14. A company that has a high debt ratio is (a) likely to have a lower (b) riski

Question

14. A company that has a high debt ratio is (a) likely to have a lower (b) riskier (c) less risky than a company that uses more equity f Return on Equity to stockholders in good economic times than a company that uses less debt interest expense on its income statement. (d) likely to have low 15. Which actions below would increase a company's liquidity rrent assets (a) more short-term investments comprising cu (b) more short-term debt financing rather than long-term (c) more money invested in merchandise inventory (d) more money invested in property, plant, and equipment assets. financing 16. Which ratio below compares the current value of a stock to its historical cost of the common equity on the Balance Sheet? (a) Price/Earnings ratio (b) Price/Book ratio (c) Equity/Assets ratio (d) Return on Equity ratio. 17. Which ratio below may indicate that the current value of the stock may be overpric if too high to a potential investor of the stock? (a) Price/Earnings ratio (b) Price/Dividend ratio (c) Equity/Assets ratio (d) Return on Equity ratio 18. What may be an advantage of borrowing long-term rather than short-term? (a) a lower interest rate (b) a higher interest rate (c) securing borrowed funds before the company's business activity declines (d) lower liquidity 19. The reason that lines of credit are often times more expensive than the quoted rate the line of credit is because of the requirement of a required (a) pledging (b) factoring (c) compensating balance (d) hedging 20. Which loan using inventory as collateral would i transportation costs? (a) floatingt

Explanation / Answer

14 The correct alternative is b The alternative a is incorrect because it gives higher returns to shareholder in good economic times The alternative c is incorrect because it is more risky than a company which uses higher equity financing The alternative d is incorrect because it is likely to have more and not low interest expense in income statement So, The correct alternative is b 15 The correct alternative is a The alternative c & d are incorrect because Inventory and Property, plant & equipment does not form part of liquid assets The alternative b is incorrect because more short term debt would decrease the company's liquidity So, The correct alternative is a 16 The correct alternative is b The alternative c & d are incorrect because these ratios does not include the current value of stock in their calculation. The alternative a is incorrect because it does not speaks about the historical cost of common equity on the balance sheet So, The correct alternative is b 17 The correct alternative is a The alternative c & d are incorrect because these ratios does not include the current value of stock in their calculation. The alternative c is incorrect because it is earning which is more likely to give correct picture to potential investors. So, The correct alternative is a As per the Chegg policy, we are supposed to answer the maximum of four sub-parts of a question. Thank You

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