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10 Cards in this Set

  • Front
  • Back

1. Operating leverage refers to ________
Financing a portion of the firm’s assets with securities bearing a fixed rte of return
The additional chance or insolvency borne by the common shareholder.
The incurrence of fixed operating costs in the firm’s income stream
A high degree of variable costs of production
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


1. Operating leverage refers to ________
Financing a portion of the firm’s assets with securities bearing a fixed rte of return
The additional chance or insolvency borne by the common shareholder.
The incurrence of fixed operating costs in the firm’s income stream
A high degree of variable costs of production
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


2. A firm that uses large amounts of debt financing in an industry characterized by a high degree of business risk would have ______ earnings per share fluctuations resulting from changes in levels of sales.
No
Constant
Large
Small
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


2. A firm that uses large amounts of debt financing in an industry characterized by a high degree of business risk would have ______ earnings per share fluctuations resulting from changes in levels of sales.
No
Constant
Large
Small
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


3. JB Corporation has a retained earnings balance of $1,000,000. The company reported net income of $200,000, sales of $2,000,000, and had 100,000 shares of common stock outstanding. The company announced a dividend of $ 1 per share. Therefore, the company’s dividend payout ratio is _________.
10%
20%
50%
100%
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


3. JB Corporation has a retained earnings balance of $1,000,000. The company reported net income of $200,000, sales of $2,000,000, and had 100,000 shares of common stock outstanding. The company announced a dividend of $ 1 per share. Therefore, the company’s dividend payout ratio is _________.
10%
20%
50%
100%
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


4. Assume Harris, Inc. Has 10,000,000 common shares outstanding that have a par value of $2 per share. The stock is currently trading for $30 per share. The firm reported a net profit after-tax of $25,000,000. All else equal, what will happen to earnings per share if the company issues a 10 % stock dividend?
Earnings per share will remain the same since a stock dividend does not create an expense.
Earnings per share will increase because the dividend increases the value of the company.
Earnings per share will decrease because the number of shares outstanding will go up.
The impact cannot be determined without additional information on the new price per share.
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


4. Assume Harris, Inc. Has 10,000,000 common shares outstanding that have a par value of $2 per share. The stock is currently trading for $30 per share. The firm reported a net profit after-tax of $25,000,000. All else equal, what will happen to earnings per share if the company issues a 10 % stock dividend?
Earnings per share will remain the same since a stock dividend does not create an expense.
Earnings per share will increase because the dividend increases the value of the company.
Earnings per share will decrease because the number of shares outstanding will go up.
The impact cannot be determined without additional information on the new price per share.
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


5. All of the following are likely to result in the use of less debt in a company’s capital structure expect:
Desire to maintain financial flexibility
Desire to maintain a high credit rating
Insufficient internal funds
An increase in a company’s marginal tax rate
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


5. All of the following are likely to result in the use of less debt in a company’s capital structure expect:
Desire to maintain financial flexibility
Desire to maintain a high credit rating
Insufficient internal funds
An increase in a company’s marginal tax rate
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


6. Which of the following statements would be consistent with the Dividend Irrelevance Theory?
There is no relationship between a firm’s dividend policy and the value of its common stock.
Perfect capital markets are assumed to exist which allow investors to buy and sell stock without incurring any transaction costs.
Investors are indifferent whether stock returns come from dividend income or capital gains income.
All of the above.
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


6. Which of the following statements would be consistent with the Dividend Irrelevance Theory?
There is no relationship between a firm’s dividend policy and the value of its common stock.
Perfect capital markets are assumed to exist which allow investors to buy and sell stock without incurring any transaction costs.
Investors are indifferent whether stock returns come from dividend income or capital gains income.
All of the above.
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


7. The break even point in sales dollars is convenient if ______
The firm sells a large amount of one product
The firm deals with more than one product
The price per unit is very low
Depreciation expense is high
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


7. The break even point in sales dollars is convenient if ______
The firm sells a large amount of one product
The firm deals with more than one product
The price per unit is very low
Depreciation expense is high
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


8. In perfect capital markets there ______
Is no informational content assigned to a particular dividend policy.
Are no income taxes
Are no flotation costs
All of the above
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


8. In perfect capital markets there ______
Is no informational content assigned to a particular dividend policy.
Are no income taxes
Are no flotation costs
All of the above
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


9. Financial leverage could mean financing some of a firm’s assets with _______
Common stock
Retained earnings
Corporate bonds
Sales revenues
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


9. Financial leverage could mean financing some of a firm’s assets with _______
Common stock
Retained earnings
Corporate bonds
Sales revenues
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


10. Dividend policy is influenced by _______
A company’s investment opportunities
A firm's capital structure mix
A company’s availability of internally generated funds.
All of the above
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4


10. Dividend policy is influenced by _______
A company’s investment opportunities
A firm's capital structure mix
A company’s availability of internally generated funds.
All of the above
http://entirecourse.com/course/BUS-401-Principles-of-Finance/BUS-401-Week-4-Quiz-4