1) The financial manager typically cannot control the level of credit sales, and hence the
company’s investment in accounts receivable, as the level of credit sales is determined
in large part by the nature of the business enterprise.
2) When several sign reversals in the cash flow stream occur, a project can have more
than one IRR.
3) Net working capital is equal to gross working capital minus depreciation.
4) The bid rate is the rate at which the bank buys the foreign currency from the
customer by paying in home currency.
5) Ratio analysis enhances our understanding of three basic attributes of performance:
liquidity, profitability, and the ability to create shareholder value.
6) The purpose of work-in-process inventory is to ensure that machine failures and
work stoppages in one operation do not affect other operations.
7) One example of a terminal cash flow is the recapture of the net working capital
associated with the project.
8) Factoring accounts receivable is the sale of a firm’s receivables while pledging
accounts receivable is the use of accounts receivable as collateral for a loan.
9) A bond rating of “BB” indicates that the company’s financial position is above
average and hence the default risk on the bonds is very low.
10) Over-the-counter markets include all security markets, with the exception of
organized exchanges.
11) The moderate view of capital structure theory allows for the tax-deductibility of
interest expense.
12) Financial structure includes long- and short-term sources of funds.