Nelson Industries has a higher debt ratio than Butler, Inc., and Nelson also has a higher times interest earned ratio than Butler. If Nelson and Butler both have the same amount of total assets, then A) Nelson may have more non-interest bearing liabilities, such as accounts payable, than Butler has. B) if both companies have […]
All of the following are considered insured locations for medical payments to others (Coverage F) under a homeowners policy EXCEPT A) a new vacation home purchased by an insured during the policy period. B) a motel room where an insured is temporarily residing. C) a hall rented by the insured for her daughter’s graduation party. […]
Which of the following statements about the personal liability coverage (Coverage E) of an unendorsed homeowners policy is true? A) Coverage is written on an accident basis. B) Coverage is provided for bodily injury liability. C) Coverage is provided for business and professional liability. D) Coverage is provided for personal injury liability. ANSWER […]
A corporation sells securities to an investment banking firm on January 1st. The next day an international oil crisis causes stock prices to drop dramatically. The corporation is immune from the drop in price of its stock due to which function of the investment banking firm? A) reinsurance B) underwriting C) hedging D) distributing […]
Determining the best way to raise money to fund a firm’s long-term investments is called A) the portfolio decision. B) the capital budgeting decision. C) the money flow processing decision. D) the capital structure decision. ANSWER D
Raising new capital through the sale of common equity is an example of which cash-related activity in the cash flow cycle? A) Operating activity B) Profitability activity C) Investing activity D) Financing activity ANSWER D
Investment firms, such as Goldman Sachs, assist the transfer of capital by A) facilitating indirect transfers from savers (investing public) to borrowers (corporations needing capital). B) selling common stock for corporate clients in the secondary market. C) selling indirect securities to savers and using the funds to buy common stock for corporations needing funds. D) […]
Capital budgeting is concerned with A) whether a company’s assets should be financed with debt or equity. B) managing a firm’s cash budgeting procedures. C) planning sales of a corporation’s equity capital. D) what long-term investments a firm should undertake. ANSWER D
California Retailing Inc has sales of $4,000,000; the firm’s cost of goods sold is $2,500,000; and its total operating expenses are $600,000. The firm’s interest expense is $250,000, and the corporate tax rate is 40%. The firm paid dividends to preferred stockholders of $40,000, and the firm distributed $60,000 in dividend payments to common stockholders. […]
When a company repurchases its own common stock, it is likely that A) the stock price will remain the same as this is simply an internal transaction. B) the stock price will increase because the company views the stock as undervalued. C) the board of directors will be fired for incompetence. D) the stock price […]
