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 […]
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
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
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
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
Which of the items below is sometimes termed hybrid equity financing? A) Retained earnings B) Preferred stock C) Callable bonds D) Variable rate bonds ANSWER Answer: B
Calculate each firm’s 2000 ROE. ROE(Pfizer) ROE(Immunogen) a. 22.2% 10.2% b. 22.2% -4.4% c. 41.8% 10.2% d. 41.8% -4.4% ANSWER D
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 […]
In a theoretical paper, Williams (1995) develops a model of industry equilibrium that incorporates agency costs due to both creditor-shareholder and management-shareholder conflicts. His model has implications for the distribution of firms within an industry in equilibrium. Which of the following statements correctly describes Williams’ depiction of industry equilibrium? a. Each industry has a core […]
In general, the more net working capital a firm has, ________. A) the greater its risk B) the lower its risk C) the less likely are creditors to lend to the firm D) the lower its level of long-term funds ANSWER B
