McqMate
| 601. |
Book building -------------------- |
| A. | Is a plant |
| B. | Is a profit cum expenses |
| C. | Is a process used for marketing a public offer of equity shares of a company |
| D. | Is a cost |
| Answer» C. Is a process used for marketing a public offer of equity shares of a company | |
| 602. |
When an option is allowed to be exercised only on maturity date is called -------------- |
| A. | Indian option |
| B. | European option |
| C. | American option |
| D. | Option |
| Answer» B. European option | |
| 603. |
Commercial paper effective from --------------------- |
| A. | 1-1-1980 |
| B. | 1-1-1990 |
| C. | 1-1-1975 |
| D. | 1-1-1995 |
| Answer» B. 1-1-1990 | |
| 604. |
In India commercial paper is regulated by ------------------- |
| A. | RBI |
| B. | SEBI |
| C. | SBI |
| D. | Indian companies act 1956 |
| Answer» A. RBI | |
| 605. |
The interest rate on commercial paper is determined by ------------- |
| A. | RBI |
| B. | SEBI and Market Force |
| C. | SBI |
| D. | Market Force |
| Answer» D. Market Force | |
| 606. |
Factoring is a ---------------- |
| A. | Cost of sales |
| B. | Production plan |
| C. | Financial planning |
| D. | New financial service |
| Answer» D. New financial service | |
| 607. |
Factoring involves ---------------- |
| A. | Provision of specialized services relating to credit investigation |
| B. | Sales ledger management |
| C. | Purchase and collection of debts |
| D. | All of these |
| Answer» D. All of these | |
| 608. |
Which of the following recognizes risk in capital budgeting analysis by adjusting estimated cash flows and employs risk free rate to discount the adjusted cash flows? |
| A. | Pay back period |
| B. | Certainty equivalent approach |
| C. | Cash |
| D. | Inventory |
| Answer» B. Certainty equivalent approach | |
| 609. |
------------- rate at which discounts the cash flows to zero |
| A. | Payback period by economic order quantity |
| B. | Internal rate of return |
| C. | Cash flow |
| D. | None of these |
| Answer» C. Cash flow | |
| 610. |
The net present value is expressed in financial value, where as internal rate of return(IRR) is expressed in --------------- |
| A. | Hundred by percentage terms |
| B. | One thousand |
| C. | All of these |
| D. | None of these |
| Answer» B. One thousand | |
| 611. |
Return on assets is a ratio which measures ---------------- |
| A. | Cost of capital |
| B. | Cost of production |
| C. | Profitability |
| D. | Cost of sales |
| Answer» C. Profitability | |
| 612. |
Return on equity measures the profitability of ------------------- invested in the firm |
| A. | Capital |
| B. | Equity funds |
| C. | Book debt |
| D. | Debentures and book dept |
| Answer» B. Equity funds | |
| 613. |
Which ratio reveals how profitability of the owner’s funds have been utilized by the firm? |
| A. | Return on equity |
| B. | Current ratio |
| C. | Fixed asset ratio |
| D. | Debt equity ratio |
| Answer» A. Return on equity | |
| 614. |
Capital employed is ---------- |
| A. | Assets + cash |
| B. | Shareholders funds + Long funds |
| C. | Cash + bank |
| D. | Bank |
| Answer» B. Shareholders funds + Long funds | |
| 615. |
Financial leverage is ---------------- |
| A. | EBIT/100* sales |
| B. | EBIT/EBT |
| C. | Sales/fixed asset |
| D. | Profit/sales*capital |
| Answer» B. EBIT/EBT | |
| 616. |
Shareholder value analysis is an approach to Financial Management Development in ------------------ |
| A. | 1970 |
| B. | 1980 |
| C. | 1990 |
| D. | 1996 |
| Answer» B. 1980 | |
| 617. |
The term financial engineering is used to ---------------- |
| A. | Cost of production |
| B. | Risk management |
| C. | Capital |
| D. | Sales planning |
| Answer» B. Risk management | |
| 618. |
The packing order theory is based on ----------- |
| A. | Stable dividend policy |
| B. | A performance for internal |
| C. | All of these |
| D. | None of these |
| Answer» D. None of these | |
| 619. |
SGR is stands for -------------- |
| A. | Sustainable Growth rate |
| B. | Sales Growth rate |
| C. | Sales Goodwill rate |
| D. | Super Goodwill ratio |
