Compared to other firms in the industry, a company that maintains a conservative working capital policy will tend to have a Select the correct response: Greater percentage of short-term financing. Higher total asset turnover. Higher ratio of current assets to fixed assets Greater risk of needing to sell current assets to repay debt.

Compared to other firms in the industry, a company that maintains a conservative working capital policy will tend to have a Select the correct response: Greater percentage of short-term financing. Higher total asset turnover. Higher ratio of current assets to fixed assets Greater risk of needing to sell current assets to repay debt.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter5: Risk Analysis

Section: Chapter Questions

Problem 2QE

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Item 1 of 25 Which of the following statements is incorrect about working capital policy? Select the correct response: Credit policy has an impact on working capital since it has the potential to influence sales levels and the speed with which cash is collected. Managing working capital levels is important to the financial staff since it influences financing decisions and overall profitability of the firm. Holding minimal levels of inventory can reduce inventory carrying costs and cannot lead to any adverse effects on profitability. O A company may hold a relatively large amount of cash if it anticipates uncertain sales levels in the coming year. The cash budget is useful in determining future financing needs.
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9. Which of the following strategy enables a manager to report a higher current ratio? Select one: a. Pay off accounts payable prior to year-end b. Purchase more fixed assets c. Purchase more fixed income securities d. Invest more in long term debt
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Give typing answer to all parts with explanation and conclusion
Several factors affect a firm’s need for external funds. Evaluate the effect of each following factor and place a check next to each factor that is likely to increase a firm’s need for external capital—that is, its AFN (additional funds needed). Check all that apply. The firm increases its dividend payout ratio. The firm switches its supplier for the majority of its raw materials. The new supplier offers less favorable credit terms and thus reduces the trade credit available to the firm, resulting in a reduction in accounts payable. The firm improves its production system and increases its profit margin. Accounts payable and accrued liabilities represent obligations that the firm must pay off. Assuming everything else holds constant, if they increase, the firm’s AFN will_________ .
21 Which of the following best describes the efficiency ratios? OOOO Review Later These ratios measure how efficiently a company is utilizing its assets and resources. These ratios measure the company's ability to pay both short-term and long-term debt. These ratios evaluate the ability of a company to generate income relative to revenue, assets, operating costs, and equity. These ratios measure the amount of capital that comes from debt. They show how solvent the company is.
Which usually costs less short term or long term debt?
Investors and financial analysts wanting to evaluate the operation efficiency of a firm's managers would probably look primarily at the firm's A. Leverage/debt ratios. market value ratios. 11. B. asset management ratios. D. liquidity ratios. C. 12. in a non-interest bearing account, this will tend to lower the firm's A. profit margin. B. return on equity. C. debt ratio. Other things held constant, if a firm holds cash balances in excess of their optimal level D. current ratio.
Financial slack is the amount of unused access to debt markets or bank financing. Which theory of capital structure would place the highest value on maintaining financial slack for a firm that is not in financial distress? Question 10 options: a) Trade-off theory b) Debt financing as a managerial constraint c) Pecking order theory d) Modigliani & Miller irrelevance theory
Managing companies to a Target Optimal Capital Ratio requires which of the following for managers to think through debt has the cheapest cost of capital, but adding too much will increase cost of debt and cost of equity cost of debt requires confidence in achieving certain credit ratings, resulting in better debt cost confidence cost of equity requires estimates on risk, returns and growth expectations on tax rates being relatively stable all of the above
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