Assume a firm’s production process requires an average of 80 days to go from raw materials to finished products and another 40 days before the

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The cost of issuing and selling the stock was $4 per share. The cost of Ningbo Spping preferred stock is: 7.2%. 12.0%. 12.4%. 15%. A firm’s mix of debt and equity defines the firm’s: capital structure working capital net working capital degree of operating leverage

Assume a firm’s production process requires an average of 80 days to go from raw materials to finished products and another 40 days before the finished goods are sold. If the accounts receivable cycle is 70 days and the accounts payable cycle is 80 days, what would the operating cycle be? 110 days 130 days 190 days 270 days The time between ordering materials and collecting cash from receivables is known as the: operating cycle cash conversion cycle accounts receivable period term payable cycle The time between when the firm pays its suppliers and when it collects money from its customers is known as the: operating cycle cash conversion cycle accounts receivable period clearing cycle Wch of the following is not an advantage of short-term borrowing? flexibility establisng continuous relationsps   with a bank or financial institution frequent renewals lower cost In June, Erie Plastics had an ending cash balance of $35,000. In July, the firm had total cash receipts of $40,000 and total cash disbursements of $50,000. The minimum cash balance required by the firm is $25,000. At the end of July, Erie Plastics had an excess cash balance of $25,000 An excess cash balance of $0 required financing of $10,000 required financing of $25,000 A compensating balance on a bank loan effectively ____________ the cost of the loan. raises lowers has no effect on has an indeterminate effect on In order to borrow $100,000 for a 10% loan on discount basis, the firm will actually have to borrow: $110,000 $111,111 $100,000 $90,000 When old short-term debt is replaced by new short-term debt as the old debt comes due, the process is known as: compensating balance rolling the debt fluctuating financing re-terming Wch of the following short-term sources of funds is available only to the financially strongest concerns? trade credit commercial bank loans finance company loans commercial paper If a firm actually sells its accounts receivable, the process is known as: wholesale financing pledging field crediting factoring The ratio between the present value of a project’s cash inflows and the present value of its initial investment is called the: MIRR. IRR. PI. NPV. Internal rate of return (IRR) and net present value (NPV) methods: generally arrive at the same   accept/reject decisions are less sopsticated than the   payback period cannot make use of the same cash   flows can be substituted for by the payback   period Wch of the following is not considered a stage in the capital budgeting process? development production implementation selection The internal rate of return concept is best explained by wch of the following? rate where NPV is equal to zero point where initial investment has   been returned marginal cost of capital average book value The payback period concept is best explained by wch of the following? marginal cost of capital point where initial investment has   been returned rate where NPV is equal to zero accounting rate of return The cost of debt: is typically gher than the cost of   preferred stock must be adjusted to an after-tax cost is gher than the cost of retained   earnings is the lowest component cost because   corporations can deduct 70 percent of the interest expense As a general rule, the capital structure that maximizes stock price also: minimizes the weighted average cost   of capital maximizes the weighted average cost   of capital minimizes the required rate of return   on equity maximizes the cost of debt The after-tax cost of debt for a firm in the 35% tax bracket with a before-tax cost of debt of 6% is: 6% 2.1% 3.9% 5.8% Ningbo Spping has issued preferred stock at its $125 per share par value. The stock will pay a $15 annual dividend. The cost of issuing and selling the stock was $4 per share. The cost of Ningbo Spping preferred stock is: 7.2%. 12.0%. 12.4%. 15%. A firm’s mix of debt and equity defines the firm’s: capital structure working capital net working capital degree of operating leverage

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