In general, the greater a firm’s operating leverage, the higher its business risk. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
A major metric of a company’s health and its prospects for a long life is how much ________ it can generate. A) cash flow B) depreciation C) tax deferral D) net income ANSWER Answer: A
Date: September 19th, 2020
The ________ model incorporates the time-value of money but still ignores cash flows after the cutoff date. A) Payback Period B) Discounted Payback Period C) IRR D) Modified Internal Rate of Return ANSWER Answer: B
Date: September 19th, 2020
Financial risk is the risk to a firm of being unable to cover operating costs. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Which of the following is an advantage of factoring? A) accounts receivable immediately turned into cash B) addition of credit and collection departments C) less costly form of secured short-term loans D) improves current ratio ANSWER A
Date: September 19th, 2020
One principal-agent conflict is that between a firm’s creditors (as a principal) and its shareholders (as agent). For example, after issuing risky debt, stockholders have an incentive to increase the riskiness of the firm’s assets (e.g. , by changing operating strategy), which would tend to expropriate wealth from creditors to stockholders. Which of the assumptions […]
Date: September 19th, 2020
The ________ method is simple and fast but economically unsound as it ignores all cash flow after the cutoff date and ignores the time-value of money. A) Payback Period B) MIRR C) Net Present Value D) IRR ANSWER Answer: A
Date: September 19th, 2020
The ________ is/are critical to business decisions, business growth, and ultimately business success. A) risk and timing but not the amount of cash flow B) currency denomination of profits C) risk and profits but not the amount of cash flow D) timing and amount of cash flow ANSWER Answer: D
Date: September 19th, 2020
Information asymmetry is chief among violations of which of the assumptions of an ideal capital market? a. Capital Markets are frictionless b. Homogeneous expectations c. Atomistic competition d. The firm has a fixed investment program e. Once chosen, the firm’s financing is fixed ANSWER B
Date: September 19th, 2020
The ________ method is economically sound and properly ranks projects across various sizes, time horizons, and levels of risk, without exception for all independent projects. A) NPV B) Discounted Payback Period C) Profitability Index D) Modified IRR ANSWER Answer: A
Date: September 19th, 2020
