A is a seasoned equity offering (SEO) of a firm that has recently gone public. a. follow-on b. supplemental IPO c. lockup offering d. quasi-seasoned equity offering ANSWER A
If the firm’s current liabilities in December were $40,000, the net working capital was ________. (See Table 14.1) A) $140,000 B) $60,000 C) $10,000 D) -$10,000 ANSWER C
An increase in the average payment period will ________ the operating cycle and ________ the cash conversion cycle. A) increase; decrease B) decrease; decrease C) decrease; not affect D) not affect; decrease ANSWER D
Myers (2000) recognizes three imperfect solutions to the basic contracting problem between diffuse shareholders and management. Which of the following is NOT one of these solutions? a. dividends b. monitoring c. incentive compensation d. contingent shareholder intervention ANSWER D
TRUE or FALSE. The dollar value of aggregate share repurchases has grown relative to aggregate dividends in recent years. a. TRUE b. FALSE ANSWER A
One shortcoming of the traditional capital budgeting paradigm is that: a. it does not recognize that projects must be evaluated on the basis of their NPVs. b. it does not recognize that the firm may face capital rationing. c. it does not deal with why some firms have multiple activities ANSWER C
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
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
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 […]
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