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Question
If a firm adheres strictly to the residual dividend policy, then if its optimal capital budget requires the use of all earnings for a given year (along with new debt according to the optimal debt/total assets ratio), then the firm should paya. no dividends to common stockholders.
b. dividends only out of funds raised by the sale of new common stock.
c. dividends only out of funds raised by borrowing money (i.e., issue debt).
d. dividends only out of funds raised by selling off fixed assets.
e. no dividends except out of past retained earnings.
Answer
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In a portfolio of three different stocks, which of the following could NOT be true?
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Suppose that you're planning a vacation and borrow $2,000 from a bank for one year at a stated annual interest rate of 14 percent, with interest prepaid (a discounted loan). Also, assume that the bank requires you to maintain a compensating balance equal to 20 percent of the initial loan value. What effective annual interest rate are you being charged?a. 14.00%b. 8.57%c. 16.28%d. 21.21%e. 28.00%
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Which of the following is not correct for a firm with seasonal sales and customers who all pay promptly at the end of 30 days?
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b. The level of accounts receivable will be constant from month to month.
c. The ratio of accounts receivable to sales will vary from month to month.
d. The level of accounts receivable at the end of each quarter will be the same.
e. DSO will vary from month to month.
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a. True
b. False