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 […]
Date: September 19th, 2020
A _ merger involves the combination of two firms in unrelated industries. a. conglomerate b. vertical c. diagonal d. horizontal ANSWER A
Date: September 19th, 2020
A firm has annual operating outlays of $1,800,000 and a cash conversion cycle of 60 days. If the firm currently pays 12 percent for financing and reduces its cash conversion cycle to 50 days, the annual savings is ________. (Assume a 365-day year.) A) $4,652.19 B) $3,065.86 C) $5,917.81 D) $2,160.23 ANSWER C
Date: September 19th, 2020
The conservative financing strategy results in financing all projected funds requirements with ________ funds and use of ________ funds in the event of an unexpected cash outflow. A) long-term; short-term B) short-term; long-term C) permanent; seasonal D) seasonal; permanent ANSWER A
Date: September 19th, 2020
Under what circumstances would a firm engage in share repurchases rather than increasing dividends? a. If the firm has excess free cash flow that management expects will continue indefinitely. b. If the firm has excess free cash flow that management expects will be only temporary. c. If shareholders are in a lower tax bracket for […]
Date: September 19th, 2020
A firm wants to borrow $100 million for 5 years (pure discount, for simplicity). Which of the following sources has the lower effective interest cost? Orig. Fee/ Source Interest Rate Flotation Cost Private Placement 9. 00% 1% Public Issue 8.25% 3% a. The private placement b. The public issue c. The costs are the same […]
Date: September 19th, 2020
Which of the following correctly describes the Dutch auction method of share repurchase? a. The firm conducts open-market purchases. b. The firm specifies a price and a quantity of shares that it will repurchase. c. The firm auctions shares to the highest bidder, as long as that bidder meets the firm’s reservation price. d. The […]
Date: September 19th, 2020
According to the principal, short-term assets should be financed with short-term capital and long-term assets with long-term capital. a. maturity matching b. hedging c. risk-return c. capital asset ANSWER A
Date: September 19th, 2020
A negative cash conversion cycle ________. A) means that the operating cycle exceeds the average inventory period B) means that the average payment period exceeds the operating cycle C) indicates that a firm is shortening its average payment period and lengthening its average collection period D) indicates that a firm is shortening its average age […]
Date: September 19th, 2020
Monitoring is one means by which creditors can control a borrower’s incentive to expropriate wealth from the creditors. However, direct monitoring of a borrower’s actions is more difficult in a public bond issue than in a private bond issue because of the: a. free-rider problem. b. requirement of registration with the SEC for a public […]
Date: September 19th, 2020
