Which of the statements below is NOT true? A) Preferred stock is a form of hybrid equity financing. B) Retained earnings are a form of hybrid equity financing. C) Common stock is a form of equity financing. D) Corporate bonds are a form of debt financing. ANSWER Answer: B Explanation: B) Retained earnings […]
Date: September 19th, 2020
The weighted average cost of capital is ________. A) the average of the cost of each financing component, weighted by the proportion of each component B) the cost of capital for the firm as a whole C) made up of three financing components: the cost of debt, the cost of preferred stock, and the cost […]
Date: September 19th, 2020
________ refers to the way a company finances itself through some combination of loans, bond sales, preferred stock sales, common stock sales, and retention of earnings. A) Capital structure B) Cost of capital C) Working capital management D) NPV ANSWER Answer: A
Date: September 19th, 2020
Acme Supply Co. has a new project that will require the company to borrow $3,000,000. Acme has made an agreement with three lenders for the needed financing. First National Bank will give $1,500,000 and wants 10% interest on the loan. Lockup Bank will give $1,000,000 and wants 12% interest on the loan. Southern National Bank […]
Date: September 19th, 2020
Which of the following is not considered a part of the firm’s capital structure? A) Long-term debt B) Retained earnings C) Inventory D) Preferred stock ANSWER Answer: C
Date: September 19th, 2020
Michigan Manufacturing Inc. (MM) has a new project that will require the company to borrow $1,000,000. MM has made an agreement with three lenders for the needed financing. First National Bank will give $500,000 and wants 9% interest on the loan. Key West Bank will give $300,000 and wants 11% interest on the loan. Chase […]
Date: September 19th, 2020
A firm’s capital structure can be determined by examining which parts of the firm’s balance sheet? A) The long-term assets B) The debt and equity C) The short-term assets and liabilities D) None of the above because a firm’s capital structure is best observed on the income statement. ANSWER Answer: B Explanation: B) […]
Date: September 19th, 2020
________ is the risk of being unable to cover financial obligations of a firm. A) Systematic risk B) Business risk C) Financial risk D) Diversifiable risk ANSWER C
Date: September 19th, 2020
The cost of capital is ________. A) the cost of debt in a firm that finances with both debt and equity B) the cost of each financing component multiplied by that component’s percent of the total borrowed C) another name for the IRR D) All of the above ANSWER Answer: B
Date: September 19th, 2020
A decrease in current assets and an increase in current liabilities will ________ net working capital, thereby ________ the risk of insolvency. A) increase; increasing B) decrease; increasing C) increase; reducing D) decrease; reducing ANSWER B
Date: September 19th, 2020
