Corporations tend to be MORE reluctant to increase dividends than to cut them. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
How can investors reduce the risk associated with an investment portfolio without having to accept a lower expected return? A) Increase the amount of money invested in the portfolio. B) Purchase a variety of securities; i.e., diversify. C) Purchase stocks that have exceptionally high standard deviations. D) Wait until the stock market rises. […]
Date: September 19th, 2020
Big City Lumber Inc. has a levered beta of 1.70, a debt-equity ratio of 0.40, and a tax rate of 25%. What is the value of the firm’s unlevered beta? A) 0.78 B) 1.00 C) 1.31 D) 1.70 ANSWER C Explanation: C) βU = βL / (1 + (D/E) (1-t)) = 1.70/(1 + […]
Date: September 19th, 2020
Comparing a credit card with a debit card indicates that A) they are identical except that debt card can be used in more places. B) they are identical except some lenders prefer the name “debit card” over “credit card.” C) debit cards charge higher rates of interest. D) consumer protection with a credit card is […]
Date: September 19th, 2020
In the United States, financial statements are prepared following the Financial Accounting Standards Board’s generally accepted accounting principles (GAAP). Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A limited partnership provides limited liability to: A) all general partners. B) only limited partners responsible for day-to-day management of the firm’s operations. C) only to limited partners who do not participate in the management of the business. D) all partners. ANSWER C
Date: September 19th, 2020
What are the limitations of financial statements? What will be an ideal response? ANSWER When reviewing financial statements, keep in mind that accounting rules give managers discretion; thus, they may take advantage of the leeway, as long as it doesn’t violate GAAP, to produce the high or stable earnings that investors are looking […]
Date: September 19th, 2020
Knowledge about the sustainable growth rate is important to all but one of the following groups or individuals. A) The CEO B) The CFO C) Managers involved in a budgeting process D) Knowledge about the sustainable growth rate is important to all of the above and others as well. ANSWER D
Date: September 19th, 2020
A mutual fund is an organization that A) invests its funds in securities issued by corporations and governments. B) is part of an insurance company that invests policyholders’ premiums. C) a partnership of corporate investors. D) sets money aside to absorb potential stock market losses. ANSWER A
Date: September 19th, 2020
The term structure of interest rates usually indicates that longer terms to maturity have higher expected returns. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
