Test 3B Chapters 11-14

Test 3B Chapters 11-14 - Exam 3B Chapters 11 - 14 Course:...

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Exam 3B Chapters 11 - 14 Course: Principles of Finance BUSG 1303 Section 25049 OPC 004 Instructor: Jason P Ahrenholtz TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 1) As credit standards are relaxed, sales are expected to increase and the investment in accounts receivable is expected to decrease. 1) 2) Unlike the spontaneous sources of unsecured short - term financing, bank loans are negotiated and result from deliberate actions taken by the financial manager. 2) 3) The cost of giving up a cash discount is the implied rate of interest paid in order to delay payment of an account payable for an additional number of days. 3) 4) Firms having stable and predictable revenues can more safely employ highly leveraged capital structures than can firms with volatile patterns of sales revenue. 4) 5) Since lenders are generally reluctant to make loans to a firm to pay dividends, the firm's ability to pay cash dividends is generally constrained by the amount of excess cash available. 5) 6) Since its objective is to minimize inventory investment, a Just - in - Time (JIT) system uses no, or very little, safety stocks. 6) 7) Symmetric information results when managers of a firm have more information about operations and future prospects than do investors. 7) 8) Generally, legal constraints prohibit the payment of cash dividends until a certain level of earnings has been achieved or limit the amount of dividends paid to a certain dollar amount or percentage of earnings. 8) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 9) The dividend policy must be formulated considering two basic objectives, namely 9) A) maximizing shareholder wealth and delaying the tax liability of the stockholder. B) maintaining liquidity and minimizing the weighted average cost of capital. C) maximizing shareholder wealth and providing for sufficient financing. D) delaying the tax liability of the stockholder and information content. 10) The capital impairment restrictions are established to 10) A) protect the shareholder. B) provide a sufficient base to protect creditors' claims. C) reduce dividends equal to or below the current earnings level. D) constrain the firm to paying dividends which do not require additional borrowing. 1
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11) A firm purchased goods with a purchase price of $1,000 and credit terms of 1/10 net 30. The firm paid for these goods on the 5th day after the date of sale. The firm must pay ________ for the goods. 11) A) $1,000 B) $900 C) $1,100 D) $990 12) A firm has directly placed an issue of commercial paper that has a maturity of 60 days. The issue sold for $980,000 and has an annual interest rate of 12.24 percent. The value of the commercial paper at maturity is 12) A) $999,992. B) $980,000. C) $19,992. D) $960,008. 13) ________ costs are a function of time, not sales, and are typically contractual.
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This note was uploaded on 02/02/2009 for the course BUSG 1303 taught by Professor Schwartz during the Fall '08 term at University of Cincinnati.

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Test 3B Chapters 11-14 - Exam 3B Chapters 11 - 14 Course:...

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