Amount of cash on company balance sheet


Question 1) The principal differences between a forward contract and a future contract include all of the following EXCEPT:

- A future contract is standardized as to size and terms

- A future contract is only good on agricultural commodities

- There is an active secondary market in future contracts

- Forward contracts can be specifically designed to fit the exact needs of two counterparties, while a futures contract cannot

Question 2) Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet?

- Buying a fixed asset

- Selling shares of stock from treasury stock

- Declaring a cash dividend

- Calling in a callable bond issue

Question 3) If a typical U.S. company uses the same cost of capital to evaluate all projects, the firm will most likely become:

- riskier over time, but its intrinsic value will be maximized.

- riskier over time, and its intrinsic value will not be maximized.

- less risky over time, and its intrinsic value will not be maximized.

- less risky over time, and its intrinsic value will be maximized.

- There is no reason to expect its risk position or value to change over time as a result of its use of a single cost of capital.

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Finance Basics: Amount of cash on company balance sheet
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