In theory, a firm’s optimal capital structure is that which minimized the firm’s overall cost of capital resulting in a maximization of the market value of a firm. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Bond contracts generally include restrictive covenants, designed to protect the interests of the bondholders. Typical covenants restrict all of the following EXCEPT: a. the borrowing firm’s investment activities. b. the borrowing firm’s ability to issue additional debt. c. the borrowing firm’s dividend policy. d. the firm’s hiring of management personnel. ANSWER D
Date: September 19th, 2020
The aggressive funding strategy is risky due to its minimum level of net working capital, high dependency on short-term sources of funds, and the changing short-term interest. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The amount of sales a company predicts is a function of two types of data. Which of the types below is one of these two types? A) Accounting data B) Internal data C) Rationing data D) Legal data ANSWER Answer: B Explanation: B) The amount of sales a company predicts is a function […]
Date: September 19th, 2020
The conservative funding strategy is a strategy by which a firm finances at least its seasonal requirements, and possibly some of its permanent requirements, with short-term funds and the balance of its permanent requirements with long-term funds. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Conflicts of interest between a borrowing firm and its creditors. This problem is exacerbated in the case of a public bond, because the ownership of public bonds is generally dispersed among many bondholders. For these reasons, the interests of the investors in a public corporate bond are protected in part by the appointment of a […]
Date: September 19th, 2020
There are two primary tools used to forecast and set in action a company plan. Which of the tools below is one of these? A) Statements of retained earnings B) Profit budgets C) Income statements D) Pro forma statements ANSWER Answer: D Explanation: D) Two of the primary tools used to forecast and […]
Date: September 19th, 2020
Northwest Outdoor Store will have cash receipts of $83,000 in December and cash disbursements of $78,000 for this month. If its beginning cash is $5,000 and its desired reserve is $4,000, what will its excess be for December? A) There is no excess but a shortfall. B) $6,000 C) $9,000 D) $13,000 ANSWER […]
Date: September 19th, 2020
The cost of equity increases with increasing financial leverage in order to compensate the stockholders for the higher degree of financial risk. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Under an aggressive funding strategy, a firm funds its seasonal requirements with short-term debt and its permanent requirements with long-term debt. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
