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
A firm has an operating cycle of 120 days, an average collection period of 40 days, and an average payment period of 30 days. The firm’s average age of inventory is ________ days. A) 80 B) 50 C) 90 D) 70 ANSWER A
Date: September 19th, 2020
The EBIT-EPS analysis tends to concentrate on maximization of earnings rather than maximization of owners’ wealth. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A firm has a cash conversion cycle of 80 days, an average collection period of 25 days, and an average age of inventory of 70 days. Its operating cycle is ________ days. A) 95 B) 105 C) 60 D) 130 ANSWER A
Date: September 19th, 2020
In January, 2002, Jones Company issues a pure-discount bond with a promised payment of X=$1000 that matures in T=5 years. The market price of the bond is P=$777 . The bond is default- risky. Specifically, the probability is 0. 8 that Jones Company will pay the full amount of X at maturity, and is 0.2 […]
Date: September 19th, 2020
Financial breakeven point represents the level of earnings after interest and taxes necessary for a firm to cover its fixed operating and financial changes—that is, the point at which dividends per share is equal to zero. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