| Answer» A. Sustainable Growth rate | |
| 620. |
A company may raise funds by issue of shares or ------------- |
| A. | By borrowings |
| B. | By sales of goods |
| C. | By sale of assets |
| D. | By sale of services |
| Answer» A. By borrowings | |
| 621. |
Borrowings carry ----------- |
| A. | Fixed rate of interest |
| B. | A flexible rate of interest |
| C. | A fixed dividend |
| D. | A flexible dividend |
| Answer» A. Fixed rate of interest | |
| 622. |
Which helps in deciding whether funds should be raised by internal equity or by borrowings> |
| A. | Capital structure |
| B. | Loan |
| C. | Cash |
| D. | Trading on equity |
| Answer» D. Trading on equity | |
| 623. |
Which are the determinants of capital structure? |
| A. | Requirement of investors |
| B. | Control |
| C. | Tax |
| D. | Govt. policy |
| Answer» D. Govt. policy | |
| 624. |
Which is the instrument of finance |
| A. | Zero coupon bonds |
| B. | Debt securitization |
| C. | Credit card |
| D. | All of these |
| Answer» D. All of these | |
| 625. |
Which is the part of restrictive covenants |
| A. | Asset related covenants |
| B. | Liability related covenants |
| C. | Cash flow related covenants |
| D. | All of these |
| Answer» D. All of these | |
| 626. |
LIBOR is a term of ------------- |
| A. | Capital market |
| B. | Accounting |
| C. | Common market |
| D. | International Financial Market |
| Answer» D. International Financial Market | |
| 627. |
Foreign bonds are ------------------- |
| A. | Domestic currency bonds |
| B. | Foreign currency bonds |
| C. | Product loan |
| D. | Currency |
| Answer» B. Foreign currency bonds | |
| 628. |
Foreign bonds, are foreign currency bonds and sold at the country of that currency and are subject to the restrictions as placed by that country on the ------------------- |
| A. | Foreigner’s fund |
| B. | Domestic holder’s fund |
| C. | Firm’s fund |
| D. | All of these |
| Answer» A. Foreigner’s fund | |
| 629. |
Euro bond is a ------------ |
| A. | Debt instrument |
| B. | Foreign currency bond |
| C. | Paper |
| D. | Bill |
| Answer» A. Debt instrument | |
| 630. |
Eurobonds are debt instruments denominated in a currency issued ----- |
| A. | Outside the country |
| B. | In the country |
| C. | In the firm |
| D. | Outside the firm |
| Answer» A. Outside the country | |
| 631. |
Bills discounting is a ----------------------- |
| A. | Product of company |
| B. | Accounting paper |
| C. | Short term source of finance |
| D. | Capital |
| Answer» C. Short term source of finance | |
| 632. |
The cost of capital is the rate of return of a company must earn on investment to maintain ---------------- |
| A. | The value of the company |
| B. | The value of the product |
| C. | Price |
| D. | Product quality |
| Answer» A. The value of the company | |
| 633. |
The cost of capital is -------------- |
| A. | The maximum rate of return |
| B. | The minimum rate of return |
| C. | A profit |
| D. | A product |
| Answer» B. The minimum rate of return | |
| 634. |
The debt capital can be raised from issue of ----- |
| A. | Bonds |
| B. | Equity share capital |
| C. | Right share |
| D. | Preference share capital |
| Answer» A. Bonds | |
| 635. |
The cost of debt capital is the ratio of interest payable on --------- |
| A. | Debenture |
| B. | Equity share capital |
| C. | Preference share capital |
| D. | Retained earning |
| Answer» A. Debenture | |
| 636. |
Dividends are the ---------- of a company distributed amongst members in proportion to their shares |
| A. | Divisible profits |
| B. | Indivisible profits |
| C. | Reserves |
| D. | Assets with cash and bank |
| Answer» A. Divisible profits | |
| 637. |
A sound dividend policy contains the ------------- features |
| A. | Stability |
| B. | Distribution of dividend in cash |
| C. | Gradually rising dividend ratio |
| D. | All of these |
| Answer» D. All of these | |
| 638. |
This item can be treated as an item of current liability or as an item of appropriation |
| A. | Dividend |
| B. | Debentures |
| C. | Reserve |
| D. | Debtors |
