1) The payback method considers all cash inflows.
2) Sales minus cost of goods sold is equal to gross profit.
3) Increased use of long-term financing is generally a more conservative approach to
current asset financing.
4) When a bond trades at a discount to par, the yield to maturity on the bond will exceed
the required return.
5) Dividends can only be distributed if the firm has positive income in the year the
dividend is paid.
6) Institutional investors have had increasing influence over corporations with their
ability to vote with large blocks of stock and replace poorly performing boards of
directors.
7) A balance sheet represents the assets, liabilities, and owner’s equity of a company at a
given point in time.
8) A general rule of thumb would be that firms with a faster growth rate have smaller
payout ratios.
9) Proper management of sales, receivables, payables, and inventory form the basis of
cash flow.
10) Investors are most concerned with the liquidity ratios of a company.
11) If the cash dividend per share remains constant following a stock dividend, the
stockholder will receive greater total cash dividends.
12) As corporate bonds mature and become due for payment, it’s common for the
borrowing corporation to replace this debt with the issuance of new bonds.
13) Sole proprietorship means single-person ownership and offers the advantages of
simplicity of decision making and low organizational and operating costs.
14) The cost of NOT taking a discount is higher for terms of 2/10, net 60 than for 2/10,
net 30