13. Spontaneous sources of funds refer to all of the below EXCEPT:a. accounts payableb. accrualsc. common stockd. a bank loan14. Selection of a source of short-term financing should include all of the following EXCEPT:a. the effect of the use of credit from a particular source on the cost and availability of othersources of creditb. the floatation costs for debenturesc. the effective cost of creditd. the availability of financing in the amount and for the time needed15. The terminal warehouse agreement differs from the field warehouse agreement in that:a. the cost of the terminal warehouse agreement is lower due to the lower degree of riskb. the warehouse procedure differs for both agreementsc. the terminal agreement transports the collateral to a public warehoused. the borrower of the field warehouse agreement can sell the collateral without the consentof the lender16. Your company buys supplies on credit terms of 2/10 net 45. Suppose the company makes apurchase of $20,000 today. Which of the following payment options makes the most sense asa general rule?a. pay the bill as soon as possible to keep the supplier happyb. pay the bill on day 10 to get the discountc. either pay the bill on day 10 to get the discount, or wait until day 45d. pay the bill on day 45 due to the time value of money17. Which of the following statements about financial leverage is true?a. Financial leverage is the responsiveness of the firm’s EBIT to fluctuations in sales.b. Financial leverage is the responsiveness of the firm’s EPS to fluctuations in EBIT.c. Financial leverage involves the incurrence of fixed operating costs in the firm’s incomestream.d. Financial leverage reduces a firm’s risk.18. Which of the following statements about combined (operating & financial) leverage is true?a. Usage of both operating and financial leverage reduces a firm’s risk.b. If a firm employs both operating and financial leverage, any percent change in sales willproduce a larger percent change in earnings per share.c. High operating leverage and high financial leverage offset one another, meaning that ifsales increase by 10%, then EPS will also increase by 10%.d. A firm that is in a capital-intensive industry should use a higher level of financial leveragethan a firm that employs low levels of operating leverage.19. The “bird-in-the-hand dividend theory” supports which view of the effect of dividend policy oncompany value?a. constant dividends increase stock valuesb. high dividends increase stock valuesc. a firm’s dividend policy is irrelevantd. low dividends increase stock values20. All of the following will increase the discretionary financing needed EXCEPT:a. decrease the dividend payout ratiob. decrease the spontaneous financingc. decrease the sales growth rated. decrease the net profit margin21. If a firm relies on short-term debt or current liabilities in financing its asset investments, andall other things remain the same, what can be said about the firm’s liquidity?a. The liquidity of the firm will be unchanged.b. The firm will be relatively more liquid.c. The firm will be relatively less liquid.d. The firm will be more liquid only if interest rates are below the company’s weightedaverage cost of capital.22. Dakota Oil, Inc. reported that its sales and EBIT increased by 10%, but its EPS increased by30%. The much larger change in earnings per share could be the result of:a. high operating leverageb. high financial leveragec. high fixed costs of productiond. a high percentage of credit sale collections from prior years23. Which of the following statements would be consistent with the bird-in-the-hand dividendtheory?a. Dividends are less certain than capital gains.b. Investors are indifferent whether stock returns come from dividend income or capital gainsincome.c. Wealthy investors prefer corporations to defer dividend payments because capital gainsproduce greater after-tax income.d. Dividends are more certain than capital gains income.24. The term “lumpy asset” means:a. assets that have economies of scale but not economies of scopeb. assets that must be purchased in discrete quantitiesc. the same thing as assets that exhibit scale economiesd. assets that can be purchased in incremental units25. All of the following are potential advantages of commercial paper EXCEPT:a. ability to borrow very large amountsb. flexible repayment termsc. no compensating balance requirementsd. lower interest rates than comparable sources of short-term financing
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