| Answer» A. Dividend | |
| 639. |
"Shareholder wealth" in a firm is represented by: |
| A. | the number of people employed in the firm. |
| B. | the book value of the firm's assets less the book value of its liabilities |
| C. | the amount of salary paid to its employees. |
| D. | the market price per share of the firm's common stock. |
| Answer» D. the market price per share of the firm's common stock. | |
| 640. |
The long-run objective of financial management is to: |
| A. | maximize earnings per share. |
| B. | maximize the value of the firm's common stock. |
| C. | maximize return on investment. |
| D. | maximize market share. |
| Answer» B. maximize the value of the firm's common stock. | |
| 641. |
What are the earnings per share (EPS) for a company that earned Rs. 100,000 last year in after-tax profits, has 200,000 common shares outstanding and Rs. 1.2 million in retained earning at the year end? |
| A. | Rs. 100,000 |
| B. | Rs. 6.00 |
| C. | Rs. 0.50 |
| D. | Rs. 6.50 |
| Answer» C. Rs. 0.50 | |
| 642. |
A(n) would be an example of a principal, while a(n) would be an example of an agent. |
| A. | shareholder; manager |
| B. | manager; owner |
| C. | accountant; bondholder |
| D. | shareholder; bondholder |
| Answer» A. shareholder; manager | |
| 643. |
The market price of a share of common stock is determined by: |
| A. | the board of directors of the firm. |
| B. | the stock exchange on which the stock is listed. |
| C. | the president of the company. |
| D. | individuals buying and selling the stock. |
| Answer» D. individuals buying and selling the stock. | |
| 644. |
The focal point of financial management in a firm is: |
| A. | the number and types of products or services provided by the firm. |
| B. | the minimization of the amount of taxes paid by the firm. |
| C. | the creation of value for shareholders. |
| D. | the dollars profits earned by the firm. |
| Answer» C. the creation of value for shareholders. | |
| 645. |
___________________ of a firm refers to the composition of its long-term funds and its capital structure. |
| A. | Capitalisation |
| B. | Over-capitalisation |
| C. | Under-capitalisation |
| D. | Market capitalization |
| Answer» A. Capitalisation | |
| 646. |
In the _______________, the future value of all cash inflow at the end of time horizon at a particular rate of interest is calculated. |
| A. | Risk-free rate |
| B. | Compounding technique |
| C. | Discounting technique |
| D. | Risk Premium |
| Answer» C. Discounting technique | |
| 647. |
______________ is the price at which the bond is traded in the stock exchange. |
| A. | Redemption value |
| B. | Face value |
| C. | Market value |
| D. | Maturity value |
| Answer» C. Market value | |
| 648. |
_____________ enhance the market value of shares and therefore equity capital is not free of cost. |
| A. | Face value |
| B. | Dividends |
| C. | Redemption value |
| D. | Book value |
| Answer» B. Dividends | |
| 649. |
In _______________ approach, the capital structure decision is relevant to the valuation of the firm. |
| A. | Net income |
| B. | Net operating income |
| C. | Traditional |
| D. | Miller and Modigliani |
| Answer» A. Net income | |
| 650. |
When __________ is greater than zero the project should be accepted. |
| A. | Internal rate of return |
| B. | Profitability index |
| C. | Net present value |
| D. | Modified internal rate of return |
| Answer» C. Net present value | |
| 651. |
____________ is defined as the length of time required to recover the initial cash out-lay. |
| A. | Payback-period |
| B. | Inventory conversion period |
| C. | Discounted payback-period |
| D. | Budget period |
| Answer» A. Payback-period | |
| 652. |
_______________ refers to the amount invested in various components of current assets. |
| A. | Temporary working capital |
| B. | Net working capital |
| C. | Gross working capital |
| D. | Permanent working capital |
| Answer» C. Gross working capital | |
| 653. |
____________ is the length of time between the firm’s actual cash expenditure and its own cash receipt. |
| A. | Net operating cycle |
