual restrictions that a bank may impose on a firm as part of a line of credit agreement. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
