The basic strategies for determining the appropriate financing mix are ________. A) seasonal and permanent funding B) short-term and long-term financing C) aggressive and conservative funding D) current and non-current liabilities ANSWER C
If a firm uses an aggressive financing strategy, ________. A) it increases return and increases risk B) it increases return and decreases risk C) it decreases return and increases risk D) it decreases return and decreases risk ANSWER A
One major risk a firm assumes in an aggressive financing strategy is ________. A) the possibility that collections will be slower than expected B) the possibility that long-term funds may not be available when needed C) the possibility that short-term funds may not be available when needed D) the possibility that it will run out […]
In economic conditions characterized by short-term interest rates which exceed long-term interest rates, the financing strategy which would maximize profits is ________ strategy. A) the aggressive B) the conservative C) the trade-off D) a seasonal ANSWER B
A firm with a very low current ratio in comparison to the industry standard could lower the risk of unavailable short-term funds by moving toward ________ financing strategy. A) the aggressive B) the conservative C) a permanent D) a seasonal ANSWER B
A firm which uses the aggressive financing strategy plans to purchase a major fixed asset financed with a loan. The most likely consequence of this action is ________. A) a decrease in the current ratio B) an increase in net working capital C) a decrease in the risk of insolvency D) an increase in long-term […]
A _ merger involves the combination of two firms in unrelated industries. a. conglomerate b. vertical c. diagonal d. horizontal ANSWER A
obtains if a merger results in improvements in any business function, including: (i) management; (vii) labor costs; (ii) production or distribution; etc. a. Operating synergy b. Financial synergy c. Business synchronization d. Economies of scope ANSWER A
obtains in a merger if some aspect of the financial configuration of the merged firm causes its market value to be greater than the sum of the market values of the separate firms. a. Operating synergy b. Financial synergy c. Business synchronization d. Economies of scope ANSWER B
In theory, the conservative financing strategy ignores ________. A) all current liabilities B) the spontaneous forms of short-term financing C) all current assets D) the high risk associated with external financing ANSWER B