Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Principles of Finance, 6e
Besley/Brigham
Principles of Finance, 6e
Besley/Brigham
Chapter 08
Cengage Learning Testing, Powered by Cognero
Page 47
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-03 - Capital Budgeting and Cost of Capital
DISC-FIN-05 - Financial Analysis and Cash Flows
Time Estimate-a - 5 min.
TOPICS:
DOL
109. The higher the DOL, the greater the firm's use of debt and the more earnings will change following a change in sales.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-03 - Capital Budgeting and Cost of Capital
DISC-FIN-05 - Financial Analysis and Cash Flows
Time Estimate-a - 5 min.
TOPICS:
DOL and Debt
110. A high degree of operating leverage, other things held constant, means that a relatively small change in unit sales will
result in a large change in operating income.
a.
True
b.
False
ANSWER:
True
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-03 - Capital Budgeting and Cost of Capital
DISC-FIN-05 - Financial Analysis and Cash Flows
Time Estimate-a - 5 min.
TOPICS:
DOL and Income
111. It is more difficult to estimate fixed and variable cost per unit for a project during planning than once the project is
underway. This is because, once a project is operational, the firm has access to clearly reported and separated actual costs
that the project incurs.
a.
True
b.
False
Principles of Finance, 6e
Besley/Brigham
Chapter 08
Cengage Learning Testing, Powered by Cognero
Page 48
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-03 - Capital Budgeting and Cost of Capital
DISC-FIN-05 - Financial Analysis and Cash Flows
Time Estimate-a - 5 min.
TOPICS:
Estimating Costs
112. An advantage of breakeven analysis is that it can be applied with equal precision whether a firm's cost curve is linear
or nonlinear.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-03 - Capital Budgeting and Cost of Capital
DISC-FIN-05 - Financial Analysis and Cash Flows
Time Estimate-a - 5 min.
TOPICS:
Breakeven and Cost Curves
113. The degree of financial leverage (DFL) is an index number that measures the effect of a change in sales on the
financial breakeven point.
a.
True
b.
False
ANSWER:
False
POINTS:
1
DIFFICULTY:
Moderate
ACCREDITING STANDARDS:
Blooms Taxonomy-5 - Knowledge
Business Program-6 - Reflective Thinking
DISC-FIN-03 - Capital Budgeting and Cost of Capital
DISC-FIN-05 - Financial Analysis and Cash Flows
Time Estimate-a - 5 min.
TOPICS:
DFL
114. If a small change in sales results in a large change in EPS, then it must be caused by the financial leverage associated
with the firm.
a.
True
b.
False
ANSWER:
False
POINTS:
1
