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15 Cards in this Set
- Front
- Back
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It is possible for a company to report negative free cash flow and still be highly valued by investors; that is, sometimes a negative free cash flow can be a good thing in the eyes of investors. T/F |
False |
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On the balance sheet, total assets may or may not equal the sum of total liabilities plus equity. T/F |
False |
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The annual report contains four basic financial statements: The income statement, the balance sheet, the cash flow statement, and the statement of stockholder's equity. T/F |
True
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The price/earnings (P/E) ratio tells how much investors are willing to pay for a dollar of current earnings. In general, investors regard companies with higher P/E ratios as being less risky and/or more likely to enjoy higher growth in the future. T/F |
Truth |
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If a firm's fixed assets turnover ratio is significantly higher than its industry average, this could indicate that it uses its fixed assets very efficiently or is operating at a over capacity and should probably add fixed assets. T/F |
True |
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In general, It's better to have a low inventory turnover ratio, rather than a high one, as a low ratio indicates that the firm has an adequate stock of inventory relative to sales and this will not lose sales as a result of running out of stock. |
False |
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If interest rates declines significantly, the values of callable bonds will not rise by as much as those bonds without the call provision. It is likely that the bonds would be called by the issuer before maturity, so that the issuer can take advantage of the new, lower rates. T/F |
True |
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Assuming a bond issue is callable, the Y.T.M. is a better estimate of a bond's expected return when interest rates are below an outstanding bond's coupon rate. The Y.T.C. is a better estimate of a bond's expected return when interest rates are equal or above an outstanding bond's coupon rate. T/F |
False |
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Assume the rates on 20-year treasury and corporate bonds as follows: The difference in rates among these issues were most probably caused primarily by: |
Default and liquidity risk differences |
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The "pure expectations theory" states that the shape of the yield curve depends on investors' expectations about the future interest rates T/F |
True |
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The "apparent," but not necessarily the "true," financial position of a company whose sales are seasonal can charge dramatically during a given year, depending on the time of year when the financial statements are constructed. T/F |
True |
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The four most fundamental factors that affect the cost of money are (1) production opportunities (2) time preferences for consumption, (3) risk, and (4) inflation. T/F |
True |
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Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet? |
The company issues new common stock |
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Which of the following events would make it more likely that a company would call its outstanding callable bonds |
Market interests rates decline sharply |
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The economy is just entering a recession. Your firm must raise capital immediately, and debt will be used. You believe it would be great to borrow short term now, and then convert to long term when rates reach a cyclical low. T/F |
True |
