Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
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Chapter 6, Problem 7DQ
Summary Introduction
To explain: The significance of short-term financing methods over a normal financing plan used by a firm for certain permanent current assets.
Introduction:
Short-term financing:
It is a type of financing through which the short-term needs of organizations are met. Such finance has a maturity period of less than a year and is referred to as working capital finance.
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Students have asked these similar questions
Q.Which of the following is not true about maturity matching current asset financing?
Select one:
a. Temporary current assets will be financed using short term debt.
b. It is easy to match equipment maturities with the maturity of debt instruments.
c. The use of equity is difficult to classify as equity lacks a maturity date.
d. Fixed assets and the permanent level of current assets are financed with long-term debt of varying maturities.
e. All of the above are true about current asset financing.
Which of the following are assumptions of the Capital Asset Pricing Model (CAPM)? Check all that apply.
Consider the equation for the Capital Asset Pricing Model (CAPM):
All assets are perfectly divisible and liquid.
Investors assume that their investment activities won't affect the price of a stack.
7 = TRF + (TM - TRF) X
bi
-0.50
There are no transaction costs.
0.30
Assets have unique liquidity.
In this equation, the term (M - TRF) represents the
1.00
Suppose that the market's average excess return on stocks is 12.00% and that the risk-free rate is 1.00%. Complete the following table
expected returns to stocks for each beta coefficient using the Capital Asset Pricing Model (CAPM):
3.00
Cov(ri, TM)
02 M
Expected Return to Stocks (%)
Based on the CAPM and your calculations for the return to stocks, what does it mean when the coefficient b; > 1?
O The stock's return correlates with the stock market as a whole.
The stock is more volatile than the market.
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.
Chapter 6 Solutions
Foundations of Financial Management
Ch. 6 - Prob. 1DQCh. 6 - Prob. 2DQCh. 6 - Prob. 3DQCh. 6 - Prob. 4DQCh. 6 - “The most appropriate financing pattern would be...Ch. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - What are three theories for describing the shape...Ch. 6 - Since the mid-1960s, corporate liquidity has been...
Ch. 6 - Gary’s Pipe and Steel Company expects sales next...Ch. 6 - Prob. 2PCh. 6 - Tobin Supplies Company expects sales next year to...Ch. 6 - Antivirus Inc. expects its sales next year to be...Ch. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Boatler Used Cadillac Co. requires $850,000 in...Ch. 6 - Biochemical Corp. requires $550,000 in financing...Ch. 6 - Sauer Food Company has decided to buy a new...Ch. 6 - Assume that Hogan Surgical Instruments Co. has...Ch. 6 - Assume that Atlas Sporting Goods Inc. has $840,000...Ch. 6 - Colter Steel has $4,200,000 in assets. Short-term...Ch. 6 - Prob. 13PCh. 6 - Guardian Inc. is trying to develop an asset...Ch. 6 - Lear Inc. has $840,000 in current assets, $370,000...Ch. 6 - Using the expectations hypothesis theory for the...Ch. 6 - Using the expectations hypothesis theory for the...Ch. 6 - Carmen’s Beauty Salon has estimated monthly...Ch. 6 - Prob. 19PCh. 6 - Eastern Auto Parts Inc. has 15 percent of its...Ch. 6 - Bombs Away Video Games Corporation has forecasted...Ch. 6 - Esquire Products Inc. expects the following...
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Similar questions
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