1) One of several reasons that companies might choose to issue bonds is to shift their
capital structure from more equity ownership to more borrowing.
2) The contribution margin is equal to sales price per unit minus total costs per unit.
3) The degree of financial leverage is not influenced by the interest rate on debt, only
the amount borrowed.
4) Privately placed bonds are the most popular method of raising long-term corporate
debt.
5) The portfolio effect of a merger is greatest for the stockholders of the firm being
acquired.
6) Financial ratios are used to weigh and evaluate the operational performance of the
firm.
7) The coefficient of correlation represents the standard deviation divided by the
expected value.
8) Stretching out the maturity of marketable securities can rarely result in a loss.
9) Even during slack loan periods, banks will never loan out money at an interest rate
lower than the prime rate because the prime rate is their best rate.
10) As long as prices continue to rise faster than costs in an inflationary environment,
reported profits will generally continue to rise.
11) It is less expensive to clear a check through the Federal Reserve System than to
process an automatic fund transfer through an automated clearinghouse.
12) Interest rates and inflation are inversely related.
13) The top 10 underwriters in the world are all large U.S. firms.
14) For the most downside protection, an investor should search for convertibles trading
below par value near their floor value.
15) Small companies finance a relatively greater proportion of their assets through trade
credit than do larger concerns.
16) Expected value analysis involves assigning “weights” to various expected future
outcomes by their respective probabilities of occurrence.
17) The two basic costs associated with inventory are production cost and ordering cost.
18) Investors are usually in favor of poison pills because they prevent takeovers.
19) All commercial paper involves the physical transfer of actual paper certificates.