Financial literacy

Which of the following statements is correct? If a firm repurchases some of its

Which of the following statements is correct? If a firm repurchases some of its stock in the open market, then shareholders who sell their stock for more than they paid for it wil…

Which of the following statements is correct? In the text, depreciation is regar

Which of the following statements is correct? In the text, depreciation is regarded as a use of cash because it reduces fixed assets, which then must be replaced. If a company use…

Which of the following statements is correct? Interest payments paid to U.S. Fed

Which of the following statements is correct? Interest payments paid to U.S. Federal bond holders are not taxed at the federal level Interest payments paid to municipal bond holde…

Which of the following statements is correct? O Undiversified stockholders, incl

Which of the following statements is correct? O Undiversified stockholders, including the owners of small businesses, are more concerned about corporate risk than market risk Empi…

Which of the following statements is correct? O Undiversified stockholders, incl

Which of the following statements is correct? O Undiversified stockholders, including the owners of small businesses, are more concerned about corporate risk than market risk Empi…

Which of the following statements is correct? One defect of the IRR method vs. t

Which of the following statements is correct?   One defect of the IRR method vs. the NPV is that the IRR does not take account of cash flows over a project’s full life One defect …

Which of the following statements is correct? Select one: A. One disadvantage of

Which of the following statements is correct? Select one: A. One disadvantage of dividend reinvestment plans is that they increase transactions costs for investors who want to inc…

Which of the following statements is correct? Select one: a. Any forecast of fin

Which of the following statements is correct? Select one: a. Any forecast of financial requirements involves determining how much money the firm will need and is obtained by addin…

Which of the following statements is correct? Select one: a. The probability of

Which of the following statements is correct? Select one: a. The probability of default is higher on short -term bonds than on long-term bonds. b. Reinvestment rate risk is lower,…

Which of the following statements is correct? The only difference between the di

Which of the following statements is correct? The only difference between the discounted dividend and corporate valuation models is the expected cash flow stream. Expected future …

Which of the following statements is correct? a) If Firms X and Y have the same

Which of the following statements is correct? a) If Firms X and Y have the same P/E ratios, the their market-to-book ratios must also be equal. b) If Firms X and Y have the same n…

Which of the following statements is correct? a) If a security saw that a firm’s

Which of the following statements is correct? a) If a security saw that a firm’s days’ sales outstanding (DSO) was higher than the industry average, and was increasing and trendin…

Which of the following statements is correct? a) The higher its debt ratio, the

Which of the following statements is correct? a) The higher its debt ratio, the lower a firm’s BEP ratio will be, other things held constant. b) If a firm’s expected basic earning…

Which of the following statements is correct? a. As long as managers stay within

Which of the following statements is correct? a. As long as managers stay within the law, there is no way to either force or motivate managers to act in the b. Because of their si…

Which of the following statements is correct? a. Depreciation is included in the

Which of the following statements is correct? a. Depreciation is included in the estimate of free cash flows (FCF = EBIT(1 T) + Depreciation [Capital expenditures + NOWC]), hence …

Which of the following statements is correct? a. For the most part, our federal

Which of the following statements is correct? a. For the most part, our federal tax rates are progressive, because higher incomes are taxed at higher average rates. b. bonds issue…

Which of the following statements is correct? a. Generally, debt ratios do not v

Which of the following statements is correct? a. Generally, debt ratios do not vary much among different industries, although they do vary among firms within a given industry b. E…

Which of the following statements is correct? a. If a firm follows the residual

Which of the following statements is correct? a. If a firm follows the residual dividend model, then a sudden increase in the number of profitable projects would be likely to lead…

Which of the following statements is correct? a. Once a firm has defined its pur

Which of the following statements is correct? a. Once a firm has defined its purpose, scope, and objectives, it must develop a strategy or strategies for achieving its goals. The …

Which of the following statements is correct? a. One advantage of dividend reinv

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

Which of the following statements is correct? a. One advantage of forming a corp

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

Which of the following statements is correct? a. One disadvantage of dividend re

Which of the following statements is correct? a. One disadvantage of dividend reinvestment plans is that they increase transactions costs for investors who want to increase their …

Which of the following statements is correct? a. Subordinated debt has less defa

Which of the following statements is correct? a. Subordinated debt has less default risk than senior debt. b. Junior debt is debt that has been more recently issued, and in bankru…

Which of the following statements is correct? a. The degree of operating leverag

Which of the following statements is correct? a. The degree of operating leverage (DOL) depends on a company's fixed costs, variable costs, and sales. The DOL formula assumes (1) …

Which of the following statements is correct? a. The dividened growth model take

Which of the following statements is correct? a. The dividened growth model takes into consideration the capital gains earned on a stock. b. Assume that the required return on a g…

Which of the following statements is correct? a. The net present value method is

Which of the following statements is correct? a. The net present value method is generally regarded as being the best method for evaluating capital budgeting projects. b. The modi…

