rach phase of the business cycle has certain characteristics. During peak or prosperity, businesses expandend employment is high. Creditors lend money freely; wages, consumer spending, and prices rise.Contraction begins when production begins to slow some because most people who want a good haveaiready purchased the good. As the business cycle moves downward a recession might occur. During arecession, businesses readjust to reduced demand, unemployment rises, consumer spending and prices fall,and creditors restrict loans. If the recession continues or worsens, it becomes a depression. The lowest pointof a depression is called a trough. Eventually, technology, government programs, international developments,or low depression prices cause an increase in demand. As business adjusts and begins to expand again, thecycle moves upward through a recovery or expansion phase-back to peak or prosperity.Identify the phase of the business cycle described in each statement below.Band"1. Stores continue to place large orders to keep up with growing demand.2. Business surpluses accumulate because consumer demand has fallen off.3. Depression prices lead to increased demand for certain goods and services..4. Consumers begin to cut back on spending for luxuries such as entertainment.5. There is a boom in vacation real estate investments.6. Car dealers lower prices and offer rebates to attract customers.7. A large number of major corporations and banks go out of business.8. New high tech businesses begin hiring many of the unemployed.9. The number of banks loaning money to prospective homeowners reaches anall-time high.10. Stock prices plummet and unemployment is widespread.Crthe

Firstly, We have to understand different stages of business cycle : 1) Expansion - In this stage,…

Answered: Identify the phase of the business…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 12QTD

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Suppose that as the economy moves through a business cycle, risk premiums also change. For example, in a recession, when people are concerned about their jobs, risk tolerance might be lower and risk premiums might be higher. In a booming economy, tolerance for risk might be higher and premiums lower.a. Would a predictably shifting risk premium such as described here be a violation of the efficient market hypothesis?b. How might a cycle of increasing and decreasing risk premiums create an appearance that stock prices “overreact,” first falling excessively and then seeming to recover?
An economy is making a rapid recovery from steep recession, and businesses foresee a need for large amounts of capital investment. Why would this development affect real interest rates?
Which of the following is true about a firm with products in the decline stage of their lifecycle? A. We expect financing activities to be positive to cash as the product sales continue to be greater than the costs. B. We expect to see the cash from operations turn negative in this phase. C. We expect cash to be positive from investing activities as the investments in the firm have likely stopped and assets are being sold OD. All of the above a re signs of the decline phase.
If we hold all other factors the same, an increase in interest rates will: a. Decrease the present value of a stream of constant payments we expect to receive. b. Increase the present value of a stream of constant payments we expect to receive. c. Decrease the interest revenue that a company will earn on its funds that it holds in its interest-bearing checking account. d. No impact on how much a company should be willing to pay for factory equipment that is expected to significantly reduce the factory electricity costs.
What affects the firm’s operating break-even point? Several factors affect a firm’s operating break-even point. Based on the scenarios described in the following table, indicate whether these factors would increase, decrease, or leave unchanged a firm’s break-even quantity—assuming that only the listed factor changes and all other relevant factors remain constant. Increase Decrease No Change The product’s sales price increases. The amount of debt increases, causing the firm’s total interest expense to increase. The firm’s fixed costs increase. When fixed costs are high, a small decline in sales can lead to a decline in return on invested capital (ROI).
Which 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.
Suppose a company increases the price of its product and demand hardly declines.which of the following will increase? A) profit margin B) return - on - equity C) taxes D) all the above
By modifying the break-even equation, a company is able to determine the sales required to earn a ________________ profit. a.banker's b.working capital c.target d. contribution
Making changes to a firm’s credit policy involves trade-offs. Assuming that all other factors remain constant, which of the following are outcomes expected to result from an increase in a firm’s cash discount? Check all that apply. An increase in the cost of the discounts given An increase in the firm’s bad-debt expenses An increase in the firm’s credit sales, a speeding up of customer payments, and a reduction in the firm’s receivables investment An increase in the creditworthiness of the firm’s customers
Which of the following statements is true? O As a general rule, management would want to reduce the firm's average collection period. O As a general rule, a firm is not financially affected by the amount of time required to collect its accounts receivable. O As a general rule, management would want to increase the firm's average collection period. O As a general rule, management would want to reduce the firm's accounts receivable turnover ratio.
Ceteris paribus, current financial market returns will increase as _____. Group of answer choices a. the uncertainty about the productivity of capital goods increases and people become more risk averse b. the uncertainty about the productivity of capital goods increases and people become less risk averse c. the uncertainty about the productivity of capital goods decreases and people become more risk averse d. the uncertainty about the productivity of capital goods decreases and people become less risk averse
Short term financing is financing that a borrowers pay off over shorter payment period. Small businesses depend on short term finance to continue operations through economic downturns. Discuss the advantages of short-term loans.

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