Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
FIN 475
capital Structure and Working Capital
| Question | Answer |
|---|---|
| Which of the following increases value of operations? Increasing WACC Increasing FCF Increasing marketable securities Two of the answers are correct | Increasing FCF |
| Which of the following is true for higher proportion of debt in capital structure? Increases cost of stock Reduces taxes that a firm pays Increases bankruptcy risk All of the answers are correct | All of the answers are correct |
| True or False: Bankruptcy risk reduces cash flow | True |
| Risk inherent firm operations is called what? Occupational risk Business risk Financial risk None of the above | Business risk |
| Financial risk is associated with which of the following? Higher levels of debt financing concentrated risk placed on common stockholders Higher levels of fixed costs two of the answers are correct | Two of the answers are correct (higher debt level and more risk on remaining stockholders) |
| Operating leverage is associated with which of the following? Higher fixed costs lower breakeven point Two of the answers are correct None of the answers are correct | Higher fixed costs |
| Trade off theory depicts a relationship between what? Value and taxes Value and financial leverage Value and stock market returns None of the answers is correct | Value and financial leverage |
| Access to financial information between investors and company managers is what? Symmetric Asymmetric The same for any firm None of the answers is correct | Asymmetric |
| If a firm issues new shares this signals what? Company prospects good; bring in new investors Company prospects bad; bring in new investors Limited risk of bankruptcy Two of the answers are correct | Company prospects bad; bring in new investors |
| Hamada Equation expresses what? How more leverage produces a lower beta How more leverage produces a higher beta That beta is minimized at around 30-40% debt Two of the answers are correct | How more leverage produces a higher beta |
| Which of the following is consistent with a recapitalization? A change in wealth from change in capital structure A change in number of shares outstanding Opportunity to distribute to shareholders All of the answers are correct | All of the answers are correct |
| Which is associated with a restricted current asset holding policy? ROE =PM xTAT xEM ROE =(net income/sales) x(sales/assets) x(assets/common equity) Low level of current assets High total asset turnover ratio High ROE All of the answers are correct | All of the Answers are correct |
| A self-liquidating approach to financing is also called what? Bank loan Accrued liabilities Common equity Maturity matching | Maturity Matching |
| An aggressive approach to financing is what? Using more long-term financing Being more exposed to changes in interest rates Two of the answers are correct None of the answers is correct | Being more exposed to changes in interest rates |
| Which is consistent with a good cash conversion cycle? Paying your bills sooner Receiving payments later Quicker inventory conversion Two of the answers are correct | Quicker inentory conversion |
| Higher levels of accounts receivable this year are associated with what? More relaxed collection efforts Higher levels of free cash flow Two of the answers are correct None of the answers is correct | More relaxed collection efforts |
| A 2/10 net 60 payment term __________ offers 2% discount if paid within 10 days provides a less expensive trade credit than a 2/10 net 40 cost of trade credit turns over fewer times than net 40 All of the answers are correct | All of the answers are correct |
| When to take the trade discount and pay sooner? When cost of loan is < cost of trade credit When cost of loan is > cost of trade credit When a firm has limited liquidity or weak financials Two of the answers are correct | When cost of loan is < cost of trade credit |
| True or False: Bigger spread between days credit is outstanding and the discount period, the lower the effective cost of trade credit | True |
| True or False: Extending the net terms of a trade credit is a way to stimulate sales? | True |
Created by:
m.r.gray
Popular Finance sets