Document Sample
20 Powered By Docstoc
					20. Financial leverage is concerned with the relation between a. changes in volume and changes in EPS. b. changes in
volume and changes in EBIT. c. changes in EBIT and changes in EPS. d. changes in EBIT and changes in operating

22. If in determining the yield to maturity on a bond at a given interest rate, you get a value below the current market
price, in the next calculation you should use a. a higher interest rate. b. a lower interest rate. c. a longer maturity. d. a
higher coupon payment.

23. Which of the following is not a condition under which a prudent manager would accept some risk in financing? a.
Predictable cash-flow patterns b. Inventory is highly perishable c. Price of inventory is stable d. Easy access to capital

24. Risk exposure due to heavy short-term borrowing can be compensated for by a. carrying highly liquid assets. b.
carrying illiquid assets. c. carrying longer term, more profitable current assets. d. carrying more receivables to increase
cash flow.

25. Companies that are mostly influenced by seasonal sales have to make a choice between a. level production and
inventory buildup. b. seasonal production and an uneven workforce. c. a stable workforce and a fluctuating workforce. d.
All of the above

26. All of the following are benefits of just-in-time inventory ordering systems except a. reduces warehouse space. b.
saves utility and manpower costs. c. reduces inventory costs. d. prevents stock outs.

27. You will deposit $2,000 today. It will grow for 6 years at 10% interest compounded semiannually. You will then
withdraw the funds annually over the next 4 years. The annual interest rate is 8%. Your annual withdrawal will be: a.
$2,340 b. $4,332 c. $797 d. $1,085

28. The shorter the length of time between a present value and its corresponding future value, a. the lower the present
value, relative to the future value. b. the higher the present value, relative to the future value. c. the higher the
interest rate used in the present-valuation. d. none of the above.

29. Analog Computers needs to borrow $800,000 from the Midland Bank. The bank requires a 15% compensating
balance. How much money will Analog need to borrow in order to end up with $800,000 spendable cash? a. $920,000 b.
$1,058,264 c. $941,177 d. none of the above

30. If Analog computers can borrow at 9.5% for 3 years, what is the effective rate of interest on a $800,000 loan where a
15% compensating balance is required? a. 11.18% b. 17.27% c. 9.50% d. none of the above

Shared By: