The difference between the number of days resources are tied up in the operating cycle and the number of days a firm can use spontaneous financing before payment is made is the ________. A) cash conversion cycle B) average payment period C) operating cycle D) average age of inventory ANSWER A
Date: September 19th, 2020
The firm’s initial ratio of current to total assets is ________. (See Table 14.1) A) 1:3.2 B) 3:1 C) 2:3 D) 3:2.3 ANSWER A
Date: September 19th, 2020
Which of the following is NOT a stated reason why an internal capital market, managed by a firm’s headquarters, may be superior to external financing? a. External equity financing is problematic because of the information asymmetry problem. b. Even if internal and external providers of capital have the same ability to monitor, internal providers will […]
Date: September 19th, 2020
The firm’s initial net working capital is ________. (See Table 14.2) A) $15,000 B) $13,000 C) $5,000 D) $10,000 ANSWER C
Date: September 19th, 2020
In a multi-divisional firm, what are the two fundamental (and related) problems with the internal capital allocation process? a. centralized information and tax-avoidance b. monitoring and signaling c. decentralized information and incentive problems d. signaling and tax-avoidance ANSWER C
Date: September 19th, 2020
The firm’s initial ratio of current assets to total assets is ________. (See Table 14.2) A) 3:1 B) 1:3 C) 2:1 D) 2:3 ANSWER B
Date: September 19th, 2020
In undertaking a seasoned equity offering (SEO), why do firms almost always hire an underwriter via negotiation rather than competitive bidding? a. The SEC mandates negotiation for SEOs (except in rare cases). b. The selling process can be problematic because of informational asymmetry problems. c. Negotiation actually results in a lower underwriter spread. […]
Date: September 19th, 2020
If the firm was to shift $3,000 of current assets to fixed assets, the firm’s net working capital would ________, and the risk of insolvency would ________, respectively. (See Table 14.2) A) increase; increase B) decrease; decrease C) increase; decrease D) decrease; increase ANSWER D
Date: September 19th, 2020
If the firm was to shift $7,000 of fixed assets to current assets, the firm’s net working capital would ________, and the risk of not being able to meet current obligations would ________, respectively. (See Table 14.2) A) increase; increase B) decrease; decrease C) increase; decrease D) decrease; increase ANSWER C
Date: September 19th, 2020
Which of the following is the explanation of why the market generally reacts negatively to the announcement of a SEO offered in the pecking order hypothesis? a. Management is taking a self-serving action. b. Management is signaling that the shares are overpriced. c. Creditors are forcing the firm to increase its equity base. d. The […]
Date: September 19th, 2020
