1) The expected value is a weighted average of the outcomes multiplied by their
probabilities of occurrence.
2) The issuing company desires to have as little underpricing of new securities as
possible.
3) In considering the share price effect on risk-return trade-offs, our goal should always
be to earn the highest return possible.
4) Cost-benefit is not a consideration in development of a cash management system,
only safety and liquidity.
5) The current ratio is a more severe test of a firm’s liquidity than the quick ratio.
6) “Float” has been largely reduced because of electronic payments and improvements
in B2B business relationships.
7) One advantage of the corporate form of organization is that income received by
stockholders is not taxable since the corporation already paid taxes on the income
distributed.
8) When NPV and IRR analysis provide inconsistent rankings of projects, the financial
manager should generally select the project with the highest IRR.
9) Ratios are used to compare different firms in the same industry.
10) Unfortunately, float is too complicated to be effectively managed through any
combination of disbursement and collection strategies.
11) In general, cash management at the international level employs the same techniques
as domestic cash management.
12) Accumulated depreciation shows up in the income statement.
13) To determine the current worth of four annual payments of $1,000 at 4%, one
would refer to a table for the present value of $1.
14) Common stockholders have a legal claim to dividend income.
15) Profit is generally adequate to finance significant growth.
16) An increase in accounts receivable represents a reduction in cash flows from
operations.
17) Pro forma income statements follow a sales forecast and a production plan.
18) Under capital rationing, a firm will maximize profitability.
19) A key influence in recent years has been the growth in market value of futures
exchanges.
20) Following a merger, the change in the risk profile of the merged companies may
influence the P/E ratio as much as the change in the overall growth rate.