The EBIT-EPS approach to capital structure involves selecting the capital structure that maximizes earnings before interest and taxes (EBIT) over the expected range of earnings per share (EPS). Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Standard & Poors ratings are grouped into two major categories, investment-grade and speculative- grade. Bonds that are rated (i) are included in the investment-grade group, while speculative-grade bonds are those rated (ii) . (i) (ii) a. AAA, AA, A BBB, BB, B, CCC, CC, C b. AAA, AA, A, BBB BB, B, CCC, CC, C […]
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
The ________ is the length of time from the point when raw materials are purchased on account to the point when payment is made to the supplier of the goods. A) cash conversion cycle B) average payment period C) average age of inventory D) average collection period ANSWER B
Date: September 19th, 2020
Compute the promised yield to maturity and expected return to maturity on a default-risky 3-year pure-discount corporate bond that has a current price of $543 . With a probability of 0.6, the issuer will repay the principal of $1,000 at maturity. However, the probability is 0.4 that the issuer will default, in which case bondholders […]
Date: September 19th, 2020
Which of the following is NOT a possible advantage to holding marketable securities? A) Price appreciation B) Dividends C) Interest earnings D) All of the above are potential advantages to owning marketable securities. ANSWER Answer: D
Date: September 19th, 2020
