Question 21 37: Which of the following items represents a business risk in capit

Question

Question 21

37:

Which of the following items represents a business risk in capital structure decisions?

a.

Management preferences.

b.

Cash flow.

c.

Timing of information.

d.

Contractual obligations.

Question 22

The prime rate is the

Size of the commitment fee on a commercial bank loan

Effective cost of commercial paper

Effective cost of a commercial bank loan

Rate charged on business loans to borrowers with high credit ratings

Question 23

When compared with a debt-to-assets ratio, a debt-to-equity ratio is

Unrelated to the debt-to-assets ratio

About the same as the debt-to-assets ratio

Lower than the debt-to-assets ratio

Higher than the debt-to-assets ratio

Question 24

37:

Which of the following describes a normal yield curve?

a.

Upward sloping.

b.

Downward sloping.

c.

Flat.

d.

Humped.

Question 25

4:

Unlike the traditional full-absorption cost system, activity-based costing (ABC) assigns

a.

Costs to individual products based only on nonfinancial variables.

b.

Costs to individual products based on various activities involved.

c.

Overhead to individual products based on some common measure of production volume.

d.

Only costs which can be directly traced to individual products.

Question 26

Which of the following formulas should be used to calculate the economic rate of return on common stock?

Dividends per share divided by market price per share

Market price per share divided by earnings per share

(Dividends + change in price) divided by beginning price

(Net income

Question 21

37:

Which of the following items represents a business risk in capital structure decisions?

a.

Management preferences.

b.

Cash flow.

c.

Timing of information.

d.

Contractual obligations.

Question 22

The prime rate is the

Size of the commitment fee on a commercial bank loan

Effective cost of commercial paper

Effective cost of a commercial bank loan

Rate charged on business loans to borrowers with high credit ratings

Question 23

When compared with a debt-to-assets ratio, a debt-to-equity ratio is

Unrelated to the debt-to-assets ratio

About the same as the debt-to-assets ratio

Lower than the debt-to-assets ratio

Higher than the debt-to-assets ratio

Question 24

37:

Which of the following describes a normal yield curve?

a.

Upward sloping.

b.

Downward sloping.

c.

Flat.

d.

Humped.

Question 25

4:

Unlike the traditional full-absorption cost system, activity-based costing (ABC) assigns

a.

Costs to individual products based only on nonfinancial variables.

b.

Costs to individual products based on various activities involved.

c.

Overhead to individual products based on some common measure of production volume.

d.

Only costs which can be directly traced to individual products.

Question 26

Which of the following formulas should be used to calculate the economic rate of return on common stock?

Dividends per share divided by market price per share

Market price per share divided by earnings per share

(Dividends + change in price) divided by beginning price

(Net income

Explanation / Answer

21)Cash flow.

explanation: Business risk is the risk that the cash flow of an issuer will be

impaired because of adverse economic conditions, making it difficult for the issuer to
meet its operating expenses. Thus, cash is relevant to capital structure decisions because
the use of debt may bankrupt a corporation that does not have sufficient cash flows to
make the periodic interest payments

22)Rate charged on business loans to borrowers with high credit ratings

23)Lower than the debt-to-assets ratio

24)Upward sloping.

25)Costs to individual products based on various activities involved.

26)(Net income

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