Homework answers / question archive / Bellevue University MBA 620 Quiz 8 1)Which of the following presents the Pecking Order Theory order of preference of capital (funds) sources for a profitable firm, from 1st = most preferred to last listed = least preferred? a

Bellevue University MBA 620 Quiz 8 1)Which of the following presents the Pecking Order Theory order of preference of capital (funds) sources for a profitable firm, from 1st = most preferred to last listed = least preferred? a

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Bellevue University

MBA 620

Quiz 8

1)Which of the following presents the Pecking Order Theory order of preference of capital (funds) sources for a profitable firm, from 1st = most preferred to last listed = least preferred?

a.            most preferred = new debt,       then new equity,             retained earnings = least preferred

b.            most preferred = new equity, then new debt,   retained earnings = least preferred

c.             most preferred = retained earnings,       then new equity,             new debt = least preferred

d.            most preferred = new equity,    then retained earnings, new debt = least preferred

 

least preferred

 

2.            Which of the following is generally considered to be a lower cost of capital (i.e. cheaper source of financing)?

a.            debt

b.            equity

3.            Assume the following receipts and disbursement forecast:

                Week 1 Week 2

Cash Receipts    $2,000   $3,000

Cash Disbursements       $(700)   $(1,600)

Beginning Cash Balance $1,000  

Minimum Cash Required              $1,200   $1,200

 

Assuming that the company didn’t make any investments or borrowings after week 1, what will be their cash position at the end of week 2?

a.            Financing Needed (Deficit) of ($2,300)

b.            Investable Funds (Surplus) of $2,300

c.             Financing Needed (Deficit) of ($1,200)

d.            Investable Funds (Surplus) of $1,200 e. Investable Funds (Surplus) of $2,500

f.             Financing Needed (Deficit) of ($2,500)

 

4.            When attempting to identify an optimal capital structure, the following should generally be factored into the decision, EXCEPT which one?

a.            Fixed and variable costs

b.            Company’s operating risks

c.             Immediate and long-term financing needs

d.            Risk-taking attitude of the board of directors

5.            Advantages of financing with long-term debt include the following, EXCEPT which one?

a.            Lower cost than equity because historically less risky to investors

b.            Provides a fixed rate of return to investors

c.             Efficient capital markets, especially for well-rated issues

d.            Avoids dilution of stock

 

e.            Reduces the financial risk of the company page 600 slide 5 PowerPoint ch 20

f.             Owners of the company’s debt do not vote on shareholder issues

6.            A company’s payroll for the next 3 months is an example of:

a.            Certain cash flows

b.            Long-term forecasting

c.             Less predictable cash flows d. Non-predictable cash flows e. Predictable cash flows

 

7.            Advantages of financing with common stock include the following, EXCEPT which one?

a.            May extend voting rights and control to more shareholders PowerPoint slide 6 Ch. 20

b.            Does not obligate the company to make fixed payments to investors

c.             Does not mature

d.            Provides creditors with a cushion against losses

e.            Expected profitability may result in attractive terms on equity capital raised

 

8.            Additional capital raised through the sale of stock can be considered which of the following?

a.            Income

b.            A capitalized asset

c.             Cash inflow

d.            Equity

e.            c and d from above f. all of the above

 

9.            On which of the following dates would one expect the price of a stock to drop by approximately the amount of the firm’s declared dividend (assuming no other news or market price changing events)?

a.            dividend distribution date

b.            dividend holder of record date

c.             dividend payment date

d.            dividend declaration date e. ex-dividend date Page 631

 

10.          With regard to dividend policy, signaling can be either positive or negative and often depends upon the context of the dividend.

c.             True page 631 (bottom of the page)

d.            False