Capital rationing implies that: Select one: ○ A. funding resources exceed funding needs. B. funding needs exceed funding resources. C. funding needs equal funding resources. D. none of the above.
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- Other financing sources increase fund balance in the same manner as revenue. a. True b. FalseA firm’s weighted average cost of capital should not do which one of the following? Group of answer choices measure the cost of short-term sources of funds measure cost on a marginal basis measure the cost of long-term sources of funds measure cost on an after-tax basisWhich one of the following fund types is likely to have the lowest annual expense ratio? a. Index funds b. Equity funds c. Bond funds d. Balanced funds e. Hybrid funds Clear my choice
- Which of the following items does break-even analysis attempt to determine? The point at which total costs equal total revenues The point at which variable costs equal variable revenues Levels of grant payments Levels of transfer paymentsWhich of the following statements is not true as regards to matching strategy? a. all assets should be financed with permanent long-term capital. b. temporary current assets should be financed with temporary working capital c. permanent current assets should be financed with permanent working capital. d. long-term assets should be financed from long-term capital.Identify the incorrect statement in connection to working capital management: A. Conservative financing policies use short-term funds to finance only part of fluctuating current assets. B. Long-term funds are more expensive and more risky than short-term funds . C. The objectives of working capital management are profitability and liquidity. D. Permanent current assets should be financed from long-term sources if a moderate policy is adopted.
- Which of the following is not a recommended solution if the comparison of projected cash flows with goals identifies a shortfall? a. Find additional income. b. Utilize the emergency fund. c. Cut back costs. d. Change goals. e. All of the above are recommended solutions.Ranking conflicts (or conflicts in project choice) can arise between IRR and NPV decision rules when a. Crossover rate is lower than cost of capital used b. Cost of capital is lower than IRR c. Crossover rate is higher than cost of capital used d. Cost of capital is higher than IRRThe methods of evaluating capital investment proposals can be grouped into two general categories referred to as (1) methods that do not use present values and (2) methods that use present values. True False
- Consider the following statement: In a capital rationing problem withdivisible investments, if all projects have positive present worths, all of theinvestment capital will be used. Solve, a. This statement is true b. This statement is false c. Not enough information is given; the numeric values of the present worths of the projects are required to know whether this statement is true or false d. Not enough information is given; the numeric values of the IRRs of the projects and the value of MARR are required to know whether this statement is true or falseThe third step for making a capital investment decision is to establish baseline criteria for alternatives. Which of the following would not be an acceptable baseline criterion? A. payback method B. accounting rate of return C. internal rate of return D. inventory turnoverWhy are accruals called spontaneous sources of funds, what are their costs, and why don’tfirms use more of them?
