Refers to situations wherein the agent can take unseen actions for personal benefit even though such actions are costly to the principal. A. Moral Hazard B. Averse selection C. Zero-sum game D. The Behavioral Principle
Stony Products has a receivables turnover of ten times. What is Stony's receivables collections period (RCP)? A. about 35.42days B. about 36.50 days C. about 40.83. days D. none of these
Bank Term loans Represent A. Long-term loans that looks like short term debt. B. loans for specific amounts that require borrowers to repay them to to specified schedules C. the pledge of receivables D. all the these
4) ______says to compare the benefits and costs of alternative uses and sources of money using after-tax APYs. A. The Signaling Principle B. The Principle of Time Value of Money C. The Principle of Incremental Benefits D. The Options Principle
26) Which (if any) of the following statements is false? A. When invoices are numerous, a firm may use statement billing instead of invoice billing. B. With statement billing, all of the sales for a period such as a month (for which a customer receives invoices, too) are collected into a single statement and sent to the customer as one bill. C. CIA (cash in advance) refers to when the shipper collects the payment (on behalf of the seller) upon delivery. D. none of these
28) Whenever a firm splits itself into separate units, with each unit having limited liability with respect to its financing, the capital structure of each unit becomes ______. A. an irrelevant consideration for a cost of capital. B. the relevant consideration for a cost of capital. C. important only if the firm faces financial distress. D. none of these
31) Projects can be classified into various categories. These include: A. maintenance expenditures projects that involve replacing worn-out or damaged equipment. B. cost savings and revenue enhancement projects that include improvements in production technology to realize cost savings and marketing campaigns to achieve revenue enhancement. C. capacity expansion projects that involve expanding the current business by adding new equipment and facilities. D. all of these
Ideas for capital budgeting projects come from all levels within an organization. The bottom up process results in ideas percolating through the organization. A. upward B. downward C. sideways D. any way
Net present value ( NPV) is the difference between ______. A. what a capital budgeting project costs and what it is worth (its market value) B. what a capital budgeting project produces and what it is worth (its market value) C. what a capital budgeting project produces and what it is pays D. cash flows before taxes and cash flows after taxes
A firm cannot simply adopt the industry average debt ratio, because differences exist among firms in any particular industry with respect to ______. A. tax position. B. size. C. competitive position. D. all of these
The Time Value of Money Principle says ______. A. to look for the most advantageous ways to finance the firm, such as the lowest-cost debt alternative B. to set a price and other terms that investors will find acceptable when issuing securities C. that announcing the firm's decision to issue securities conveys information about the firm D. to use discounted cash flow analysis to compare the costs and benefits of financing decisions, such as alternative securities to sell, lease versus borrow and buy, and bond refunding
The wholesale price for Captain John’s is $1.70 per loaf, and the variable cost of production is $0.80 per loaf. What is the contribution margin? A. $1.70 B. cannot tell C. $2.50 D. $0.90
You are thinking about abandoning your business. If you do, then you will receive $168,000 on an after-tax basis from the land associated with your business. Abandoning your business would bring $15,000 on an after-tax basis from sale of equipment; also, you would not have to repair equipment at a cost of $10,800 per year on an after-tax basis. The before-tax cash flows from your business are $60,000 per year. Your tax rate is 25% and your required return is 12%. If you abandon your business, you will be able to spend your time earning wages that are equivalent to receiving an annuity of $16,000 per year on an after-tax basis until you retire in 12 years. At that time you could sell your land but would only realize what you could receive today. Should you abandon your business if you can make more money doing that? A. Yes. The NPV is greater than $100,000 B. No. The NPV from abandoning is smaller than -$5,000 C. No. The NPV from abandoning is negative. D. Yes. Abandon the business.
Due to asymmetric information, the market fears that a firm issuing securities will do so when the stock is ______. A. overvalued. B. being sold by insiders. C. caught up in a bear market. D. undervalued.