Accounts payable are spontaneous secured sources of short-term financing that arise from the normal operations of a firm. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Ajax enterprises, Inc has the following income statement items: sales of $48,250,000; operating expenses of $10,225,000; cost of goods sold of $32,025,000; and interest expense of $650,000. If the firm’s income tax rate is 34%, what is the amount of the firm’s income tax liability? A) $1,665,000 B) $2,040,000 C) $1,819,000 D) $1,385,000 […]
Date: September 19th, 2020
A constant-payout-ratio dividend policy is based on the payment of a certain percentage of earnings to owners in each dividend period. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Two firms, Sunny Inc, and Rainy Inc, are alike in every way. They sell the same products in the same markets for the same price and have equally good reputations. In fact, they even have identical ROEs. If Rainy Inc however, has a higher leverage ratio, then we can conclude that: A) Rainy Inc. shareholders […]
Date: September 19th, 2020
The ________ method is the most intuitive but least sophisticated capital budgeting technique presented by the author. A) net present value B) internal rate of return C) payback D) modified internal rate of return ANSWER C
Date: September 19th, 2020
Which of the following statements regarding the income statement is INCORRECT? A) The income statement shows the retained earnings and expenses at a given point in time. B) The income statement shows the flow of earnings and expenses generated by the firm between two dates. C) The last or “bottom” line of the income statement […]
Date: September 19th, 2020
If a firm has publicly traded debt then the yield to maturity is approximately the same as: A) the after-tax cost of debt. B) the before-tax cost of debt. C) the 10-year Treasury bond rate. D) the WACC. ANSWER B
Date: September 19th, 2020
Which of the following is NOT a strength of the payback method of capital budgeting? A) The payback values are relatively simple to calculate. B) When comparing projects the payback method decision is intuitive. C) The payback method uses all project cash flows in establishing the project payback period. D) It is a quick measure […]
Date: September 19th, 2020
The firm’s revenues and expenses over a period of time are reported on the firm’s: A) income statement or statement of financial position. B) income statement or statement of financial performance. C) balance sheet or statement of financial performance. D) balance sheet or statement of financial position. ANSWER B
Date: September 19th, 2020
The capital impairment restrictions are established to ________. A) reduce dividends equal to or below the current earnings level B) constrain the firm to paying dividends which do not require additional borrowing C) provide sufficient safety to equity holders D) provide a sufficient equity base to protect creditors’ claims ANSWER D
Date: September 19th, 2020
