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
As debt is substituted for equity in the capital structure and the debt ratio increases, the behavior of the overall cost of capital is partially explained by ________. A) the tax-deductibility of interest payments B) the increase in the number of common shares outstanding C) the reduction in risk as perceived by the common shareholders […]
Date: September 19th, 2020
Which of the following would be classified as debt lenders for a firm? A) Preferred shareholders, banks, and nonbank lenders B) Nonbank lenders, common shareholders, and commercial banks C) Preferred shareholders, common shareholders, and suppliers D) Suppliers, nonbank lenders, and commercial banks ANSWER Answer: D Explanation: D) Preferred stockholders are hybrid equity lenders, […]
Date: September 19th, 2020
Empirical evidence indicates that the market equity value of a multiple-segment firm generally is (i) than the sum of the imputed market values of its individual segments, a phenomenon called the (ii). (i) __(ii)__ a. lower diversification discount. b. lower segment effect. c. higher diversification premium. d. higher segment effect. ANSWER A
Date: September 19th, 2020
Which of the following would be classified as equity financing for a firm? A) Preferred shareholders, banks, and nonbank lenders B) Nonbank lenders, common shareholders, and commercial banks C) Preferred shareholders, common shareholders, and retained earnings D) Suppliers, nonbank lenders, and commercial banks ANSWER Answer: C Explanation: C) Bank and nonbank lenders, as […]
Date: September 19th, 2020
A(n) ________ in current assets increases net working capital, thereby ________ the risk of insolvency. A) decrease; increasing B) increase; increasing C) increase; reducing D) decrease; reducing ANSWER C
Date: September 19th, 2020
When a company borrows money from a bank or sells bonds, it is called ________. A) capital structure financing B) stock financing C) equity financing D) debt financing ANSWER Answer: D
Date: September 19th, 2020
Of the following, which is NOT a source of funds for a company? A) Common shareholders B) Commercial banks C) Preferred stockholders D) All are sources of funds for companies. ANSWER Answer: D
Date: September 19th, 2020
Which of the following is the correct order in which corporations generally raise funds to enhance the wealth of stockholders and to send positive signals to the market? A) retained earnings, equity, debt B) retained earnings, debt, equity C) debt, retained earnings, equity D) equity, retained earnings, debt ANSWER B
Date: September 19th, 2020
