Spontaneous liabilities such as accounts payable and accruals represent a use of financing that arise from the normal course of business. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Which of the following is NOT a problem with the dividend model approach to estimating the cost of equity? A) Some firms do not pay dividends. B) Some firms pay dividends but do not follow a policy of constant growth. C) Sometimes it is very difficult to estimate a constant dividend growth rate for a […]
Date: September 19th, 2020
As sales increase, a company needs more inventory and more employees resulting in ________. A) more accounts payable and accruals, and therefore increasing its spontaneous liabilities B) less accounts payable and accruals, and therefore decreasing its spontaneous liabilities C) more accounts payable and accruals, and therefore decreasing its spontaneous liabilities D) less accounts payable and […]
Date: September 19th, 2020
Which of the following is NOT a key component of the CAPM? A) beta B) diversifiable risk C) the risk-free rate D) the market risk premium ANSWER B
Date: September 19th, 2020
If a project has a ________ NPV, it should also have an IRR ________ the hurdle rate. A) positive; greater than B) positive; less than C) negative; greater than D) negative; equal to ANSWER A
Date: September 19th, 2020
The author presents the Return on Equity (ROE) as one of our most important benchmarks because it measures the return to the owners of the firm. because stockholders own the firm, maximizing their returns is considered an important goal. Use the DuPont method to de construct the ROE into three components and briefly discuss what […]
Date: September 19th, 2020
The advantage of using the extra dividend policy is that ________. A) a firm can avoid giving false hopes to shareholders B) if a firm’s earnings drop, so does the dividend payment C) the extra dividend may become a regular event D) cyclical shifts in earnings may be avoided ANSWER A
Date: September 19th, 2020
A firm should take the cash discount if the firm’s cost of borrowing from the bank is greater than the cost of giving up a cash discount. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Common-size statements allow us to level the playing field by examining trends across time or among competitors by focusing on percentages. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The problem with a constant-payout-ratio dividend policy from the shareholders’ perspective is that ________. A) it pays constant dividend irrespective of the earnings of a firm B) if the firm’s earnings drop, the dividends tend to be lower C) even when earnings are low, the company must pay a fixed dividend D) there is no […]
Date: September 19th, 2020
