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 […]
Sales made and actual cash received may differ for any particular month. However, sales and cash received must be equal for a calendar year. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: There is no need nor expectation that these two values be the same in any particular year.
Poor capital structure decisions can result in ________ the cost of capital, resulting in ________ acceptable investments. A) increasing; fewer B) decreasing; more C) increasing; more D) decreasing; fewer ANSWER A
Under conservative funding strategy, short-term financing is used only to finance an emergency, an unexpected outflow of funds, and the variable portion of a firm’s current assets. Indicate whether the statement is true or false ANSWER FALSE
In _, an issuing firm solicits bids from among several investment banks for the job of underwriting a bond issue. a. competitive bidding b. negotiated underwriting c. aggressive bidding d. bargain bidding ANSWER A
Managers know that for cash and credit sales completed in one month that all will be recorded as sales revenue in that month, but that the actual cash flow will take place over a longer period of time because of ________. A) credit sales B) erosion C) foreclosure D) transit time ANSWER Answer: […]
Which one of the costs below is NOT a production cost? A) The wages paid to workers B) The raw materials for manufacturing products C) The dividends paid to shareholders D) The shipping costs that get the product to the customer ANSWER Answer: C Explanation: C) Production costs include, among other items, the […]
The optimal capital structure is the one that balances ________. A) return and risk factors in order to maximize profits B) return and risk factors in order to maximize earnings per share C) return and risk factors in order to maximize market value D) return and risk factors in order to maximize dividends […]
Under a conservative funding strategy, the firm funds both its seasonal and its permanent requirements with long-term debt. Indicate whether the statement is true or false ANSWER TRUE
