ABC Corp. extends credit terms of 45 days to its customers. Its credit collection would likely be considered poor if its average collection period was ________. A) 30 days B) 36 days C) 44 days D) 57 days ANSWER D
Date: September 19th, 2020
A call feature is a feature included in all corporate bonds and allows the issuer to repurchase bonds at the market price prior to maturity. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Which of the following ratios is difficult for the creditors of a firm to analyze from the published financial statements? A) debt equity ratio B) average payment period C) quick ratio D) total asset turnover ANSWER B
Date: September 19th, 2020
The approximate before-tax cost of debt for a 10-year, 8 percent, $1,000 par value bond selling at $1,150 is ________. A) 5.97 percent B) 8.33 percent C) 8.82 percent D) 9 percent ANSWER A
Date: September 19th, 2020
Bondholders will convert their convertible bonds into shares of stock only when the conversion price is greater than the market price of the stock. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The size of a loan and its issuance costs (as a percentage of the amount borrowed) are ________. A) not related B) inversely related C) independent D) perfectly positively correlated ANSWER B
Date: September 19th, 2020
The approximate after-tax cost of debt for a 20-year, 7 percent, $1,000 par value bond selling at $960 (assume a marginal tax rate of 40 percent) is ________. A) 4.43 percent B) 5.15 percent C) 7 percent D) 7.35 percent ANSWER A
Date: September 19th, 2020
If an inventory turnover is divided into 365, it becomes a measure of ________. A) financial efficiency B) the average age of the inventory C) sales turnover D) the average collection period ANSWER B
Date: September 19th, 2020
Debt is generally the least expensive source of capital. This is primarily due to ________. A) the fixed interest payments B) the priority of claims on assets and earnings in the event of liquidation C) the tax deductibility of interest payments D) the secured nature of a debt obligation ANSWER C
Date: September 19th, 2020
The ________ in the capital market is the basis for determining a bond’s coupon interest rate. A) cost of money B) weighted average cost of capital C) bond’s face value D) average coupon interest rate ANSWER A
Date: September 19th, 2020
