Question 1: Which of the following statements is false regarding the cost of capital?
- The cost of capital should consider the flotation costs.
- All other being equal, it is preferable to use market value weights than book value weights.
- The WACC is the most appropriate discount rate for all projects.
- Should include the cost of retained earnings.
Question 2: Which of the following statements is true?
- The optimal credit policy minimizes the total cost of granting credit.
- Firms should avoid offering credit at all cost.
- An increase in a firm's average collection period generally indicates that an increased number of customers are taking advantage of the cash discount.
- Character, refers to the ability of a firm to meet its credit obligations out its operating cash flows.
- The optimal credit policy, is the policy that produces the largest amount of sales for a firm.
Question 3: Which one of the following industries is most apt to have the shortest cash cycle?
- electric utility company
- airplane manufacturer
- fast-food restaurant
- furniture store
- clothing manufacturer
Question 4: Delphinia's has the following estimated quarterly sales for next year. The accounts receivable period is 30 days. What is the expected accounts receivable balance at the end of the second quarter? Assume each month has 30 days.
Sales:
Q1 $1,800
Q2 $1,700
Q3 $2,100
Q4 $1,900
- $567
- $600
- $821
- $1,134
- $1,200
Question 5: Which of the following statements is true regarding the goal of financial management?
- The goal of maximizing the value per share of existing stock is relevant to all organizations.
- The ultimate goal of financial management is maximizing earnings and profits.
- For a company considering international operations, the goal will be the same but the company will have to consider the local, social, economical, and political environment in the decision-making process.
- None of the above are true statements.