Which one of the following is a direct bankruptcy cost?
Legal and accounting fees related to a bankruptcy proceeding
When is a firm insolvent from an accounting perspective?
When the firm has a negative net worth
Which one of the following best defines legal bankruptcy?
A legal proceeding for liquidating or reorganizing a business
Which one of the following is basically equivalent to a 2-for-1 stock split?
100 percent stock dividend
Research conducted on firms' dividend policies over time support which one of the following conclusions?
Managers tend to smooth dividends
Which one of the following tends to be the primary attitude of firms' towards their dividend policy?
Once a dividend is increased, it should not be decreased.
Venture capital is most apt to be the source of funding for which one of the following?
New, high-risk venture
Lexington Stables just declared a 15 percent stock dividend. Which one of the following increased by 15 percent as a result of this dividend?
Number of shares outstanding
Which one of the following terms is defined as an underwriting for which the underwriters assume full responsibility for any unsold shares?
Firm commitment underwriting
Which one of the following describes a Green Shoe provision?
Overallotment option
Which one of the following projects is most apt to be financed with venture capital?
Prototype for a newly patented hand tool by an individual inventor
Which one of the following activities is a source of cash?
Decreasing accounts receivable
Which one of the following is a use of cash?
Paying a supplier for inventory you purchased last month
The cash cycle is equal to which one of the following?
Accounts receivable period minus the accounts payable period plus the inventory period
All else constant, which one of the following will decrease the cash cycle?
Decreasing the credit period granted to a customer
All else held constant, which one of the following statements is correct concerning the accounts payable period?
An increase in the accounts payable period will decrease the cash cycle.
Which one of the following is most indicative of a flexible short-term financial policy?
High ratio of current assets to sales
Which one of the following actions is indicative of a restrictive short-term financial policy?
Minimizing the cash balances held by the firm
Which one of the following best describes a line of credit?
Short-term prearranged bank loan that can be either committed or noncommitted
Accounts receivable financing is the term used to describe which of the following types of loans which involve either the assignment or the factoring of a firm's accounts receivables?
Secured short-term loan
By definition, an inventory loan is which one of the following types of loan?
Secured short-term loan
Which one of the following best represents the transaction motive for holding cash?
Distributing the weekly paychecks
What is the primary purpose of a cash discount?
Inducement to pay promptly
What is the name given to a subsidiary of a firm that exists solely to handle the credit functions of the parent company?
Captive finance company
Which one of the following is a system for managing demand-dependent inventories that minimizes the amount of inventory on hand?
Just-in-time inventory system
Suppose a U.S. firm builds a factory in China, staffs it with Chinese workers, uses materials supplied by Chinese companies, and finances the entire operation with a loan from a Chinese bank located in the same town as the factory. This firm is most likel
Long-run exposure to exchange rate risk
The foreign subsidiary of a U.S. firm is profitable when profits are measured in the foreign currency but those profits become losses when measured in U.S. dollars. This is an example of which one of the following?
Translation exposure to exchange rate risk
Which one of the following most likely represents the greatest political risk for a U.S.-based firm?
Natural ore mine in a foreign country
Which one of the following statements correctly describes your situation if you have purchased and continue to hold of an American-style call option?
You have a right to buy on or before the expiration date.
Which one of the following describes the intrinsic value of a call option?
the stock price minus the strike price or zero, whichever is greater
Which one of the following most likely represents the greatest political risk for a U.S.-based firm?
A Koch Industries oil refinery in a port in Venezuela
Which of the following will decrease the value of a call?
Less time to expiration as days pass
Cash dividends send which of the following signals to the market?
The firm is currently, and expects to continue to be, profitable
Suppose you could buy 1,320 South Korea won or 78 Pakistan rupees last year for $1. Today, $1 will buy you 1,318 won or 80 rupees. Which one of the following occurred over the past year?
The rupee depreciated against the dollar.
Which of the following will increase the value of a call?
An increase in the volatility of the underlying stock's returns
Which was a source of cash, increasing a firm's cash balance, all else equal?
Accounts payable increased by $50 million.
You own 100 shares of JKL Inc. which has 20,000,000 shares outstanding that currently sell for $40 per share. JKL has previously announced a dividend of $0.80 per share with an ex- dividend date of May 31. Assume there are no taxes or other special advant
You should expect the stock price to drop to $39.20 on May 31.
Which of the following will increase the value of a call option?
An increase in the underlying stock price further above the strike price
Which of the following will decrease the value of a call?
A decrease in the volatility of the underlying stock's returns