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Which one of these is a correct definition?

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Current assets are assets with short lives, such as inventory.

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Long-term debt is defined as a residual claim on a firm's assets.

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Current liabilities are debts that must be repaid in 18 months or less.

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Tangible assets are fixed assets such as patents.

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Net working capital equals current assets plus current liabilities.

All else held constant, interest rate risk will increase when the time to maturity:

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Increases or the coupon rate decreases.

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Increases or the coupon rate increases.

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Decreases or the coupon rate increases.

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Decreases and the coupon rate equals zero.

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The market price of a bond increases when the:

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Face value decreases.

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Coupon rate decreases.

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Par value decreases.

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Coupon is paid annually rather than semiannually.

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Discount rate decreases.

Book value:

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Generally tends to exceed market value when fixed assets are included.

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Is adjusted to market value whenever the market value exceeds the stated book value.

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Is more of a financial than an accounting valuation.

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Is equivalent to market value for firms with fixed assets.

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Is based on historical cost.

The cash flow resulting from a firm's ongoing, normal business activities is referred to as the:

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Cash flow to investors.

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Additions to net working capital.

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Net capital spending.

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Cash flow to retained earnings.

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Operating cash flow.

An efficient capital market is one in which:

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Taxes are irrelevant.

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Security prices reflect all available information.

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Brokerage commissions are zero.

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Securities always offer a positive NPV.

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All investments earn the market rate of return

All else equal, the contribution margin must increase as:

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Sales price per unit declines.

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The fixed cost per unit declines.

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The sales price minus the fixed cost per unit increases.

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The variable cost per unit declines.

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Both the sales price and variable cost per unit increase

Which one of the following statements about preferred stock is true?

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Dividends on preferred stock payable during the next twelve months are considered to be a corporate liability.

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There is no significant difference in the voting rights granted to preferred and common shareholders.

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Preferred stock usually has a stated liquidating value of $100 per share.

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Unlike dividends paid on common stock, dividends paid on preferred stock are a tax-deductible expense.

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If preferred dividends are non-cumulative, then preferred dividends not paid in a particular year will be carried forward to the next year

Which one of these statements is correct concerning the cash cycle?

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Adopting a more liberal accounts receivable policy will tend to decrease the cash cycle.

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Increasing the accounts payable period increases the cash cycle.

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A positive cash cycle is preferable to a negative cash cycle.

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The longer the cash cycle, the more likely a firm will need external financing.

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The cash cycle can exceed the operating cycle if the payables period is equal to zero.

Which one of the following statements is false?

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Aging schedules are used to monitor accounts receivable.

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If sales are seasonal, the percentages shown on an aging schedule will vary during the year.

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Collection efforts may involve legal action.

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An aging schedule includes only overdue accounts.

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Investments in accounts receivable equal average daily sales times average collection period.

A firm has a debt-equity ratio of .64, a pretax cost of debt of 8.5 percent, and a required return on assets of 12.6 percent. What is the cost of equity if you ignore taxes?

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11.12%

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16.38%

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15.22%

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8.55%

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8.06%