Assume Nike had a Current Ratio of 3.4 and its competitor has a Current Ratio of 1.3. Which of the following statements is true?Competitors can easily raise capital through a bank loan as compared to NikeO Competitor has better liquidityONike needs to borrow cash immediately38Nike has better liquidity

Lets understand the basics. Current ratio indicates firm's liquidity position. It compares current…

Answered: Assume Nike had a Current Ratio of 3.4…

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter7: Types And Costs Of Financial Capital

Section: Chapter Questions

Problem 1bM

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Which of the following statements is most correct? (Hint: Work Problem 4-16 before answering 4-17, and consider the solution setup for 4-16, as you think about 4-17.) a. If a firm's expected basic earning power (BEP) is constant for all of its assets and exceeds the interest rate on its debt, then adding assets and financing them with debt will raise the firm' expected return on common equity (ROE). b. The higher its tax rate, the lower a firm's BEP ratio will be, other things held constant. c. The higher the interest rate on its debt, the lower a firm's BEP ratio will be, other things held constant. d. The higher its debt ratio, the lower a firm's BEP ratio will be, other things held constant. e. If a firm's expected basic earning power (BEP) is constant for all of its assets and exceeds the interest rate on its debt, then adding assets and financing them with debt will decrease the firm's expected return on common equity (ROE).
I need help answering A, B, and C, questions please in the pic.
When a firm’s accounts payable goes down, this is the result of …………paying off a short-term loan and serves as ……..of funds for the firm.
What does a firm need to do to improve liquidity? O A. Stock up on inventory in order to never run out of stock O B. Extend credit terms to customers in order to gain more sales O C. Pay all bills and payables when due O D. Speed up collection of accounts receivable from customers
1. Opportunity cost of capital (S2.1) Which of the following statements are true? The opportunity cost of capital: a. Equals the interest rate at which the company can borrow. b. Depends on the risk of the cash flows to be valued. c. Depends on the rates of return that shareholders can expect to earn by investing on their own. d. Equals zero if the firm has excess cash in its bank account and the bank account pays no interest.
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Answer the following questions with SOLUTIONS. Pls choose only the answer in the choices. Q1.What is the net cash flow to equity?a. 10,140,489b. 11,103, 272c. 11, 140, 489d. 12, 103, 272 Q2.What is the net Cash flow to the Firm?a. 11,140,489b. 12,103,272c. 12,808,412d. 13,974,000 Q3. How much is the terminal value recognized after the three-year forecast period?a. 10,880,000b. 12,466,667c. 13,090,000d. 10,880,000Q4. How much is the net cash flow of Gising Company in Year 1?a. 390,000b. 290,000c. 220,000d. 140,000
K-Life financial services Limited uses risk-adjusted return on capital (RAROC) to measure performance on several aspects. In this regard, imagine that an investment officer wants to execute a transaction with the following characteristics: Probability of default (PD) = 30 basis points Loss given default (LGD) = 55% Exposure at default (EAD) = K 1.45 million Expected loss (EL) = K 2,750 This is a loan to a company in the Agro industrial. The firm’s economic capital (EC) model is based on the 99% confidence level, with an average standard deviation of 2.15%. The risk-free rate of return is 6%. Assume that the bank has set a RAROC hurdle rate of 15% and this transaction has a net profit of K10, 500. REQUIRED: Compute the K-life’s risk-adjusted rate of return on this transaction. Now assume that K-life could also have made a loan for the same amount to a firm in the service industry, and that the standard deviation for economic capital purposes in this case is 1.29%. Compute the bank’s…
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Which of the following transactions would result in an increase in capital employed? A. Paying a trade payable in cash B. Writing off a bad debt C. Purchasing on credit D. Repaying a loan E. Selling inventory at a profit F. Increasing the bank overdraft to purchase a non - current asset
When a profitable business has no mandated loan capital but there are non-mandated liabilities a. the return on equity always exceeds the return on total capitalb. the return on equity always equals the return on total capitalc. the return on equity may be equal to the return on total capitald. the return on equity always lags behind the return on total capital choose one
1. Which firm is more likely to borrowing money in the future, a rapidly growing firm that is expanding its markets before the competition "copies" its product or service or a mature company like Procter and Gamble with established mature brands? Explain. 2. Are cash flows constant over time for most firms or do they vary across the life cycle of the typical firm? Explain.

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