If the company had a large depreciation expense during the period, the income statement could show a loss for the period, even though the cash account may have grown during the same period. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
Effective capital structure decisions can lower the cost of capital, resulting in higher NPVs and more acceptable projects, thereby increasing the value of a firm. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Profits can be defined as an accounting measure of performance during a specific period of time. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
Appropriate collateral for a loan secured under a floating inventory lien is ________. A) cars B) granite slabs C) air conditioners D) paper clips ANSWER D
Date: September 19th, 2020
Consider the case of a business that has had a very profitable year and earned a million dollars in profits. Can it distribute a million dollars to its owners (via dividends)? A) Yes, definitely B) Maybe, maybe not C) Definitely not D) It can certainly distribute over a million dollars. ANSWER Answer: B […]
Date: September 19th, 2020
A firm initially finances its assets with specified proportions of debt and equity, and then later issues additional debt, using the proceeds to pay a dividend to shareholders. If the new debt has the same priority as the original debt, the value of the original debt will probably fall, an effect called claim dilution. Which […]
Date: September 19th, 2020
A firm has revenue of $50,000, the cost of goods sold is $23,000, other expenses (from selling and administration) are $14,000, interest expenses are $4,000 and depreciation is $5,000. What is the EBIT? A) $4,000 B) $8,000 C) $13,000 D) $27,000 ANSWER Answer: B Explanation: B) EBIT = Revenue – Cost of Goods […]
Date: September 19th, 2020
The more fixed cost financing a firm has in its capital structure, the greater is its financial leverage and risk. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Inventory is more attractive than accounts receivable as a short-term collateral since it normally has a market value greater than its book value, which is used to establish its value as collateral. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Operating Cash Flow (OCF) is equal to what? A) EBIT – Depreciation + Taxes B) EBIT + Depreciation – Taxes C) EBIT – Depreciation – Taxes D) EBIT + Depreciation + Taxes ANSWER Answer: B
Date: September 19th, 2020