| B. | Cash conversion cycle |
| C. | Working capital cycle |
| D. | Gross operating cycle |
| Answer» A. Net operating cycle | |
| 654. |
_______________ refers to a firm holding some cash to meet its routine expenses that are incurred in the ordinary course of business. |
| A. | Speculative motive |
| B. | Transaction motive |
| C. | Precautionary motive |
| D. | Compensating motive |
| Answer» B. Transaction motive | |
| 655. |
_______________ refers to the length of time allowed by a firm for its customers to make payment for their purchases. |
| A. | Holding period |
| B. | Pay-back period |
| C. | Average collection period |
| D. | Credit period |
| Answer» D. Credit period | |
| 656. |
Amounts due from customers when goods are sold on credit are called _____________. |
| A. | Trade balance |
| B. | Trade debits |
| C. | Trade discount |
| D. | Trade off |
| Answer» B. Trade debits | |
| 657. |
____________________ and __________________________ are the two versions of goals of the financial management of the firm. |
| A. | Profit maximisation, Wealth maximization |
| B. | Production maximisation, Sales maximisation |
| C. | Sales maximisation, Profit maximization |
| D. | Value maximisation, Wealth maximisation |
| Answer» A. Profit maximisation, Wealth maximization | |
| 658. |
Consider the below mentioned statements: 1. A company is considered to be overcapitalised when its actual capitalisation is lower than the proper capitalisation as warranted by the earning capacity 2. Both over-capitalisation and under-capitalisation are detrimental to the interests of the society. State True or False: |
| A. | 1-True, 2-True |
| B. | 1-False, 2-True |
| C. | 1-False, 2-False |
| D. | 1-True, 2-False |
| Answer» B. 1-False, 2-True | |
| 659. |
Consider the below mentioned statements: 1. The dividends are not cumulative for equity shareholders, that is, they cannot be accumulated and distributed in the later years. 2. Dividends are taxable. State True or False: |
| A. | 1-True, 2-True |
| B. | 1-False, 2-True |
| C. | 1-False, 2-False |
| D. | 1-True, 2-False |
| Answer» D. 1-True, 2-False | |
| 660. |
____________ and____________ carry a fixed rate of interest and are to be paid off irrespective of the firm’s revenues. |
| A. | Debentures, Dividends |
| B. | Debentures, Bonds |
| C. | Dividends, Bonds |
| D. | Dividends, Treasury notes |
| Answer» B. Debentures, Bonds | |
| 661. |
Consider the below mentioned statements: 1. A debt-equity ratio of 2:1 indicates that for every 1 unit of equity, the company can raise 2 units of debt. 2. The cost of floating a debt is greater than the cost of floating an equity issue. State True or False: |
| A. | 1-True, 2-True |
| B. | 1-False, 2-True |
| C. | 1-False, 2-False |
| D. | 1-True, 2-False |
| Answer» D. 1-True, 2-False | |
| 662. |
Credit policy of every company is largely influenced by _____________ and _____________. |
| A. | Liquidity, accountability |
| B. | Liquidity, profitability |
| C. | Liability, profitability |
| D. | Liability, liquidity |
| Answer» B. Liquidity, profitability | |
| 663. |
XYZ is an oil based business company, which does not have adequate working capital. It fails to meet its current obligation, which leads to bankruptcy. Identify the type of decision involved to prevent risk of bankruptcy. |
| A. | Investment decision |
| B. | Dividend decision |
| C. | Liquidity decision |
| D. | Finance decision |
| Answer» C. Liquidity decision | |
| 664. |
The rate of interest offered by the fixed deposit scheme of a bank for 365 days and above is 12%. What will be the status of Rs. 20000, after two years if it is invested at this point of time? |
| A. | Rs. 28032 |
| B. | Rs. 24048 |
| C. | Rs. 22056 |
| D. | Rs. 25088 |
| Answer» D. Rs. 25088 | |
| 665. |
How are earnings per share calculated? |
| A. | Use the income statement to determine earnings after taxes (net income) and divide by the previous period's earnings after taxes. Then subtract 1 from the previously calculated value. |
