The steeper the slope of the EBIT-EPS capital structure line, the lower is the financial risk. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The ________ is the time period that elapses from the point when a firm sells a finished good on account to the point when the receivable is collected. A) cash conversion cycle B) average payment period C) average age of inventory D) average collection period ANSWER D
Date: September 19th, 2020
Using the bond yield spread matrix above, calculate the fair yield on a 5-year noncallable corporate bond that is rated “B” by S&P, given also that the yield on 5-year Treasuries is 4.44%. a. 4.15% b. 6.15% c. 8.59% d. 10.59% ANSWER C
Date: September 19th, 2020
A company’s cash sales for May are $300,000, its accounts receivable payments for May are $200,000, its beginning cash for May is $50,000, and there are no other cash inflows for May. Its accounts payable payments for May are $250,000, its wages and salaries for May are $100,000, its interest payments for May are $50,000, […]
Date: September 19th, 2020
When a company has excess funds, it has four options. Describe these options. What is the simplest thing to do with excess cash? What will be an ideal response? ANSWER Answer: First, you can put the excess fund in a savings account or invest them in marketable securities. Second, you can repay lenders […]
Date: September 19th, 2020
A company’s cash sales in January are $200,000, its accounts receivable payments for January are $100,000, its beginning cash for January is $50,000, and there are no other cash inflows for January. Its accounts payable payments for January are $200,000 and its wages and salaries for January are $100,000, and its interest payments for January […]
Date: September 19th, 2020
Describe some uses of excess cash. What will be an ideal response? ANSWER Answer: If the excess cash is not needed to cover future cash deficits, then it can be used to pay down, or “retire” current debt. Another option is to give the cash back to the owners via dividend payments. Excess […]
Date: September 19th, 2020
Because risk premiums increase with increases in financial leverage, maximizing EPS does not assure owners’ wealth maximization. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
An aspect of ________ is forecasting operating cash flow and ultimately the profitability of the company in the coming period. A) short-term financial planning B) medium-term financial planning C) long-term financial planning D) short-term financial investing ANSWER Answer: A
Date: September 19th, 2020
A firm has a cash conversion cycle of 120 days, an average collection period of 25 days, and an average payment period of 50 days. The firm’s average age of inventory is ________ days. A) 45 B) 95 C) 125 D) 145 ANSWER D
Date: September 19th, 2020
