Financial literacy

Which of the following statements is CORRECT? Identifying an externality can nev

Which of the following statements is CORRECT? Identifying an externality can never lead to an increase in the calculated NPV. Both the NPV and IRR methods deal correctly with exte…

Which of the following statements is CORRECT? If a 10-year, $1,000 par, zero cou

Which of the following statements is CORRECT? If a 10-year, $1,000 par, zero coupon bond were issued at a price that gave investors a 10% yield to maturity, and if interest rates …

Which of the following statements is CORRECT? If a bank loan officer saw that a

Which of the following statements is CORRECT? If a bank loan officer saw that a firm’s days in patient accounts receivable (ACP) was higher than the industry average and was also …

Which of the following statements is CORRECT? If a company has a WACC = 12% and

Which of the following statements is CORRECT? If a company has a WACC = 12% and its free cash flow is expected to grow at a constant rate of 5%, this implies that the stock's divi…

Which of the following statements is CORRECT? If the maturity risk premium (MRP)

Which of the following statements is CORRECT? If the maturity risk premium (MRP) is greater than zero, then the yield curve must have an upward slope. Because long-term bonds are …

Which of the following statements is CORRECT? If you have a series of cash flows

Which of the following statements is CORRECT? If you have a series of cash flows, each of which is positive, you can solve for I, where the solution value of I causes the PV of th…

Which of the following statements is CORRECT? It is unrealistic to believe that

Which of the following statements is CORRECT? It is unrealistic to believe that any increases in net operating working capital required at the start of an expansion project can be…

Which of the following statements is CORRECT? Most sinking funds require the iss

Which of the following statements is CORRECT? Most sinking funds require the issuer to provide funds to a trustee, who saves the money so that it will be available to pay off bond…

Which of the following statements is CORRECT? O a. The NYSE is an example of an

Which of the following statements is CORRECT? O a. The NYSE is an example of an over-the-counter market. O b. As they are generally defined, money market transactions involve debt…

Which of the following statements is CORRECT? O a. The New York Stock Exchange i

Which of the following statements is CORRECT? O a. The New York Stock Exchange is an auction market, and it has a physical location b.Home mortgage loans ar traded inthe money mar…

Which of the following statements is CORRECT? O a. The New York Stock Exchange i

Which of the following statements is CORRECT? O a. The New York Stock Exchange is an auction market, and it has a physical location b.Home mortgage loans ar traded inthe money mar…

Which of the following statements is CORRECT? One advantage of dividend reinvest

Which of the following statements is CORRECT? One advantage of dividend reinvestment plans is that they enable investors to postpone paying taxes on the dividends credited to thei…

Which of the following statements is CORRECT? One advantage of forming a corpora

Which of the following statements is CORRECT? One advantage of forming a corporation is that equity investors are usually exposed to less liability than in a partnership. Corporat…

Which of the following statements is CORRECT? One defect of the IRR method is th

Which of the following statements is CORRECT? One defect of the IRR method is that it does not take account of cash flows over a project's full life. One defect of the IRR method …

Which of the following statements is CORRECT? One disadvantage of operating as a

Which of the following statements is CORRECT? One disadvantage of operating as a corporation rather than as a partnership is that corporate shareholders are exposed to more person…

Which of the following statements is CORRECT? One of the ways in which firms can

Which of the following statements is CORRECT? One of the ways in which firms can mitigate or reduce potential conflicts between bondholders and stockholders is by increasing the a…

Which of the following statements is CORRECT? Other things held constant, the hi

Which of the following statements is CORRECT? Other things held constant, the higher a firm s days sales outstanding (DSO). the better its credit department If a firm that sells o…

Which of the following statements is CORRECT? Other things held constant, the mo

Which of the following statements is CORRECT? Other things held constant, the more debt a firm uses, the higher its operating margin will be. Debt management ratios show the exten…

Which of the following statements is CORRECT? Perhaps the most important step wh

Which of the following statements is CORRECT? Perhaps the most important step when developing forecasted financial statements is to determine the breakdown of common equity betwee…

Which of the following statements is CORRECT? Please explain your answer. a. A f

Which of the following statements is CORRECT? Please explain your answer. a. A firm that makes 90% of its sales on credit and 10% for cash is growing at a constant rate of 10% ann…

Which of the following statements is CORRECT? Please provide your answer in the

Which of the following statements is CORRECT? Please provide your answer in the rich text box. A An NPV profile graph shows how a project’s payback varies as the cost of capital c…

Which of the following statements is CORRECT? Question 10 options: All are corre

Which of the following statements is CORRECT? Question 10 options: All are correct. It is possible to have a situation where the market risk of a single stock is less than that of…

Which of the following statements is CORRECT? Question 10 options: a) Downward-s

Which of the following statements is CORRECT? Question 10 options: a) Downward-sloping yield curves are inconsistent with the expectations theory. b) The actual shape of the yield…

Which of the following statements is CORRECT? Question 14 options: a) As a rule,

Which of the following statements is CORRECT? Question 14 options: a) As a rule, the optimal capital structure is found by determining the debt-equity mix that maximizes expected …

Which of the following statements is CORRECT? Question 4 options: The constant g

Which of the following statements is CORRECT? Question 4 options: The constant growth model is often appropriate for evaluating start-up companies that do not have a stable histor…

