corporate finance

Lenders probably have the most interest in which one of the following sets of ratios?

Long-term debt and times interest earned.

Which bond would you generally expect to have the highest yield?

Long-term, taxable junk bond

Which one of the following is a source of cash for a non-tax-paying firm?

increase in common stock.

Answer this question based on the dividend growth model. If you expect the market rate of return to increase across the board on all equity securities, then you should also expect:

A decrease in all stock values.

Bonds issued by the U.S. government:

Are considered to be free of default risk.

Which one of the following is the financial statement that shows the accounting value of a firm's equity as of a particular date?

Balance sheet.

Which one of the following terms is defined as the management of a firm's long-term investments?

Capital budgeting.

Which type of business organization has all the respective rights and privileges of a legal person?

Corporation.

Which one of the following relationships applies to a par value bond?

Coupon rate = current yield = yield-to-maturity.

According to the statement of cash flows, an increase in inventory will _____ the cash flow from _____ activities.

Decrease; operating.

Financial risk is:

Dependent upon a firm's capital structure.

For a tax-paying firm, an increase in _____ will cause the cash flow from assets to increase.

Depreciation.

Which one of the following is included in a firm's market value but yet is excluded from the firm's accounting value?

Good reputation of the company.

A zero coupon bond:

Has more interest rate risk than a comparable coupon bond.

The DuPont identity can be used to help managers answer which of the following questions related to a firm's operations?

I. How many sales dollars has the firm generated per each dollar of assets? II. How many dollars of assets has a firm acquired per each dollar in shareholders' equity? III. How much net profit is a firm generating per dollar of sales?

Which one of the following best illustrates that the management of a firm is adhering to the goal of financial management?

Increase in the market value per share.

As a bond's time to maturity increases, the bond's sensitivity to interest rate risk:

Increases at a decreasing rate.

You expect interest rates to decline in the near future even though the bond market is not indicating any sign of this change. Which one of the following bonds should you purchase now to maximize your gains if the rate decline does occur?

Long-term; zero coupon.

Which one of the following statements related to market efficiency tends to be supported by current evidence?

Markets tend to respond quickly to new information.

A Treasury yield curve plots Treasury interest rates relative to which one of the following?

Maturity.

Which one of the following statements concerning net working capital is correct?

Net working capital increases when inventory is sold for cash at a profit.

Shareholders' equity:

Represents the residual value of a firm.

Which one of the following statements related to an income statement is correct?

Taxes reduce both net income and operating cash flow.

A news flash just appeared that caused about a dozen stocks to suddenly drop in value by 20 percent. What type of risk does this news flash best represent?

Unsystematic

If a firm has the optimal amount of debt, then the:

Value of the levered firm will exceed the value of the firm if it were unlevered.

A bond has a market price that exceeds its face value. Which one of these features currently applies to this bond?

Yield to maturity less than the coupon rate.