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A declining trend in the capital outlay ratio could be an indicator of deferred replacement of capital assets. O Truc O False pt
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- Define negative working capital. Is a negative working capital a sign of illiquidity or of liquidity? Use the framework identified by Fazzari and Petersen, 1993do liquid assets frequently have lower rates of return than fixed assets?___________ is the possible loss of revenue resulting mainly from a decline in the revenue base. Group of answer choices Investment risk Debt-related risk Revenue risk Insurance risk
- Forecasting risk can be defined as the possibility that _____ will lead to incorrect decisions. a. the inclusion of opportunity costs b. erosion c. errors in projected cash flows d. the exclusion of sunk costs e. net working capital costsCapital account transactions are not affected by Select one: a. Investment diversification b. Risk c. Rate of return d. All the answers are correct e. SpeculationBriefly define capital risk and explain how a positive leverage-adjusted duration gap can contribute to an adverse impact on capital.
- Why is the acid test ratio a more rigorous test of short-term solvency than the current ratio? A. The quick ratio eliminates prepaid expenses for the denominator.B. The quick ratio eliminates prepaid expenses for the numerator.C. The quick ratio eliminates inventories from the numerator.D. The quick ratio considers only cash and marketable investments as current assets.E. The quick ratio eliminates revenue from the numerator.According to the Capital Asset Pricing Model, higher investment risk, however it is measured, translates into higher required rates of return. True FalseAn abnormal return occurs: Only when the actual return is lower than the expected return. Only when the actual return is higher than the expected return. Only when the market value is higher than the intrinsic value. Only when capital appreciation exceeds the expected capital appreciation. Should not be discussed because the word “abnormal” might be hurtful to someone.
- Generally, the ____ is considered to be a more realistic reinvestment rate than the ____. a. risk-free rate; cost of capital b. risk-free rate; internal rate of return c. cost of capital; internal rate of return d. internal rate of return; cost of capitalWhich of the following is not true? GAP analysis Ignores changes in the market value of assets and liabilities. GAP analysis Ignores time value of money. GAP analysis is easy to compute and can accurately predicts the exact losses or gains Gap analysis fails to capture non-interest revenueThe profitability index is most useful When the NPV method and the IRR method give conflicting signals. When capital needs to be rationed. When the cash flow pattern is unusual. None of the above.