1) Inventories are usually the most liquid, but lowest-yielding, current asset of a firm.
2) An increase in an asset represents a source of funds.
3) The value of a share of stock is the present value of the expected stream of future
dividends.
4) The amount of debt capital used by a corporation is not related to the availability of
equity funds from retained earnings and new common stock.
5) One of the major influences on dividends is the corporate growth rate in sales and the
subsequent return on assets.
6) A branch of investment banking that has been very opportunistic in recent years has
been the increase in sales of foreign securities of companies formerly owned by the
government.
7) Accounts payable is a spontaneous source of funds that grows as the business
expands.
8) The use of automated clearinghouses (ACHs) saves money for consumers,
corporations, and financial institutions by reducing transaction costs.
9) The current market value of Markowitz Corp stock is $61. If 10 rights are required to
buy one additional share of Markowitz at the subscription price of $50, then the rights
are worth $1.00.
10) Synergy is said to take place when the whole is less than the sum of the parts.
11) Leasing land provides a tax advantage to the lessee in that lease payments are
tax-deductible, while there is no deduction for depreciation for a landowner.
12) Financial leverage primarily affects the left-hand side of the balance sheet.
13) Research shows that firms that repurchase their shares exhibit positive stock price
returns.
14) Dividends paid to corporate stockholders have already been taxed once as corporate
income.
15) Compounding refers to the growth process that turns $1 today into a greater value
several periods in the future.
16) The fact that interest payments on debt are fixed is both an advantage and a
drawback.
17) To calculate Future or Present Values of an “Annuity Due,” we must assume that
payments happen twice as often.
18) On average, convertible bonds have call premiums of less than 10% at the time of
issue.
19) The European Union (EU) includes Britain, Germany, France, Italy, and seven other
European countries.
20) The reinvestment assumption is a downside of the IRR method of analysis because
it assumes that cash flows are reinvested at the cost of capital.