1. When projected assets are less than projected liabilities and equity, the firm will have
a. need for debt
b. a need for equity
c. excess cash
d. None of the above
2. The cost of debt is based on
a. Before tax cost
b. After tax cost
c. After tax cost plus premium
d. After tax cost less premium
e. None of the above
3. Many coverage ratios include
a. sinking fund obligations
b. dividends
c. Both A and B
d. None of the above
4. Aspect Company acquires Penn Company which is downstream in the production chain. This is an example of
a. Diversification
b. Vertical integration
c. Horizontal integration
d. None of the above
5. Ivy Company acquires Reynolds Company. Reynolds is in a totally unrelated business to Ivy. This is an example of
a. Vertical integration
b. Horizontal integration
c. Diversification
d. None of the above
6. If the bond’s coupon rate is less than the general interest rates in the market, the Bond will sell at a
a. Premium
b. Discount
c. Neither A or B
7. A differential analysis
a. can be used to compare an alternative to the status quo
b. can be used to compare any set of alternatives
c. is easier to comprehend if a consistent frame of reference is employed
d. B and C