| B. | Use the income statement to determine earnings after taxes (net income) and divide by the number of common shares outstanding. |
| C. | Use the income statement to determine earnings after taxes (net income) and divide by the number of common and preferred shares outstanding. |
| D. | Use the income statement to determine earnings after taxes (net income) and divide by the forecasted period's earnings after taxes. Then subtract 1 from the previously calculated value |
| Answer» B. Use the income statement to determine earnings after taxes (net income) and divide by the number of common shares outstanding. | |
| 666. |
Which of the following would NOT improve the current ratio? |
| A. | Borrow short term to finance additional fixed assets. |
| B. | Issue long-term debt to buy inventory. |
| C. | Sell common stock to reduce current liabilities. |
| D. | Sell fixed assets to reduce accounts payable. |
| Answer» A. Borrow short term to finance additional fixed assets. | |
| 667. |
The gross profit margin is unchanged, but the net profit margin declined over the same period. This could have happened if |
| A. | cost of goods sold increased relative to sales. |
| B. | sales increased relative to expenses. |
| C. | Govt. increased the tax rate. |
| D. | dividends were decreased. |
| Answer» C. Govt. increased the tax rate. | |
| 668. |
Palo Alto Industries has a debt-to-equity ratio of 1.6 compared with the industry average of 1.4. This means that the company |
| A. | will not experience any difficulty with its creditors. |
| B. | has less liquidity than other firms in the industry. |
| C. | will be viewed as having high creditworthiness. |
| D. | has greater than average financial risk when compared to other firms in its industry. |
| Answer» D. has greater than average financial risk when compared to other firms in its industry. | |
| 669. |
Kanji Company had sales last year of Rs. 265 million, including cash sales of Rs. 25 million. If its average collection period was 36 days, its ending accounts receivable balance is closest to . (Assume a 365-day year.) |
| A. | Rs. 26.1 million |
| B. | Rs. 23.7 million |
| C. | Rs. 7.4 million |
| D. | Rs. 18.7 million |
| Answer» B. Rs. 23.7 million | |
| 670. |
A company can improve (lower) its debt-to-total assets ratio by doing which of the following? |
| A. | Borrow more. |
| B. | Shift short-term to long-term debt. |
| C. | Shift long-term to short-term debt. |
| D. | Sell common stock. |
| Answer» D. Sell common stock. | |
| 671. |
Which of the following statements (in general) is correct? |
| A. | A low receivables turnover is desirable. |
| B. | The lower the total debt-to-equity ratio, the lower the financial risk for a firm. |
| C. | An increase in net profit margin with no change in sales or assets means a poor ROI. |
| D. | The higher the tax rate for a firm, the lower the interest coverage ratio. |
| Answer» B. The lower the total debt-to-equity ratio, the lower the financial risk for a firm. | |
| 672. |
Debt-to-total assets (D/TA) ratio is .4. What is its debt-to-equity (D/E) ratio? |
| A. | .2 |
| B. | .6 |
| C. | .667 |
| D. | .333 |
| Answer» C. .667 | |
| 673. |
A firm's operating cycle is equal to its inventory turnover in days (ITD) |
| A. | plus its receivable turnover in days (RTD). |
| B. | minus its RTD. |
| C. | plus its RTD minus its payable turnover in days (P |
| D. | . |
| Answer» A. plus its receivable turnover in days (RTD). | |
| 674. |
If the following are balance sheet changes:
|
| A. | Rs. 7,000 decrease in cash. |
| B. | Rs. 5,005 decrease in accounts receivable. |
| C. | Rs. 10,001 increase in accounts payable. |
| D. | Rs. 12,012 decrease in notes payable. |
| Answer» D. Rs. 12,012 decrease in notes payable. | |
| 675. |
Uses of funds include a (an): |
| A. | decrease in cash. |
| B. | increase in any liability. |
| C. | increase in fixed assets. |
| D. | tax refund. |
| Answer» C. increase in fixed assets. | |
| 676. |
Which of the following would be included in a cash estimation/ budget? |
| A. | depreciation charges. |
| B. | dividends. |
