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
Economies of scale are present where the cost of producing each unit declines as the quantity of product produced increases. In this environment, large-scale firms have a cost advantage. Thus, economies of scale serve to _ the cost of entry into an industry. a. increase b. decrease ANSWER A
Date: September 19th, 2020
Financial institutions (such as commercial banks and finance companies) play an important role in mitigating information asymmetry problems in financial markets because: a. they require a potential borrower to disclose confidential information about their project to the public before they are approved for a loan. b. they regularly receive private information from the firm about […]
Date: September 19th, 2020
A firm’s board of directors has a variety of tools at its disposal to control management’s activities, including all of the following EXCEPT: a. Controlling the firm’s capital structure. b. Requiring board approval of major capital expenditures, acquisitions, divestitures, security offerings, etc. c. requiring board approval of all mergers and acquisitions. d. hiring outside consultants […]
Date: September 19th, 2020
