The cost to a firm of each type of capital is dependent upon ________. A) the risk-free rate of bonds plus the business risk of the firm B) the risk-free rate of each type of capital plus the business risk of the firm C) the risk-free rate of each type of capital plus the financial […]
Date: September 19th, 2020
Average age of inventory can be calculated as inventory turnover divided by 365. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
In order to recognize the interrelationship between financing and investments, a firm should use ________ when evaluating an investment. A) the least costly source of financing B) the most costly source of financing C) the weighted average cost of all financing sources D) the current opportunity cost ANSWER C
Date: September 19th, 2020
A ________ is a restrictive provision in a bond indenture, providing for the systematic retirement of the bonds prior to their maturity. A) redemption clause B) sinking-fund requirement C) conversion feature D) subordination clause ANSWER B
Date: September 19th, 2020
Longer the maturity, higher is the cost of a bond. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The marginal cost of capital is a relevant cost of capital for evaluating a firm’s future investment opportunities. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The two basic measures of liquidity are the debt-to-equity ratio and the asset turnover ratio. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Without adjustment, inflation may tend to cause ________ firms to appear more efficient and profitable than ________ firms. A) larger; smaller B) older; newer C) smaller; larger D) newer; older ANSWER B
Date: September 19th, 2020
Subordination means that subsequent creditors agree to wait until all claims of the senior debt are satisfied. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Which of the following groups of ratios primarily measure risk? A) liquidity, activity, and profitability B) liquidity, profitability, and market C) liquidity, activity, and debt D) activity, debt, and profitability ANSWER C
Date: September 19th, 2020
