Operating Cash Flow (OCF) = EBIT + Depreciation + Taxes. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: Operating Cash Flow (OCF) = EBIT + Depreciation – Taxes
Date: September 19th, 2020
Business risk is the risk to the firm of being unable to cover required financial obligations. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
A firm can spend its reported profits. Indicate whether the statement is true or false. ANSWER Answer: FALSE Explanation: A firm can only spend cash. Profits are an accounting measure of performance during a specific period of time.
Date: September 19th, 2020
The ________ model provides a single measure (return) but must apply risk outside the model, thus allowing for errors in rankings of projects. A) Payback Period B) IRR C) Net Present Value D) Profitability Index ANSWER Answer: B
Date: September 19th, 2020
________ corrects for most, but not all, of the problems of IRR and gives the solution in terms of a return. A) Profitability Index B) Discounted Payback Period C) Net Present Value D) MIRR ANSWER Answer: D
Date: September 19th, 2020
Lenders recognize that by having an interest in collateral they can reduce losses if the borrowing firm defaults, ________. A) and the presence of collateral reduces the risk of default B) but the presence of collateral has no impact on the risk of default C) therefore lenders prefer to lend to customers from whom they […]
Date: September 19th, 2020
According to an academic survey of large and small U.S. businesses, the IRR method of capital budgeting is slightly preferred over NPV by the survey respondents. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
The discounted payback method, net present value method (NPV), internal rate of return (IRR), modified internal rate of return (MIRR), and profitability index (PI) are all consistent with the time value of money. Indicate whether the statement is true or false. ANSWER Answer: TRUE Explanation: The IRR method is used by 75.61% of […]
Date: September 19th, 2020
Calculating IRR, NPV, or MIRR is easy and efficient using a spreadsheet once you know the relevant cash flow, the timing of the cash flow, the cost of capital, and the reinvestment rate. Indicate whether the statement is true or false. ANSWER Answer: TRUE
Date: September 19th, 2020
A floating inventory lien is a lender’s claim on the borrower’s general inventory as collateral for a secured loan. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
