Quiz_________________?
"Leveraged" results in -
Answer✅
having more debt (bonds) than equity (stock) and lower stock prices
NOTE: recall that debt is safer and levels out risk in a portfolio
Quiz_________________?
A bond premium occurs when -
Answer✅
bonds are issued for an amount greater than their face or maturity amount; caused by the
bonds having a stated interest rate that is higher than the market interest rate for similar
bonds
Quiz_________________?
A change in notes payable (bank loans) will -
Answer✅
impact CFF
NOTE: A/P and A/R impacts CFO; while notes payable (bank loans) are considered long-
term and affect CFF
1
, Quiz_________________?
A collection float can be specifically defined as -
Answer✅
the time it takes for a firm to be able to use the payments from customers
Quiz_________________?
A commonly used method for shortening the float time is -
Answer✅
electronic check processesing
Quiz_________________?
A company that increases A/R by $5000 in the recent period but expects to collect half in
the next period, will see the change in A/R affect cash flows from the operating section as -
Answer✅
an inflow of cash
a decrease of cash flows by $5000
NOTE: the $5000 received is an expected inflow of cash; however receiving $5000 indicates
that the firm is down $5000 in inventory which is shown as a decrease
Quiz_________________?
A dealer market is a -
Answer✅
secondary market
2
, Quiz_________________?
A discount policy 2/10 net 30 means -
Answer✅
that a discount of 2% is applied if the payment is received within 10 days and the total bill is
due in 30 days
Quiz_________________?
A firm can sustain negative CFO indefinitely by borrowing, selling equity, and/or by selling
assets -
Answer✅
FALSE
NOTE: a firm can NOT sustain negative CFO forever
Quiz_________________?
A firm reports the following cash flow data CFO 1 million, CFI 750K, and CFF -100K. Is the
firm sustainable -
Answer✅
Yes, the firm is sustainable. CFF may be due to paying down debt, buying back stock, or
paying dividends
Quiz_________________?
A firm with positive CFO should be considered healthy -
Answer✅
FALSE
NOTE: a positive CFO can still be detrimental to the firm depending on other factors
3
, Quiz_________________?
A highly risk averse investor should invest in -
Answer✅
index funds
Quiz_________________?
A simple interest problem formula is -
Answer✅
simple interest = principle * I/Y * number of years
Quiz_________________?
A Statement of Cash Flows includes -
Answer✅
operating, investing, and financing sections for a PERIOD of time
Quiz_________________?
A tax cut -
Answer✅
increases WACC and the rate of return
Quiz_________________?
A working capital increase caused by an increase in inventory will be -
Answer✅
a cash outflow
4
"Leveraged" results in -
Answer✅
having more debt (bonds) than equity (stock) and lower stock prices
NOTE: recall that debt is safer and levels out risk in a portfolio
Quiz_________________?
A bond premium occurs when -
Answer✅
bonds are issued for an amount greater than their face or maturity amount; caused by the
bonds having a stated interest rate that is higher than the market interest rate for similar
bonds
Quiz_________________?
A change in notes payable (bank loans) will -
Answer✅
impact CFF
NOTE: A/P and A/R impacts CFO; while notes payable (bank loans) are considered long-
term and affect CFF
1
, Quiz_________________?
A collection float can be specifically defined as -
Answer✅
the time it takes for a firm to be able to use the payments from customers
Quiz_________________?
A commonly used method for shortening the float time is -
Answer✅
electronic check processesing
Quiz_________________?
A company that increases A/R by $5000 in the recent period but expects to collect half in
the next period, will see the change in A/R affect cash flows from the operating section as -
Answer✅
an inflow of cash
a decrease of cash flows by $5000
NOTE: the $5000 received is an expected inflow of cash; however receiving $5000 indicates
that the firm is down $5000 in inventory which is shown as a decrease
Quiz_________________?
A dealer market is a -
Answer✅
secondary market
2
, Quiz_________________?
A discount policy 2/10 net 30 means -
Answer✅
that a discount of 2% is applied if the payment is received within 10 days and the total bill is
due in 30 days
Quiz_________________?
A firm can sustain negative CFO indefinitely by borrowing, selling equity, and/or by selling
assets -
Answer✅
FALSE
NOTE: a firm can NOT sustain negative CFO forever
Quiz_________________?
A firm reports the following cash flow data CFO 1 million, CFI 750K, and CFF -100K. Is the
firm sustainable -
Answer✅
Yes, the firm is sustainable. CFF may be due to paying down debt, buying back stock, or
paying dividends
Quiz_________________?
A firm with positive CFO should be considered healthy -
Answer✅
FALSE
NOTE: a positive CFO can still be detrimental to the firm depending on other factors
3
, Quiz_________________?
A highly risk averse investor should invest in -
Answer✅
index funds
Quiz_________________?
A simple interest problem formula is -
Answer✅
simple interest = principle * I/Y * number of years
Quiz_________________?
A Statement of Cash Flows includes -
Answer✅
operating, investing, and financing sections for a PERIOD of time
Quiz_________________?
A tax cut -
Answer✅
increases WACC and the rate of return
Quiz_________________?
A working capital increase caused by an increase in inventory will be -
Answer✅
a cash outflow
4
