PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Textbook Question
Chapter 18, Problem 23PS
Financial slack* True or false?
- a. Financial slack means having cash in the bank or ready access to the debt markets.
- b. Financial slack is most valuable to firms with few investment opportunities and poor prospects.
- c. Managers with excessive financial slack may be tempted to spend it on poor investments.
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Students have asked these similar questions
Financial slack is the amount of unused access to debt markets or bank financing. Which theory of capital structure would place the highest value on maintaining financial slack for a firm that is not in financial distress?
Question 10 options:
a)
Trade-off theory
b)
Debt financing as a managerial constraint
c)
Pecking order theory
d)
Modigliani & Miller irrelevance theory
TRUE OR FALSE
1. Short-term financial policies that are flexible with regard to current assets includes keeping large balance of short-term debt.
2. Costs that fall with increases in the level of investment in current assets are called shortage costs.
3. The firm further increases the effective interest rate earned by the bank on the committed line of credit.
If a bank has a negative gap, it is likely that it has a:
a. positive duration gap.
b. negative duration gap.
c. low stock price.
d. high return on assets.
Chapter 18 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 18 - Prob. 1PSCh. 18 - Tax shields Compute the present value of interest...Ch. 18 - Tax shields Here are book and market value balance...Ch. 18 - Tax shields Look back at the Johnson Johnson...Ch. 18 - Prob. 5PSCh. 18 - Tax shields The firm cant use interest tax shields...Ch. 18 - Prob. 7PSCh. 18 - Tax shields The trouble with MMs argument is that...Ch. 18 - Bankruptcy costs On February 29, 2019, when PDQ...Ch. 18 - Financial distress This question tests your...
Ch. 18 - Prob. 12PSCh. 18 - Agency costs Let us go back to Circular Files...Ch. 18 - Agency costs The Salad Oil Storage (SOS) Company...Ch. 18 - Agency costs The possible payoffs from Ms....Ch. 18 - Prob. 17PSCh. 18 - Prob. 18PSCh. 18 - Prob. 20PSCh. 18 - Pecking-order theory Fill in the blanks: According...Ch. 18 - Financial slack For what kinds of companies is...Ch. 18 - Financial slack True or false? a. Financial slack...Ch. 18 - Debt ratios Rajan and Zingales identified four...Ch. 18 - Leverage targets Some corporations debtequity...Ch. 18 - Prob. 26PSCh. 18 - Trade-off theory The trade-off theory relies on...
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