The cost of retained earnings tends to exceed the cost of issuing new stock because of
the flotation costs.
Stocks with low beta coefficients have higher required rates of return.
The higher the “times-interest-earned,” the safer (i.e., more assured) should be interest
payments.
The creditors of corporations are equally liable for the debts of the firm.
The current yield and yield to maturity are equal when the bond is initially sold for its
face value.
If the price of common stock falls, the value of a convertible preferred stock will also
tend to fall.
Accounts payable may be used to secure a loan.
If the price of the European euro is $1.26, how many euros are necessary to purchase
$1.00?
You inherit a trust account that promises to pay $13,000 a year for 10 years and then
distribute $100,000. If current yields are 10 percent, what is the value of the trust?
Firm XX has the following accounts receivable:
The firm sells on credit and requires payment on the thirtieth day. What proportion of
its sales are overdue and what proportion are more than ten days overdue?
Studies of realized rates of return assume that investors do not reinvest dividend
income.
A swap agreement transfers ownership in a stock from the seller to the buyer.
If fixed asset requirements increase with increases in sales, the firm will need more
sources of finance.
A firm can initially increase its use of debt financing without increasing the cost of
debt.
If a speculator enters a futures contract to sell (make delivery), that individual
anticipates selling the commodity.