EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN: 9781337514835
Author: MOYER
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 16, Problem 10QTD
a)
Summary Introduction
To select: The working capital policy which subjects the company to a greater risk.
b)
Summary Introduction
To select: The working capital policy which makes more anticipated profitability.
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Students have asked these similar questions
1. Explain the profitability-risk trade-off of alternative levels of working capital balances.
2. Explain the profitability-risk trade-off of alternative methods of financing a given working capital investment.
3. Discuss the profitability versus risk trade-offs associated with alternative levels of working capital investment.
4.
A. which of the following working capital financing policies subjects the firm to a greater risk?i. Financing permanent current assets with short-term debtii. Financing fluctuating current assets with long-term debtB. Which policy will produce the higher expected profitability?
7. A. which of the following working capital financing policies subjects the firm to a
greater risk?
i. Financing permanent current assets with short-term debt
ii. Financing fluctuating current assets with long-term debt
B. Which policy will produce the higher expected profitability?
Which of the following decision criteria is the easiest to use and very popular among investors?
O Payback period.
O Internal rate of return.
O Average accounting return.
Net present value.
O Discounted return on investment.
Chapter 16 Solutions
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Ch. 16 - Prob. 1QTDCh. 16 - Prob. 2QTDCh. 16 - Prob. 3QTDCh. 16 - Prob. 4QTDCh. 16 - Prob. 5QTDCh. 16 - Prob. 6QTDCh. 16 - Prob. 7QTDCh. 16 - Prob. 8QTDCh. 16 - Prob. 9QTDCh. 16 - Prob. 10QTD
Ch. 16 - Prob. 11QTDCh. 16 - Prob. 12QTDCh. 16 - Prob. 13QTDCh. 16 - Prob. 14QTDCh. 16 - Prob. 15QTDCh. 16 - Prob. 16QTDCh. 16 - Prob. 17QTDCh. 16 - Prob. 18QTDCh. 16 - Prob. 19QTDCh. 16 - Prob. 20QTDCh. 16 - Prob. 21QTDCh. 16 - Prob. 22QTDCh. 16 - Prob. 23QTDCh. 16 - Prob. 24QTDCh. 16 - Prob. 1PCh. 16 - Prob. 2PCh. 16 - Prob. 3PCh. 16 - Prob. 4PCh. 16 - Prob. 5PCh. 16 - Prob. 6PCh. 16 - Prob. 7PCh. 16 - Prob. 8PCh. 16 - Prob. 9PCh. 16 - Prob. 10PCh. 16 - Prob. 11PCh. 16 - Prob. 12PCh. 16 - Prob. 13PCh. 16 - Prob. 14PCh. 16 - Prob. 15PCh. 16 - Prob. 16PCh. 16 - Prob. 17PCh. 16 - Prob. 18PCh. 16 - Prob. 19PCh. 16 - Prob. 20PCh. 16 - Prob. 21PCh. 16 - Prob. 22PCh. 16 - Prob. 23PCh. 16 - Prob. 24PCh. 16 - Prob. 25PCh. 16 - Prob. 26PCh. 16 - Prob. 27PCh. 16 - Prob. 28PCh. 16 - Prob. 29PCh. 16 - Prob. 30PCh. 16 - Prob. 31PCh. 16 - Prob. 32PCh. 16 - Prob. 33PCh. 16 - Prob. 34P
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- What is the risk-return tradeoff that arises when firm manages its working capital? Give tangible exam.ple/s.arrow_forwardWhich of the following are present value methods of analyzing capital investment proposals? a. internal rate of return and average rate of return b. average rate of return and net present value c. net present value and cash payback d. net present value and internal rate of returnarrow_forwardThe internal rate of return method assumes that the cash flows over the life of the project are reinvested ata. the risk-free rate.b. the firm's cost of capital.c. the computed internal rate of return.d. the market capitalization rate.arrow_forward
- Which of the following methods for evaluating capital investment proposals reduces the expected future net cash flows originating from the proposals to their present values and computes a net present value? a. average rate of return b. net present value c. internal rate of return d. cash paybackarrow_forwardWhich of the following would increase risk? a. Raise the level of working capital b. Increase the amount of equity financing c. Increase the amount of short term borrowing d. Decrease the amount of inventory by formulating an effective inventory policyarrow_forwardThe third step for making a capital investment decision is to establish baseline criteria for alternatives. Which of the following would not be an acceptable baseline criterion? A. payback method B. accounting rate of return C. internal rate of return D. inventory turnoverarrow_forward
- Why do come companies prefer to use discounting in their capital investment decisions? What is a risk associated with this discounting model?arrow_forwardHow does the capital asset pricing model (CAPM) influence financial decisions regarding risk and return?arrow_forwardWhich approach to investment analysis is "best" in terms of accounting for both the timing and amount of revenue streams from a potential investment? A. the payback period B. the simple rate of return C. the net present value D. the internal rate of returnarrow_forward
- The working capital financing policy that would put a company to the highest level of risk is the one where the company finances a. permanent current assets with short-term liabilities b. temporary current assets with short-term liabilities c. permanent current assets with long-term liabilities d. temporary current assets with long-term liabilitiesarrow_forwardIdentify which one of the following is not the importance of capital market? a. Effective distribution of funds b. Capital deformation of the country c. Provides a continuous market d. Mobilizing the saving on large scalearrow_forwardDetermining optimum capital structure is a. An investment decision b. A financing decision c. A dividend decision d. liquidity decisionarrow_forward
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