1) Firms with highly volatile and perishable inventory should assume relatively low
levels of risk.
2) As inflation in France increases and stays the same in the U.S., the exchange rate of
the euro to the dollar will increase.
3) A financial lease has many of the characteristics of a long-term debt obligation.
4) The inclusion of leases on the balance sheet as an asset and liability has lowered
firms’ debt-to-asset ratios.
5) Although firms can elect to use straight-line depreciation for their external financial
reporting, the MACRS depreciation schedules have superseded other depreciation
methods for tax purposes.
6) Depreciation is an accounting entry and does not involve a cash expense.
7) In Stage III growth, stock dividends and stock splits are eliminated.
8) In a fronting loan arrangement, the intermediary bank extends a risk-free loan to the
foreign affiliate.
9) Total assets of a firm are financed with liabilities and stockholders’ equity.
10) Selling common stock to residents of foreign countries is illegal in most countries,
although it minimizes risk for any multinational corporation.
11) Sales minus cost of goods sold is equal to earnings before taxes.
12) The present value of a positive future inflow can become negative as discount rates
become higher and higher.
13) In times of tight credit in the United States, Eurodollar loans become difficult to
obtain.
14) A foreign affiliate lowers the portfolio risk of its parent company because the
foreign and domestic economies tend to be fairly similar.
15) The conversion premium represents the dollar difference between the conversion
value and the pure bond value.
16) The difference between the rights-on and ex-rights common stock price is equal to
the value of a right, all other things being equal.