Assuming that the level of total assets remains unchanged, the effect of a decrease in the ratio of current assets to total assets is an increase in a firm’s risk of insolvency. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Which of the following is a reason why equity capital is considered riskier than debt capital? A) Equity capital has a higher priority claim against assets and earnings. B) Equity capital requires regular periodic payments in the form of dividends. C) Equity capital expects dividend payments which are not tax-deductible. D) Equity capital remains invested […]
Date: September 19th, 2020
The goal of working capital management is to ________. A) achieve a balance between short-term and long-term liabilities so that they add to the achievement of a firm’s overall goals B) achieve a balance between a firm’s non-current assets and non-current liabilities C) achieve a balance between profitability and risk that contributes positively to a […]
Date: September 19th, 2020
According to the __ hypothesis, short-term assets should be financed with short-term capital and long-term assets with long-term capital. a. maturity matching b. hedging c. risk-return d. capital asset ANSWER A
Date: September 19th, 2020
The purpose of managing current assets and current liabilities is to ________. A) achieve a balance between short-term and long-term financing of a firm B) achieve as low a level of current liabilities as possible C) achieve a balance between profitability and risk that contributes to a firm’s value D) achieve as high a level […]
Date: September 19th, 2020
The hypothesis is stated as follows: Among long-term assets, the firm should finance long-term tangible assets, such as PP&E, with long-term debt, while other long-term assets, such as investments and intangibles, must be financed with equity. a. tangible asset b. debt-equity c. collateral d. Fisher ANSWER C
Date: September 19th, 2020
The current market value of the assets of levered firm ABC, Inc is $100 million. The annual standard deviation of returns on the assets is 30%. The firm’s capital structure consists of equity and pure discount debt for which payment of $80 million is due in 5 years. The risk-free rate is 5%. Using the […]
Date: September 19th, 2020
Net working capital is defined as ________. A) total assets minus total liabilities B) total liabilities minus total assets C) current liabilities minus current assets D) current assets minus current liabilities ANSWER D
Date: September 19th, 2020
Which of the following is true of net working capital? A) When current assets of a firm exceed its current liabilities,a firm is said to have negative net working capital. B) When current assets of a firm are less than its total assets,a firm is said to have positive net working capital. C) When current […]
Date: September 19th, 2020
The remaining book value when a project is terminated is the ________ minus accumulated depreciation over the life of the project. A) original cost B) ending cost C) salvage cost D) sunk cost ANSWER Answer: A
Date: September 19th, 2020
