What is free cash flow? Why is it important in the acquisition of a firm particularly a highly leveraged firm? What will be an ideal response? ANSWER Essentially, free cash flow are the funds available to pay all claimants on a firm. How much is available to meet the needs of creditors, and […]
Date: September 19th, 2020
A stock split has ________. A) little effect on a firm’s capital structure B) no effect on a firm’s capital structure C) a measurable effect on a firm’s capital structure D) a detrimental effect on a firm’s capital structure ANSWER B
Date: September 19th, 2020
________ represent current investor expectations about a firm whereas ________ are representations of historical costs. A) Book values; market values B) Market values; book values C) Regulators; investment bankers D) Common equity holders; bondholders ANSWER B
Date: September 19th, 2020
Accruals are liabilities for services received for which payment has yet to be made. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
For projects with typical cash flows the IRR method agrees with the NPV accept/reject decision. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Why is the examination of the balance sheet and income statement only not an adequate evaluation of a firm? What else should be done? What will be an ideal response? ANSWER The most obvious part missing is an examination of the statement of cash flows. Understanding cash flow statements helps identify the extent […]
Date: September 19th, 2020
Your new firm just purchased a storage building and property for $40,000 that was paid for with a $20,000 long-term loan and a new infusion of $20,000 from the owners. Which of the following accounting entries is most appropriate? A) $40,000 increase in plant, property and equipment, a $20,000 decrease in long-term debt, and a […]
Date: September 19th, 2020
Tangshan Mining has extended credit terms of 3/15 net 30 EOM. The cost of giving up the cash discount, assuming payment would be made on the last day of the credit period, would be ________. A) 75.26% B) 3.1% C) 72.99% D) 37.12% ANSWER A
Date: September 19th, 2020
The purpose of a reverse stock split is to ________. A) issue additional shares B) increase the dividend C) increase the price of a stock D) decrease trading activity ANSWER C
Date: September 19th, 2020
The net present value method implicitly makes the reasonable assumption that any interim cash flows from the project are reinvested at the firm’s internal rate of return. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
