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
Although a firm’s existing mix of financing sources may reflect its target capital structure, it is ultimately ________. A) the internal rate of return that is relevant for evaluating the firm’s future investment opportunities B) the marginal cost of capital that is relevant for evaluating the firm’s future investment opportunities C) the risk-free rate of […]
Date: September 19th, 2020
Restrictive covenants place operating and financial constraints on the borrower. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
The ________ is a weighted average of the cost of funds which reflects the interrelationship of financing decisions. A) internal rate of return B) sunk cost C) cost of capital D) risk-free rate ANSWER C
Date: September 19th, 2020
The ________ ratios are primarily used as measures of return. A) liquidity B) activity C) debt D) profitability ANSWER D
Date: September 19th, 2020
In using the cost of capital, it is important that it reflects the historical cost of raising funds over the long run. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Discuss the limitations of ratio analysis and the cautions which must be taken when reviewing a cross-sectional and time-series analysis. What will be an ideal response? ANSWER In summarizing a large number of ratios, all aspects of a firm’s activities can be assessed. However, limitations of ratio analysis must be recognized. A comparison […]
Date: September 19th, 2020
The analyst should be careful when analyzing ratios that ________. A) pre-audited statements are used B) right interpretation of the ratio value is made C) financial data being compared need not be uniform D) inflation will not affect while comparing older to newer firms ANSWER B
Date: September 19th, 2020
In a bond indenture, the term “security interest” refers to the fact that most firms that issue bonds are required to establish sinking fund provisions to protect bondholders. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
In a bond indenture, subordination is the stipulation 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