Which of the following statements is CORRECT? Question 7 options: The WACC is ca

Which of the following statements is CORRECT? Question 7 options: The WACC is calculated using before-tax costs for all components. The after-tax cost of debt usually exceeds the …

Which of the following statements is CORRECT? Question options: a) The constant

Which of the following statements is CORRECT? Question options: a) The constant growth model cannot be used for a zero growth stock, where the dividend is expected to remain const…

Which of the following statements is CORRECT? Richard Roll has argued that it is

Which of the following statements is CORRECT? Richard Roll has argued that it is possible to test the CAPM to see if it is correct. Tests have shown that the risk/return relations…

Which of the following statements is CORRECT? Select one: a. A hostile takeover

Which of the following statements is CORRECT? Select one: a. A hostile takeover is the main method of transferring ownership interest in a corporation. b. Unlimited liability and …

Which of the following statements is CORRECT? Select one: a. Capital market tran

Which of the following statements is CORRECT? Select one: a. Capital market transactions only include preferred stock and common stock transactions. b. If General Electric were to…

Which of the following statements is CORRECT? Select one: a. If a coupon bond is

Which of the following statements is CORRECT? Select one: a. If a coupon bond is selling at par, its current yield equals its yield to maturity. b. If a coupon bond is selling at …

Which of the following statements is CORRECT? Select one: a. If a stock’s risk i

Which of the following statements is CORRECT? Select one: a. If a stock’s risk increases but its expected rate of growth in earnings and dividends remain constant, then the new eq…

Which of the following statements is CORRECT? Select one: a. In the statement of

Which of the following statements is CORRECT? Select one: a. In the statement of cash flows, depreciation charges are reported as a use of cash. b. In the statement of cash flows,…

Which of the following statements is CORRECT? Select one: a. Net working capital

Which of the following statements is CORRECT? Select one: a. Net working capital is defined as current assets minus the sum of payables and accruals, and any increase in the curre…

Which of the following statements is CORRECT? Select one: a. One drawback of the

Which of the following statements is CORRECT? Select one: a. One drawback of the payback method is that this method does not consider cash flows that occur beyond the payback peri…

Which of the following statements is CORRECT? Select one: a. The cost of capital

Which of the following statements is CORRECT? Select one: a. The cost of capital used to evaluate a project should be the cost of the specific type of financing used to fund that …

Which of the following statements is CORRECT? Since debt capital can cause a com

Which of the following statements is CORRECT? Since debt capital can cause a company to go bankrupt but equity capital cannot, debt is riskier than equity, and thus the after-tax …

Which of the following statements is CORRECT? Since debt financing is cheaper th

Which of the following statements is CORRECT? Since debt financing is cheaper than equity financing, raising a company's debt ratio will always reduce its WACC Increasing a compan…

Which of the following statements is CORRECT? Sinking fund provisions sometimes

Which of the following statements is CORRECT? Sinking fund provisions sometimes turn out to adversely affect bondholders, and this is most likely to occur if interest rates declin…

Which of the following statements is CORRECT? Sunk costs were formerly hard to d

Which of the following statements is CORRECT? Sunk costs were formerly hard to dent with, but once live NPV method came into wide use, it became possible to simply include stink m…

Which of the following statements is CORRECT? Suppose a firm’s total assets turn

Which of the following statements is CORRECT? Suppose a firm’s total assets turnover ratio falls from 1.0 to 0.9, but at the same time its profit margin rises from 9% to 10% and i…

Which of the following statements is CORRECT? The NPV method was once the favori

Which of the following statements is CORRECT? The NPV method was once the favorite of academies and business executives, but today most authorities regard the MIRR as being the be…

Which of the following statements is CORRECT? The after-tax cost of debt that sh

Which of the following statements is CORRECT? The after-tax cost of debt that should be used as the component cost when calculating the WACC is the average after-tax cost of all t…

Which of the following statements is CORRECT? The beta of a portfolio of stocks

Which of the following statements is CORRECT? The beta of a portfolio of stocks is always smaller than the betas of any of the individual stocks. If you found a stock with a zero …

Which of the following statements is CORRECT? The cash flows relevant for a fore

Which of the following statements is CORRECT? The cash flows relevant for a foreign investment should, from the parent company's perspective, include the financial cash flows that…

Which of the following statements is CORRECT? The characteristic line is the reg

Which of the following statements is CORRECT? The characteristic line is the regression line that results from plotting the returns on a particular stock versus the returns on a s…

Which of the following statements is CORRECT? The corporate bylaws are identical

Which of the following statements is CORRECT? The corporate bylaws are identical for all firmss incorporated in a particular state. Corporate bylaws dictate a firm's behavior insi…

Which of the following statements is CORRECT? The corporate bylaws are identical

Which of the following statements is CORRECT? The corporate bylaws are identical for all firmss incorporated in a particular state. Corporate bylaws dictate a firm's behavior insi…

Which of the following statements is CORRECT? The income of certain small corpor

Which of the following statements is CORRECT? The income of certain small corporations that qualify under the Tax Code is completely exempt from corporate income taxes. Thus, the …

Which of the following statements is CORRECT? The most important difference betw

Which of the following statements is CORRECT? The most important difference between spot markets versus futures markets is the maturity of the instruments that are traded. Spot ma…