Leverage results from the use of equity to magnify returns to a firm’s owners. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
What are the primary strengths and weaknesses of the Net Present Value method of capital budgeting? What will be an ideal response? ANSWER The major strength of the net present value method is that it takes into account the time value of money through the discount rate. It implicitly makes the reasonable assumption […]
Date: September 19th, 2020
Generally, decreases in leverage result in increased return and risk, whereas increases in leverage result in decreased return and risk. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Jannet Company, currently pays its employees at the end of a week. The weekly payroll totals $400,000. If it were to extend the pay period so as to pay its employees 1 week later throughout an entire year, the employees would in effect be lending the firm ________ for a year. A) $400,000 B) $20,800,000 […]
Date: September 19th, 2020
Which of the following is NOT a potential source of cash for a firm? A) A decrease in Accounts receivable B) A decrease in inventory C) An increase in retained earnings D) A decrease in equity ANSWER D
Date: September 19th, 2020
The two major components for sizing up a business are: A) risk analysis and cash flow analysis. B) cash flow analysis and risk management. C) analyzing external environment and factors within the enterprise. D) growth projections and risk analysis. ANSWER C
Date: September 19th, 2020
The profitability index method of project evaluation provides an answer that is a: A) rate of interest. B) dollar value. C) time period. D) ratio. ANSWER D
Date: September 19th, 2020
As of January 29, 2012, Home Depot had an outstanding fixed rate bond issue with a 5.875% coupon rate that was priced such that the before-tax yield to maturity was 4.67%. From this information we can conclude that the current price of the bond was less than the bond’s face value. Indicate whether the statement […]
Date: September 19th, 2020
Unlike the spontaneous sources of unsecured short-term financing, bank loans are negotiated and result from deliberate actions taken by the financial manager. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Total leverage can be defined as the potential use of fixed costs, both operating and financial, to magnify the effect of changes in sales on a firm’s earnings per share. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
