A firm with a cash conversion cycle of 175 days can stretch its average payment period from 30 days to 45 days. This will result in a/an ________. A) decrease of 30 days in the cash conversion cycle B) increase of 15 days in the cash conversion cycle C) decrease of 15 days in the […]
Date: September 19th, 2020
In the EBIT-EPS approach to capital structure, a constant level of EBIT is assumed ________. A) to ease the calculations of owners’ equity B) to isolate the impact on returns of the financing costs associated with alternative capital structures C) to emphasize the relationship between interest expenses and taxes D) to concentrate on the effect […]
Date: September 19th, 2020
If the company has some fixed costs, as sales increase then a/an ________ of sales dollars flows to the bottom line if these costs are truly fixed and do not vary with production or sales. A) lower percentage B) higher percentage C) equal percentage D) much lower percentage ANSWER Answer: B
Date: September 19th, 2020
An aspect of short-term financial planning is forecasting operating cash flow and ultimately the profitability of the company in the coming period. This type of financial planning typically uses forecasted ________. A) earnings B) income statements C) working capital statements D) All of these ANSWER Answer: B Explanation: B) An aspect of short-term […]
Date: September 19th, 2020
An adjustment in the pro forma statement may be necessary for ________ expenses in line with known changes to these expenses that may not correspond directly with sales or production. A) cash B) credit C) selling, general, and administrative D) cash and credit ANSWER Answer: C
Date: September 19th, 2020
The basic shortcoming of EBIT-EPS analysis is that this model focuses on the maximization of stock returns rather than on the maximization of share price. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Suppose a venture requires $7 mn. in equity financing to move to the next stage of development. The firm’s management is negotiating with a venture capital firm (VC) for the funding. Assuming that the firm’s business goals are achieved, it will generate earnings of $21 mn. per year into perpetuity starting beginning on the harvest […]
Date: September 19th, 2020
A firm has an average age of inventory of 101 days, an average collection period of 49 days, and an average payment period of 60 days. The firm’s cash conversion cycle is ________ days. A) 150 B) 90 C) 109 D) 11 ANSWER B
Date: September 19th, 2020
A marketable security is an unsecured bank loan whereby the bank agrees to lend a company up to a specific amount of cash, at the discretion of the company. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: A LINE OF CREDIT is an unsecured bank loan whereby the bank […]
Date: September 19th, 2020
One method a company may use to handle a cash shortfall is to draw cash from savings. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
