There are a variety of ways to produce pro forma statements, but they usually rely on two primary inputs. One of these primary inputs is ________. A) the projected sales for the current year B) the projected sales for the past year C) the prior year’s financial statements D) this year’s financial statements […]
Date: September 19th, 2020
The probability of a callable bond being called, and thus the yield premium that investors demand for the risk of a call, is directly related to: a. the volatility of the bond’s yield. b. the deferment period. c. the call price. ANSWER A
Date: September 19th, 2020
A firm purchased raw materials on account and paid for them within 30 days. The raw materials were used in manufacturing a finished good sold on account 100 days after the raw materials were purchased. The customer paid for the finished good 60 days later. The firm’s cash conversion cycle is ________ days. A) 10 […]
Date: September 19th, 2020
A line of credit is unsecured, that is, there is no pledge of specific assets backing the loan. But companies can pledge assets against borrowed funds. These are called secured loans. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
Banker’s acceptances are financial assets sold by a company directly to investors, like bonds and common stock, but with very short maturity dates, while commercial paper is for self-liquidating inventories. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: COMMERCIAL PAPER is a financial asset sold by a company directly […]
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
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
