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
Operating leverage is concerned with the relationship between a firm’s sales revenue and its financial expenses. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
How is the profitability index calculated? A) The present value of the net cash flows minus the initial investment. B) The present value of the net cash flows /plus the initial investment. C) The present value of the net cash flows divided by the initial investment. D) The initial investment divided by the present value […]
Date: September 19th, 2020
A firm’s balance sheet shows the following changes over the most recent quarter: Cash increases by $1,000,000, long-term assets increase by $3,000,000, accounts payable increase by $750,000, long-term-debt increases by $1,000,000, retained earnings increase by $1,250,000, and new equity increases by $1,000,000. Which of the following statements must be TRUE? A) Cash was a $1,000,000 […]
Date: September 19th, 2020
Financial leverage is concerned with the relationship between a firm’s earnings after interest and taxes and its common stock earnings per share. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
If a firm increases the amount of debt that it has this could lead to an increase in: A) financial risk. B) the cost of equity. C) both the cost of equity and the financial risk. D) None of the above. ANSWER C
Date: September 19th, 2020
All of the following are important factors in the economy EXCEPT: A) technology. B) interest rates. C) financial markets. D) credit conditions. ANSWER A
Date: September 19th, 2020
The interest rate on a line of credit is normally stated as a fixed rate-the prime rate. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The ________ method is a capital budgeting technique for evaluating projects of unequal lives. A) equivalent annual cost B) equal amortization C) straight-line annuity D) none of the above ANSWER A
Date: September 19th, 2020
Hurdle rates may change if: A) the cost of borrowing changes. B) the firm’s risk profile changes. C) the overall economic environment changes. D) All of the above. ANSWER D
Date: September 19th, 2020
