Financial Management
Operating leverage may be defined as:
the degree to which debt is used in financing the firm
the difference between price and variable costs
the extent to which capital assets and fixed costs are utilized
the difference between fixed costs and the contribution margin
the extent to which capital assets and fixed costs are utilized
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The liquidity premium theory suggests that long-term interest rates are higher than short-term interest rates because:A. investors generally prefer to invest short periods of time
B. government policy maintains this relationship
C. there is greater risk in long-term bonds
D. exchange rate fluctuations establish this relationship
Using a lockbox system to improve collections:
A. is more expensive than the use of collection centers
B. utilizes local banks to clear local payments made to the collection center
C. provides more float than collection centers
D. results in checks being forward to a P.O. box and clearing through local banks
All of the following are factors influencing the choice of marketable securities except:
A. yield
B. maturity
C. marketability
D. maximum investment allowed
In establishing credit standards, the firm must consider the nature of the credit risk based on all of the following, except:
A. prior record of payment
B. terms of credit
C. financial stability
D. current net worth
A cash discount may best be defined as:
A. a reduction in price if payment is made within the specified time period
B. a discount offered to critical suppliers
C. a discount applied to volume sales
D. a discount or the repayment of the firm’s debt
Commercial paper may best be defined as:
A. a short term obligation of the government issued to commercial investors
B. short term unsecured promissory notes issued by corporations
C. an insignificant source of funds to large corporations
D. the debt obligations of chartered banks
The field of finance is closely related to the fields of:
A. statistics and economics
B. statistics and risk analysis
C. economics and accounting
D. accounting and comparative return analysis
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