Financial management chapter 2

Financial management chapter 2

University

26 Qs

quiz-placeholder

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Financial management chapter 2

Financial management chapter 2

Assessment

Quiz

Business

University

Medium

Created by

Ánh Hoàng

Used 2+ times

FREE Resource

26 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Homemade leverage is:

the incurrence of debt by a corporation in order to pay dividends to
shareholders

the exclusive use of debt to fund a corporate expansion project

the borrowing or lending of money by individual shareholders as a means of
adjusting their level of financial leverage

best defined as an increase in a firm's debt-equity ratio

the term used to describe the capital structure of a levered firm

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which one of the following states that the value of a firm is unrelated to the
firm's capital structure?

Capital Asset Pricing Model

M & M Proposition I

M& M Proposition II

Law of One Price

Efficient Markets Hypothesis

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which one of the following states that a firm's cost of equity capital is directly
and proportionally related to the firm's capital structure?

Capital Asset Pricing Model

M & M Proposition I

M & M Proposition II

Law of One Price

Efficient Markets Hypothesis

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which one of the following is the equity risk that is most related to the daily
operations of a firm?

market risk

systematic risk

extrinsic risk

business risk

financial risk

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which one of the following is the equity risk related to a firm's capital structure
policy?

market

systematic

extrinsic

business

financial

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Butter & Jelly reduced its taxes last year by $350 by increasing its interest
expense by $1,000. Which of the following terms is used to describe this tax
savings?

interest tax shield

interest credit

financing shield

current tax yield

tax-loss interest

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The unlevered cost of capital refers to the cost of capital for a(n):

private entity

all-equity firm

governmental entity

private individual

corporate shareholder

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