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
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
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
Date: September 19th, 2020
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
