1) Maintaining a safety stock will always guard against an “EOQ point” from occurring.
2) The potential of a tax loss carryforward has no effect when considering the
acquisition of a company.
3) Sensitivity analysis helps the financial planner determine how sensitive shareholders
will be to changes in investment strategy.
4) Growth in sales volume prevents a shortage of funds.
5) Real capital is composed of long-term plant and equipment.
6) Vertical integration is usually prohibited or severely restricted by government
antitrust regulations.
7) The coefficient of variation considers how an investment impacts the total risk of the
firm, while the coefficient of correlation considers the specific risk of an investment.
8) Fiercely competitive industries such as the computer industry have had lower profit
margins and return on equity in recent years even though they are under extreme
pressure to maintain high profitability.
9) An increase in a liability account represents a source of funds on the cash flow
statement.
10) The essence of the treatment of long-term, non-cancelable leases is the same as if
the company had borrowed the money and bought the asset.
11) The only difference in the cost of retained earnings (Ke) and the cost of new
common stock (Kn) is the flotation cost on new common stock.
12) Stockholders’ equity is equal to assets minus liabilities.
13) Stock dividends usually enhance the overall wealth of an investor upon their issue.
14) If the liquidity premium theory were the only correct theory, yield curves would
always be upward-sloping.