| C. | goodwill. |
| D. | patent amortization. |
| Answer» B. dividends. | |
| 677. |
Which of the following is NOT a cash outflow for the firm? |
| A. | depreciation. |
| B. | dividends. |
| C. | interest payments. |
| D. | taxes. |
| Answer» A. depreciation. | |
| 678. |
Which of the following would be considered a application of funds? |
| A. | a decrease in accounts receivable. |
| B. | a decrease in cash. |
| C. | an increase in account payable. |
| D. | an increase in cash. |
| Answer» D. an increase in cash. | |
| 679. |
All of the following influence capital budgeting cash flows EXCEPT: |
| A. | accelerated depreciation. |
| B. | salvage value. |
| C. | tax rate changes. |
| D. | method of project financing used. |
| Answer» D. method of project financing used. | |
| 680. |
The estimated benefits from a project are expressed as cash flows instead of income flows because: |
| A. | it is simpler to calculate cash flows than income flows. |
| B. | it is cash, not accounting income, that is central to the firm's capital budgeting decision. |
| C. | this is required by the Internal Revenue Service. |
| D. | this is required by the Securities and Exchange Commission. |
| Answer» B. it is cash, not accounting income, that is central to the firm's capital budgeting decision. | |
| 681. |
A capital investment is one that |
| A. | has the prospect of long-term benefits. |
| B. | has the prospect of short-term benefits. |
| C. | is only undertaken by large corporations. |
| D. | applies only to investment in fixed assets. |
| Answer» A. has the prospect of long-term benefits. | |
| 682. |
A profitability index of .85 for a project means that: |
| A. | the present value of benefits is 85% greater than the project's costs. |
| B. | the project's NPV is greater than zero. |
| C. | the project returns 85 cents in present value for each current dollar invest |
| Answer» C. the project returns 85 cents in present value for each current dollar invest | |
| 683. |
Which of the following statements is correct? |
| A. | If the NPV of a project is greater than 0, its PI will equal 0. |
| B. | If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0. |
| C. | If the PI of a project is less than 1, its NPV should be less than 0. |
| D. | If the IRR of a project is greater than the discount rate, k, its PI will be less than 1 and its NPV will be greater than 0. |
| Answer» C. If the PI of a project is less than 1, its NPV should be less than 0. | |
| 684. |
A project's profitability index is equal to the ratio of the of a project's future cash flows to the project's . |
| A. | present value; initial cash outlay |
| B. | net present value; initial cash outlay |
| C. | present value; depreciable basis |
| D. | net present value; depreciable basis |
| Answer» A. present value; initial cash outlay | |
| 685. |
The discount rate at which two projects have identical is referred to as Fisher's rate of intersection. |
| A. | present values |
| B. | net present values |
| C. | IRRs |
| D. | profitability indexes |
| Answer» B. net present values | |
| 686. |
Two mutually exclusive investment proposals have "scale differences" (i.e., the cost of the projects differ). Ranking these projects on the basis of IRR, NPV, and PI methods give contradictory results. |
| A. | will never |
| B. | will always |
| C. | may |
| D. | will generally |
| Answer» C. may | |
| 687. |
Preferred shareholders' claims on assets and income of a firm come those of creditors those of common shareholders. |
| A. | before; and also before |
| B. | after; but before |
| C. | after; and also after |
| D. | equal to; and equal to |
| Answer» B. after; but before | |
| 688. |
You are considering two mutually exclusive investment proposals, project A and project B. B's expected value of net present value is $1,000 less than that for A and A has less dispersion. On the basis of risk and return, you would say that |
| A. | Project A dominates project B. |
| B. | Project B dominates project A. |
| C. | Project A is more risky and should offer greater expected value. |
