24. If a firm adheres to a restrictive short-term financial policy, then the firm will generally have: a. Liberal credit terms for customers. b. Few, if any, stockouts. c. Low inventory turnover rates. d. High cash balances. e. Little, if any, investment in marketable securities.
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- Investors and financial analysts wanting to evaluate the operation efficiency of a firm's managers would probably look primarily at the firm's A. Leverage/debt ratios. market value ratios. 11. B. asset management ratios. D. liquidity ratios. C. 12. in a non-interest bearing account, this will tend to lower the firm's A. profit margin. B. return on equity. C. debt ratio. Other things held constant, if a firm holds cash balances in excess of their optimal level D. current ratio.13. A short-term creditor would be interested in A. profitability ratio. B. efficiency ratio. C. liquidity ratio. D. leverage ratio. The quick ratio of a firm would be unaffected by which of the following? 14. A. Land held for investment is sold for cash. B. Equipment is purchased, financed by a long-term debt issue. C. Inventories are sold for cash D. Inventories are sold on a credit basis.Which of the following statements is correct?(a) The quickest way to determine whether the firmhas too much debt is to calculate the Timesinterest-earned ratio.(b) The best rule of thumb for determining the firm’sliquidity is to calculate the current ratio.(c) From an investor’s point of view, the price-toearnings ratio is a good indicator of whether ornot a firm is generating an acceptable return tothe investor.(d) The operating margin is determined by subtracting all operating and non-operating expensesfrom the gross margin.
- Which of the following statements is correct?a. An increase in a firm’s inventories will call for additional financing unless theincrease is offset by an equal or larger decrease in some other asset account.b. A high quick ratio is always a good indication of a well-managed liquidityposition.c. A relatively low return on assets (ROA) is always an indicator of managerialincompetence.d. A high degree of operating leverage lowers the risk by stabilizing the firm’searnings streamWhich of the following statements is correct? A firm has a greater likelihood of needing an unexpected loan when its cash flows are relatively constant over time. The cost of borrowing affects the target cash balance of a firm. Management's desire to maintain a low cash balance has no effect on the borrowing needs of a firm. The target cash balance increases as the interest rate rises. The target cash balance decreases as the order costs increase.Which of the following is not a factor that can provide financial instability? a. Decreases in interest rate b. Increase in uncertainty c. Negative shocks to firms’ balance sheets d. A deterioration in FI’s balance sheets
- 1. A higher industry P/E will result in a(n)…A. Higher required returnB. Decrease in an industry’s business risk.C. Decrease in an industry’s growth rate.D. Increase in an industry’s liquidity risk.2. Industry analysis is important because…A. It is unusual for a firm in a troubled industry to perform well.B. There are substantial differences in stock market performances among industry groups.C. There is considerable dispersion in stock market performance among industry groups.D. All of the above3. Which of the following stages of the industry life cycle offers the highest potential returns.A. Start-upB. ConsolidationC. MaturityD. Relative decline cleIn general, as a company increases the amount of short-term financing relative to long-term financing, the A)Greater the risk that it will be unable to meet principal and interest payments. B)Leverage of the firm increases. C)Likelihood of having idle liquid assets increases. D)Current ratio increases.A firm will have a financing _________ whenever projected assets are greater than projected liabilities and equity. This is best remedied with _________. Deficit; line of credit Deficit; special dividend Surplus; line of credit Surplus; special dividend
- Which statement is most correct? * A. Since debt financing raises the firm’s financial risk, increasing debt ratio will increase WACC. B. Since debt financing is cheaper than equity financing, increasing debt ratio will reduce WACC. C. Increasing a firm’s debt ratio will typically reduce the marginal costs of both debt and equity financing; however, it still may raise the firm’s WACC. D. Statements a and c are correct. E. None of the aboveQ.The probability of financial distress a- Increases when the firm's debt to value ratio increases b- decreases when the firm's debt to value ratio increase c- Increases when the volatility in the firm's operating cash flows increase. d- Both A and CA firm that is increasing its capital structure leverage and increasing profitability will likely experience a (an) a. increasing value-to-book ratio b. decreasing return on assets c. volatile price-earnings ratio d. None of these answer choices are correct.