Harry Trading Company must choose its optimal capital structure. Currently, the firm has a 20 percent debt ratio and the firm expects to generate a dividend next year of $5.44 per share. Dividends are expected to remain at this level indefinitely. Stockholders currently require a 12.1 percent return on their investment. Harry is considering changing […]
Which of the following is NOT generally considered a cost of going public? a. Underpricing: IPOs appear to be substantially underpriced. b. Competition: Now that the firm is more visible, industry rivals will compete more intensively. c. Issuance Costs: The typical underwriter spread for an IPO is 7% of the offering proceeds. d. Management’s time […]
When estimating the impact of a capital project on a pro forma balance sheet, one should note that financing can come from a variety of sources. The resources can include increases in current assets and long-term assets. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: When estimating the impact […]
A pro forma statement sets out the financial predictions of a company on an “as if” basis—that is, it projects future performance based on a set of operating and sales facts. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: A pro forma statement sets out the financial predictions of […]
The VC industry did not become a major force in financing ventures until which TWO problems were solved? a. informational asymmetry and principal-agent problems b. legislation allowed institutional investors to provide significant capital backing, and an effective legal-liability arrangement for contributing parties was devised c. contracting problems with the venture and compensation for executives d. […]
Pro forma statements are tools used by the company to help highlight areas that the company needs to avoid as part of its short-term financial planning. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: Pro forma statements are tools used by the company to help highlight areas that the […]
Other factors remaining constant, a decrease in the average age of inventory will result in ________. A) a decrease in the average collection period B) a decrease in the cash conversion cycle C) an increase in the cash conversion cycle D) an increase in the average collection period ANSWER B
Pro forma statements are tools used by the company to forecast its profitability and obligations for the coming year. Indicate whether the statement is true or false. ANSWER Answer: TRUE
VCs generally take the form of a a. limited partnership. b. corporation. c. proprietorship. d. joint venture. ANSWER A
A pro forma statement uses the prior year’s financial statements to find the relationship or relative percentage of each line (accounting category) to either the sales revenue or the total assets of the firm. Indicate whether the statement is true or false. ANSWER Answer: TRUE