| D. | Each project is high on one variable, so the two are basically equal. |
| Answer» A. Project A dominates project B. | |
| 689. |
To increase a given present value, the discount rate should be adjusted |
| A. | upward. |
| B. | downward. |
| C. | No change. |
| D. | constant |
| Answer» B. downward. | |
| 690. |
In finance, "working capital" means the same thing as |
| A. | total assets. |
| B. | fixed assets. |
| C. | current assets. |
| D. | current assets minus current liabilities. |
| Answer» C. current assets. | |
| 691. |
Which of the following would be consistent with a more aggressive approach to financing working capital? |
| A. | Financing short-term needs with short-term funds. |
| B. | Financing permanent inventory buildup with long-term debt. |
| C. | Financing seasonal needs with short-term funds. |
| D. | Financing some long-term needs with short-term funds. |
| Answer» D. Financing some long-term needs with short-term funds. | |
| 692. |
Which asset-liability combination would most likely result in the firm's having the greatest risk of technical insolvency? |
| A. | Increasing current assets while lowering current liabilities. |
| B. | Increasing current assets while incurring more current liabilities. |
| C. | Reducing current assets, increasing current liabilities, and reducing long-term debt. |
| D. | Replacing short-term debt with equity. |
| Answer» C. Reducing current assets, increasing current liabilities, and reducing long-term debt. | |
| 693. |
Which of the following illustrates the use of a hedging (or matching) approach to financing? |
| A. | Short-term assets financed with long-term liabilities. |
| B. | Permanent working capital financed with long-term liabilities. |
| C. | Short-term assets financed with equity. |
| D. | All assets financed with 50 percent equity, 50 percent long-term debt mixture. |
| Answer» B. Permanent working capital financed with long-term liabilities. | |
| 694. |
In deciding the appropriate level of current assets for the firm, management is confronted with |
| A. | a trade-off between profitability and risk. |
| B. | a trade-off between liquidity and marketability. |
| C. | a trade-off between equity and debt. |
| D. | a trade-off between short-term versus long-term borrowing. |
| Answer» A. a trade-off between profitability and risk. | |
| 695. |
varies inversely with profitability. |
| A. | Liquidity. |
| B. | Risk. |
| C. | Financing. |
| D. | Liabilities. |
| Answer» A. Liquidity. | |
| 696. |
Spontaneous financing includes |
| A. | accounts receivable. |
| B. | accounts payable. |
| C. | short-term loans. |
| D. | a line of credit. |
| Answer» B. accounts payable. | |
| 697. |
Permanent working capital |
| A. | varies with seasonal needs. |
| B. | includes fixed assets. |
| C. | is the amount of current assets required to meet a firm's long-term minimum needs. |
| D. | includes accounts payable |
| Answer» C. is the amount of current assets required to meet a firm's long-term minimum needs. | |
| 698. |
Financing a long-lived asset with short-term financing would be |
| A. | an example of "moderate risk -- moderate (potential) profitability" asset financing. |
| B. | an example of "low risk -- low (potential) profitability" asset financing. |
| C. | an example of "high risk -- high (potential) profitability" asset financing. |
| D. | an example of the "hedging approach" to financing. |
| Answer» C. an example of "high risk -- high (potential) profitability" asset financing. | |
| 699. |
Net working capital refers to |
| A. | total assets minus fixed assets. |
| B. | current assets minus current liabilities. |
| C. | current assets minus inventories. |
| D. | current assets. |
| Answer» B. current assets minus current liabilities. | |
| 700. |
Marketable securities are primarily |
| A. | short-term debt instruments. |
| B. | short-term equity securities. |
| C. | long-term debt instruments. |
| D. | long-term equity securities. |
| Answer» A. short-term debt instruments. | |
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