Which of the following statements is correct? a. The sustainable growth rate is

Which of the following statements is correct? a. The sustainable growth rate is the maximum achievable growth rate without the firm having to raise external funds. In other words,…

Which of the following statements is correct? a. Unlike bondholders and other cr

Which of the following statements is correct? a. Unlike bondholders and other credit holders. holders of equity capital are owners of the firm. b. common equity holders have votin…

Which of the following statements is correct? a. When firms are deciding on the

Which of the following statements is correct? a. When firms are deciding on the size of stock splits--say whether to declare a 2-for-1 split or a 3-for- 1 split, it is best to dec…

Which of the following statements is correct? a. You hold two bonds, a 10-year,

Which of the following statements is correct? a. You hold two bonds, a 10-year, zero coupon, issue and a 10-year bond that pays a 6% annual coupon. The same market rate, 6%, appli…

Which of the following statements is correct? a. b. c. d. e. Under the tax laws

Which of the following statements is correct? a. b. c. d. e. Under the tax laws as they existed in 2014, a dollar received by an individual taxpayer as interest income is taxed at…

Which of the following statements is correct? es that are \"capital intensive\"

Which of the following statements is correct? es that are "capital intensive" are more likely to rely on debt financing. pant mpanies with larg e tax-loss carry forwards" are more…

Which of the following statements is false ? As a firm increases its operating l

Which of the following statements is false? As a firm increases its operating leverage for a given quantity of output, this: a. changes its operating cost structure. b. increases …

Which of the following statements is false? (Points : 10) Personal taxes have th

Which of the following statements is false? (Points : 10)        Personal taxes have the potential to offset some of the corporate tax benefits of leverage.       The actual inter…

Which of the following statements is false? (When DB and switching DB are compar

Which of the following statements is false? (When DB and switching DB are compared, assume that they have the same n and alpha parameters. Assume that SL depreciation has zero sal…

Which of the following statements is false? (When DB and switching DB are compar

Which of the following statements is false? (When DB and switching DB are compared, assume that they have the same n and alpha parameters. Assume that SL depreciation has zero sal…

Which of the following statements is false? (When DB and switching DV are compar

Which of the following statements is false? (When DB and switching DV are compared, assume that they have the same n and alpha parameters. Assume that SL depreciation has zero sal…

Which of the following statements is false? A Because expected returns are not e

Which of the following statements is false? A Because expected returns are not easy to estimate, each portfolio that is added to a multifactor model increases the difficulty of im…

Which of the following statements is false? A decrease in the interest rate and

Which of the following statements is false? A decrease in the interest rate and an increase in the number of time periods would increase the value of an annuity present value inte…

Which of the following statements is false? A) For corporate bonds, the issuer m

Which of the following statements is false? A) For corporate bonds, the issuer may default—that is, it might not pay back the full amount promised in the bond certificate. B) The …

Which of the following statements is false? A) If the bond trades at a discount,

Which of the following statements is false? A) If the bond trades at a discount, and investor who buys the bond will earn a return both from receiving the coupons and from receivi…

Which of the following statements is false? A) Just as the interest rate sensiti

Which of the following statements is false? A) Just as the interest rate sensitivity of a single cash flow increases with its maturity, the interest rate sensitivity of a stream o…

Which of the following statements is false? A)Thetangentportfolioisefficientandt

Which of the following statements is false? A)Thetangentportfolioisefficientandthat,onceweincludetherisk-freeinvestment, all efficient portfolios are combinations of the risk-free…

Which of the following statements is false? A. As long as the firm\'s choice of

Which of the following statements is false? A. As long as the firm's choice of securities does not change the cash flows generated by its assets, the capital structure decision wi…

Which of the following statements is false? A. Given a 35% corporate tax rate, f

Which of the following statements is false? A. Given a 35% corporate tax rate, for every $1 in new permanent debt that the firm issues, the value of the firm increases by $0.65. B…

Which of the following statements is false? As long as the firm\'s choice of sec

Which of the following statements is false?        As long as the firm's choice of securities does not change the cash flows generated by its assets, the capital structure decisio…

Which of the following statements is false? Because a corporation is a separate

Which of the following statements is false? Because a corporation is a separate legal entity, when it fails to repay its debts, the people who lent to the firm, the debt holders a…

Which of the following statements is false? Because investors are risk averse, t

Which of the following statements is false? Because investors are risk averse, they will demand a risk premium to hold diversifiable risk. The risk premium for diversifiable risk …

Which of the following statements is false? If the corporation fails to satisfy

Which of the following statements is false? If the corporation fails to satisfy debt holders' claims, debt holders may lose control of the firm. Because a corporation is a separat…

Which of the following statements is false? Impairment charges do not need to be

Which of the following statements is false? Impairment charges do not need to be analyzed since they are generally a non-recurring expense. Operating expenses should be tracked in…