You are considering buying some stock in Continental Grain. Which of the following are examples of non-diversifiable risks? I. Risk resulting from a general decline in the stock market. II. Risk resulting from a possible increase in income taxes. III. Risk resulting from an explosion in a grain elevator owned by Continental. IV. Risk resulting […]
The employees of an industrial heating and cooling company spent four days installing a large gas furnace in a newly-constructed building. While testing the furnace one week later, an explosion occurred, damaging the building. Damage to the building was covered under the heating and cooling company’s general liability insurance. When the heating and cooling company […]
If you put $10 in a savings account at the beginning of each month for 15 years, how much money will be in the account at the end of the 10th year? Assume that the account earns 12% compounded monthly and round to the nearest $1. A) $5,046 B) $3,485 C) $2,323 D) $1,200 […]
It is January 1st and Darwin Davis has just established an IRA (Individual Retirement Account). Darwin will put $1000 into the account on December 31st of this year and at the end of each year for the following 39 years (40 years total). How much money will Darwin have in his account at the end […]
Optimal capital structure “first” criteria suggests that FLEXIBILITY should be ________ and that the best way to obtain that is with ________ levels of debt and ________ levels of equity. A) high; high; low B) low; low; high C) high; low; high D) low; high; low ANSWER C
The general liability policy covers bodily injury or property damage caused by “an accident, including continuous repeated exposure to substantially the same general harmful conditions.” This cause is loss is called a(n) A) occurrence. B) accident. C) event. D) incident. ANSWER Answer: A
Based on the information in Table 4-3, the current and acid-test ratios are, respectively, A) 2.37 and 1.27. B) 2.18 and 1.39. C) 2.18 and 1.27. D) 2.37 and 1.39. ANSWER C
Felton Financial Inc, had net earnings last year of $487,000. If the firm has a dividend payout policy of 30%, what was the addition to retained earnings? A) $340,900 B) $487,000 C) $146,100 D) There is not enough information to answer this question. ANSWER A Explanation: A) NE * (1-DPO) = $487,000 * […]
The main function of a balance sheet is to show your net worth at a point in time. Indicate whether the statement is true or false ANSWER TRUE
Define Dual Class Shares of stock. Why would a firm consider issuing dual classes of stock? Are dual shares common in the United States? In what type of industry are they found? What will be an ideal response? ANSWER Dual class stock exists when a firm issues two types of equity shares, generally […]
