Bond indentures include restrictive covenants.These provisions protect the bondholders against ________. A) increase in inflation rate B) increase in borrower’s risk C) decrease in liquidity risk D) maturity risk ANSWER B
Date: September 19th, 2020
The purpose of the restrictive debt covenant that prohibits the sale of accounts receivable is to ________. A) assure the lender that additional borrowing is constrained B) limit the amount of fixed-payment obligations C) limit the realization of current assets to cash D) limit the payment of annual cash dividends ANSWER C
Date: September 19th, 2020
Generally, the order of cost, from the least expensive to the most expensive, for long-term capital of a corporation is ________. A) new common stock, retained earnings, preferred stock, long-term debt B) common stock, preferred stock, long-term debt, short-term debt C) preferred stock, new common stocks, common stock, retained earnings D) long-term debt, preferred stock, […]
Date: September 19th, 2020
The purpose of the restrictive debt covenant that requires that subsequent borrowing be subordinated to the original loan is to ________. A) maintain a minimum level of liquidity B) limit the amount of fixed-payment obligations C) ensure a long-run cash shortage does not cause an inability to meet current obligations D) protect the original lender […]
Date: September 19th, 2020
Which of the following is a restrictive covenant? A) to maintain satisfactory accounting records B) to pay the taxes due C) to supply audited financial statements D) to impose fixed asset restrictions ANSWER D
Date: September 19th, 2020
Average payment period can be calculated as accounts payable divided by average purchases per day. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Generally the least expensive source of long-term capital is ________. A) retained earnings B) preferred stock C) long-term debt D) common stock ANSWER C
Date: September 19th, 2020
Average age of inventory is viewed as the average length of time inventory is held by a firm or as the average number of days’ sales in inventory. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Which of the following is true of long-term funds? A) They provide an easy way to reduce financing costs because they are relatively cheaper than short-term funds. B) They are a type of investment fund which invests in money market investments of high quality and low risk. C) They are the sources that supply the […]
Date: September 19th, 2020
Which of the following is a source of long-term funds? A) commercial paper B) retained earnings C) factoring D) money market instruments ANSWER B
Date: September 19th, 2020
