Question 1

Earnings before interest and taxes (EBIT) is a descriptive label for

Accepted Answer

A)  gross profits. 
B)  operating profits. 
C)  net profits before taxes. 
D)  earnings per share. 
A)  gross profits. 
B)  operating profits. 
C)  net profits before taxes. 
D)  earnings per share.

Question 2

Which one of the following is (are) considered as a limitation of break-even analysis?

Accepted Answer

A)  It assumes that the firm faces linear or nonvarying sales revenue and total operating cost functions. 
B)  It has a short-term time horizon. 
C)  It is difficult to break semivariable costs into fixed and variable components. 
D)  All of the above. 
A)  It assumes that the firm faces linear or nonvarying sales revenue and total operating cost functions. 
B)  It has a short-term time horizon. 
C)  It is difficult to break semivariable costs into fixed and variable components. 
D)  All of the above.

Question 3

As financial leverage increases, the cost of debt remains constant and then rises, while the cost of equity always rises.

Accepted Answer

A) True 
 B)False

Question 4

Management has just discovered an excellent investment for which it needs additional funding.Relative to the discussion on asymmetric information the firm should

Accepted Answer

A)  finance with new common stock if management believes the firm is undervalued. 
B)  finance with preferred stock if the firm is at value. 
C)  finance with debt if management believes the firm is undervalued. 
D)  finance with debt if management believes the firm is overvalued. 
A)  finance with new common stock if management believes the firm is undervalued. 
B)  finance with preferred stock if the firm is at value. 
C)  finance with debt if management believes the firm is undervalued. 
D)  finance with debt if management believes the firm is overvalued.

Question 5

The relationship between operating and financial leverage is additive rather than multiplicative.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is NOT a variable cost?

Accepted Answer

A)  direct labor 
B)  rent 
C)  materials used 
D)  delivery costs 
A)  direct labor 
B)  rent 
C)  materials used 
D)  delivery costs

Question 7

The higher the degree of financial leverage (DFL), the greater the leverage a plan has, and the steeper its slope when plotted on EBIT-EPS axes.

Accepted Answer

A) True 
 B)False

Question 8

The risk of debt capital is less than that of other long-term contributors of capital because

Accepted Answer

A)  it has far stronger legal pressure against the company to make payment than do preferred and common stockholders. 
B)  it has a higher priority of claim against any earnings or assets available for payment. 
C)  the tax-deductibility of interest payments lowers the debt cost to the firm substantially. 
D)  of all of the above. 
A)  it has far stronger legal pressure against the company to make payment than do preferred and common stockholders. 
B)  it has a higher priority of claim against any earnings or assets available for payment. 
C)  the tax-deductibility of interest payments lowers the debt cost to the firm substantially. 
D)  of all of the above.

Earnings before interest and taxes (EBIT) is a descriptive label for

Which one of the following is (are) considered as a limitation of break-even analysis?

As financial leverage increases, the cost of debt remains constant and then rises, while the cost of equity always rises.

Management has just discovered an excellent investment for which it needs additional funding.Relative to the discussion on asymmetric information the firm should

The relationship between operating and financial leverage is additive rather than multiplicative.

Which of the following is NOT a variable cost?

The higher the degree of financial leverage (DFL), the greater the leverage a plan has, and the steeper its slope when plotted on EBIT-EPS axes.

The risk of debt capital is less than that of other long-term contributors of capital because

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Financial Markets, Institutions, and Securities

Time Value of Money

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Dividend Policy

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Management of Current Liabilities

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

Mergers and Acquisitions, and Business Failure

International Corporate Finance

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Exam 10: Leverage and Capital Structure

Earnings before interest and taxes (EBIT) is a descriptive label for

Which one of the following is (are) considered as a limitation of break-even analysis?

As financial leverage increases, the cost of debt remains constant and then rises, while the cost of equity always rises.

Management has just discovered an excellent investment for which it needs additional funding.Relative to the discussion on asymmetric information the firm should

The relationship between operating and financial leverage is additive rather than multiplicative.

Which of the following is NOT a variable cost?

The higher the degree of financial leverage (DFL), the greater the leverage a plan has, and the steeper its slope when plotted on EBIT-EPS axes.

The risk of debt capital is less than that of other long-term contributors of capital because

Overview of Corporate Finance

Financial Statements, Cash Flows, and Taxes

Financial Statement Analysis

Financial Planning and Forecasting

Financial Markets, Institutions, and Securities

Time Value of Money

Risk and Return

Valuation of Financial Securities

The Cost of Capital

Dividend Policy

Capital Budgeting: Principles and Techniques

Dealing With Project Risk and Other Topics in Capital Budgeting

Working Capital and Management of Current Assets

Management of Current Liabilities

Lease Financing: Concepts and Techniques

Corporate Securities, Derivatives, and Swaps

Mergers and Acquisitions, and Business Failure

International Corporate Finance

Filters