Beginning with a zero-leverage company, as debt is substituted for equity in the capital structure ________. A) the overall cost of capital first rises, reaches a maximum, and then declines B) the overall cost of capital declines C) the overall cost of capital first declines, reaches a minimum, and then rises D) the overall cost […]
The risk of the conservative funding requirements is low because of its high level of net working capital, and the fact that the strategy does not require a firm to use any of its limited short-term borrowing capacity. Indicate whether the statement is true or false ANSWER TRUE
Essentially, a convertible bond is a portfolio of: a. a bond and an automobile whose top can be removed. b. an otherwise equivalent nonconvertible bond and shares of the issuing firm’s stock. c. an otherwise equivalent nonconvertible bond and a call option on the firm’s stock. d. an otherwise equivalent nonconvertible bond and a put […]
The sales for January, February, and March are $50,000, $80,000 and $120,000, respectively. For any particular month of sales, the following percentages are received over time in cash: 40% in cash from that same month of sales; 50% in cash from the previous month’s sales; and, 10% in cash from the sales from two months […]
A financial manager needs to know if any of the credit sales will not be paid by customers. This situation will entail a reduction in the estimate of the cash flow due to “bad debts.” Indicate whether the statement is true or false. ANSWER Answer: TRUE
The sales for January, February, and March are $2,000, $6,000 and $10,000, respectively. For any particular month of sales the following percentages are received over time in cash for any given month: 50% in cash from that same month of sales; 30% in cash from the previous month’s sales; and 20% in cash from the […]
Investment banks form a temporary alliance, called a , to underwrite a bond issue. a. selling group b. syndicate c. coalition d. pricing association ANSWER B
For estimating cash budget timing, the sale of equipment might occur in one month and the tax consequence in another month. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Sales from a company’s products and services are the only source of cash inflow. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: Although sales from a company’s products and services will usually be the main source of cash inflow, other activities can generate cash receipts. For example, companies can […]
The sales for October, November, and December are $2,000, $6,000 and $10,000, respectively. For any particular month of sales, the following percentages are received over time in cash for any given month: 20% in cash from that same month of sales; 50% in cash from the previous month’s sales; and 30% in cash from the […]
