In 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 with a substandard return on total assets can improve its return on equity, all else remaining the same, but   A. decreasing its total asset turnover.   B. increasing its total asset turnover.   C. increasing its debt ratio.   D. decreasing its debt ratio.

A profitability measure of ROE is affected by the level of a firm’s debt. Thus,an investor must consider the debt-equity ratio to evaluate the firm’sprofitability. The debt-equity ratio determines a firm’s financial leverage whichindicates how much of assets the firm is able to deploy for each monetary unitof stockholders’ equity.1) Explain how the financial leverage effect can be defined as the differencebetween ROE and ROA. 2) Explain how the financial leverage effect is affected by the debt ratio and theinterest rate.

Why does the WACC decrease as a firm begins to take on debt and then increase after a certain point?

DAS Co. is preparing its financial forecast for next year and its AFN is negative. This means that Select one: O a. the predicted change in total assets must be negative. O b. sales growth must be negative. O c. the dividend payout ratio must be greater than the predicted growth rate in sales. O d. the predicted change in spontaneous liabilities must be greater than the predicted change in total assets.

What is the purpose of financial leverage in finance? a) To increase the company's liquidity b) To reduce the company's risk c) To increase the company's profitability d) To magnify the company's returns and risks

As a firm grows, it must support increases in revenue with new investments in assets. The self-supporting, or sustainable, growth model helps a firm assess how rapidly it can grow, while maintaining a balance between its cash outflows (increases in noncash assets) and inflows (funds resulting from ncreases in liabilities or equity). Consider the following case of Cold Duck Manufacturing Inc.: Cold Duck Manufacturing Inc. has no debt in its capital structure and has $200,000,000 in assets. Its sales revenues last year were $100,000,000 with a net income of $2,500,000. The company distributed $135,000 as dividends to its shareholders last year. Given the information above, what is Cold Duck Manufacturing Inc.'s sustainable growth rate? 0.56% 1.20% 0.07% 3.89% Which of the following are assumptions of the sustainable (self-supporting) growth model? Check all that apply. The firm maintains a constant net profit margin. The firm maintains a constant ratio of assets to equity. The firm uses…

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

The required return on assets will change, if O a. one of the firm's business lines is closed. O b. leverage increases. O C. if the credit rating companies downgrade the firm's corporate debt. O d. if the interest payment to creditors increases.

The cost of is highest for firms that are likely to have profitable future growth opportunities requiring large investments. debt covenants asset substitution debt maturity debt overhang