FINC600 Week 8 Practice Quiz

FINC600 Week 8 Practice Quiz

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Corporate Finance

Week 8 Practice Quiz

Question 1 of 25               4.0/ 4.0 Points  

Indirect costs of bankruptcy are borne principally by:

                  

                A.Bondholders                    

                B.Stockholders                    

                C.Managers                          

                D.The federal government                         

Question 2 of 25               4.0/ 4.0 Points  

Which of the following lists events in the chronological order from earliest to latest?

                  

                A.Record date, declaration date, ex-dividend date                             

                B.Declaration date, record date, ex-dividend date                              

                C.Declaration date, ex-dividend date, record date                              

                D.None of the above                    

Question 3 of 25               4.0/ 4.0 Points  

Dividends are decided by:

I) The managers of a firm

II) The government

III) The board of directors

                  

                A.I only                   

                B.II only                                  

                C.III only                                

                D.I and II only                   

Question 4 of 25               3.5/ 4.0 Points  

Discuss some examples of the conflicts of interest that may arise between bondholders and stockholders when a firm is in financial distress.

                  

  

                  

Question 5 of 25               4.0/ 4.0 Points  

The main advantage of debt financing for a firm is:

I) no SEC registration is required for bond issue

II) interest expense of a firm is tax deductible

III) unlevered firms have higher value than levered firms

                  

                A.I only                   

Question 6 of 25               4.0/ 4.0 Points  

Capital structure of the firm can be defined as:

I) the firm's debt-equity ratio

II) the firm's mix of different securities used to finance assets

III) the market imperfection that the firm's manager can exploit

                  

Question 7 of 25               4.0/ 4.0 Points  

If the capital markets are efficient, then the sale or purchase of any security at the prevailing market price is:

                  

                A.Always a positive NPV transaction                         

                B.Generally a zero NPV transaction                           

                C.Is always a negative NPV transaction                    

                D.None of the above                    

Question 8 of 25               0.0/ 4.0 Points  

Briefly describe the traditional position on capital structure.

                 

  

                 

                  

Question 9 of 25               4.0/ 4.0 Points  

Profitability ratios indicate:

I) How productively is the firm utilizing its assets.

II) How liquid is the firm.

III) How profitable is the firm.

IV) How highly is the firm valued by the investors.

                  

Question 10 of 25             3.5/ 4.0 Points  

What are the primary reasons for a company to use debt in its capital structure?

                 

                  

Question 11 of 25             4.0/ 4.0 Points  

The difference between Current Assets of a firm and its Current Liabilities is called.

                  

                A.Net worth                         

                B.Net working capital                       

                C.Gross working capital                   

                D.None of the above