Which of the following is true of benchmarking? A) It is an analysis in which a firm’s ratio values are analyzed to project the fundamental values of the assets for upcoming years or business cycle. B) It is an analysis in which a firm’s ratio values are compared with those of a key competitor or […]
Date: September 19th, 2020
The cost of capital is a dynamic concept and it is affected by economic and firm-specific factors such as business risk and financial risk. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Explain liquidity, default risk, and maturity risk premiums. What will be an ideal response? ANSWER Liquidity problems exist in thinly traded bonds, default risk is the likelihood the corporation will default on its bond obligations, and the maturity risk reflects the fact that longer-term bonds possess greater interest rate risk and sensitivity than […]
Date: September 19th, 2020
The restrictive debt covenant that imposes fixed assets is to guarantee fixed-payment obligations by maintaining a specified level of fixed assets. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The cost of capital reflects the cost of funds over the long-run measured at a given point in time, based on the best information available. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Cross-sectional ratio analysis is used to ________. A) correct expected problems in operations B) isolate the causes of problems C) provide conclusive evidence of the existence of a problem D) measure relative performance of a firm with its peers ANSWER D
Date: September 19th, 2020
Coupon interest rate on a bond represents the percentage of the bond’s par value that will be paid annually, typically in two equal semiannual payments, as interest. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Which of the following affects the slope of yield curve? A) tax rates B) dividend policy C) selection of accounting standards D) liquidity preferences ANSWER D
Date: September 19th, 2020
The cost of capital is described as the rate of return required by the market suppliers of capital in order to attract their funds to the firm. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
The primary concern of creditors when assessing the strength of a firm is its ________. A) profitability B) leverage C) short-term liquidity D) share price ANSWER C
Date: September 19th, 2020
