Homework Answers
The correct answer is:-
B. Business risk is high
Business risk is a risk that the company may fail, so if this risk is high, then the firm should need to have less debt, as interest payments will be lower and the probability will decrease of the firm defaults.
Add Answer to:
Firms tend to use less debt when A. Operating leverage is high O B. Business risk...
help these are multiple choice 20. When a firm employs no debt: a. It has a...
help these are multiple choice
20. When a firm employs no debt: a. It has a financial leverage of one b. It has financial leverage of zero C. Its operating leverage is equal to its financial leverage d. It will not be prifitable e. None of the above. 21. Under normal conditions, with 60% probability, financing Plan A produces a return $35,000 higher than Plan B; under tight money conditions, with 45% probability, Plan A produces a return of $40,000...
3. In general, observed capital structures: A. Tend to overweigh debt in relation to equity. B. Are easily explained in...
3. In general, observed capital structures: A. Tend to overweigh debt in relation to equity. B. Are easily explained in terms of earnings volatility. C. Are easily explained by analyzing the types of assets owned by the various firms. D. Tend to be those which maximize the use of the firm's available tax shelters. E. Vary significantly across industries. 4. Which one of the following statements is correct? A. The greater the volatility of EBIT, the more a firm should...
Integrative-Leverage and risk Firm R has sales of 97,000 units at $2.03 per unit, variable operating costs of $1.67 per unit, and fixed operating costs of $6,070. nterest is $10,080 per year. Firm W...
Integrative-Leverage and risk Firm R has sales of 97,000 units at $2.03 per unit, variable operating costs of $1.67 per unit, and fixed operating costs of $6,070. nterest is $10,080 per year. Firm W has sales of 97,000 units at $2.56 per unit, variable operating costs of $0.97 per unit, and fixed operating costs of $62,400 Interest is $17,200 per year. Assume that both firms are in the 40% tax bracket. a. Compute the degree of operating, financial, and total...
Firms in Japan often employ both high operating and financial leverage because of the use of...
Firms in Japan often employ both high operating and financial leverage because of the use of modern technology and close borrower-lender relationships. Assume the Mitaka Company has a sales volume of 136,000 units at a price of $26 per unit; variable costs are $6 per unit, and fixed costs are $1,910,000. Interest expense is $411,000. What is the degree of combined leverage for this Japanese firm? (Round your answer to 2 decimal places.) Degree of combined leverage
Which of the following statements is CORRECT? If a company were to issue debt and use...
Which of the following statements is CORRECT? If a company were to issue debt and use the money to repurchase common stock, this action would have no impact on the company's return on assets. (Assume that the repurchase has no impact on the company's operating income.) The debt ratio that maximizes EPS generally exceeds the debt ratio that maximizes share price. Increasing financial leverage is one way to increase a firm's basic earning power (BEP). Firms with lower fixed costs...
Which of the following is considered a part of financial risk? Selected Answer: Answers: A. Demand...
Which of the following is considered a part of financial risk? Selected Answer: Answers: A. Demand variability B. Sales price variability C. The extent to which operating costs are fixed D. Changes in interest rates on debt E. The ability to change prices as costs change Which of the following is an example of business risk? Selected Answer: D. Currency risk Answers: A. Default risk B. Prepayment risk C. Strategic risk D. Currency risk E. Equity risk Which of the...
Firms in Japan often employ both high operating and financial leverage because of the use of...
Firms in Japan often employ both high operating and financial leverage because of the use of modern technology and close borrower lender relationships. Assume the Mitaka Company has a sales volume of 135,000 units at a price of $30 per unit: variable costs are $9 per unit and fixed costs are $1,900,000. Interest expense is $410,000. What is the DCL for this Japanese firm? (Round the final answer to 2 decimal places.) Degree of combined leverage DI)
Which of the following statements is correct? Select one: a. Leverage reduces risk of debt even...
Which of the following statements is correct? Select one: a. Leverage reduces risk of debt even when there is no risk of default b. Leverage increases risk of debt even when there is no risk of default c. Leverage increases risk of equity even when there is no risk of default d. Leverage reduces risk of equity even when there is no risk of default
Which of the following statements is most accurate? O a. Firms with low PB ratios are value firms and tend to outpe...
Which of the following statements is most accurate? O a. Firms with low PB ratios are value firms and tend to outperform high PB firms. O b. The biggest drawback of using PCF ratio is its inability to address operating efficiency. O c. Higher PEG ratios imply undervalued stocks. O d. PCF is a preferred relative measure compared to PE.
True or False? Leverage is created when a company accumulates significant amounts of Cash. Companies have...
True or False? Leverage is created when a company accumulates significant amounts of Cash. Companies have experienced significant increases in accounts receivable because of cash based sales in direct to consumer businesses. Long-term Marketable Securities are not as liquid as Short-term Marketable Securities and needs to be segregated. Including Cash and Cash Equivalents stockpiles in Current Assets distorts the value of current assets required to operate the business. When companies have significant interest-bearing Noncurrent Liabilities, these are viewed as a...
help these are multiple choice
20. When a firm employs no debt: a. It has a financial leverage of one b. It has financial leverage of zero C. Its operating leverage is equal to its financial leverage d. It will not be prifitable e. None of the above. 21. Under normal conditions, with 60% probability, financing Plan A produces a return $35,000 higher than Plan B; under tight money conditions, with 45% probability, Plan A produces a return of $40,000...
3. In general, observed capital structures: A. Tend to overweigh debt in relation to equity. B. Are easily explained in terms of earnings volatility. C. Are easily explained by analyzing the types of assets owned by the various firms. D. Tend to be those which maximize the use of the firm's available tax shelters. E. Vary significantly across industries. 4. Which one of the following statements is correct? A. The greater the volatility of EBIT, the more a firm should...
Integrative-Leverage and risk Firm R has sales of 97,000 units at $2.03 per unit, variable operating costs of $1.67 per unit, and fixed operating costs of $6,070. nterest is $10,080 per year. Firm W has sales of 97,000 units at $2.56 per unit, variable operating costs of $0.97 per unit, and fixed operating costs of $62,400 Interest is $17,200 per year. Assume that both firms are in the 40% tax bracket. a. Compute the degree of operating, financial, and total...
Firms in Japan often employ both high operating and financial leverage because of the use of modern technology and close borrower-lender relationships. Assume the Mitaka Company has a sales volume of 136,000 units at a price of $26 per unit; variable costs are $6 per unit, and fixed costs are $1,910,000. Interest expense is $411,000. What is the degree of combined leverage for this Japanese firm? (Round your answer to 2 decimal places.) Degree of combined leverage
Which of the following statements is CORRECT? If a company were to issue debt and use the money to repurchase common stock, this action would have no impact on the company's return on assets. (Assume that the repurchase has no impact on the company's operating income.) The debt ratio that maximizes EPS generally exceeds the debt ratio that maximizes share price. Increasing financial leverage is one way to increase a firm's basic earning power (BEP). Firms with lower fixed costs...
Firms in Japan often employ both high operating and financial leverage because of the use of modern technology and close borrower lender relationships. Assume the Mitaka Company has a sales volume of 135,000 units at a price of $30 per unit: variable costs are $9 per unit and fixed costs are $1,900,000. Interest expense is $410,000. What is the DCL for this Japanese firm? (Round the final answer to 2 decimal places.) Degree of combined leverage DI)
Which of the following statements is most accurate? O a. Firms with low PB ratios are value firms and tend to outperform high PB firms. O b. The biggest drawback of using PCF ratio is its inability to address operating efficiency. O c. Higher PEG ratios imply undervalued stocks. O d. PCF is a preferred relative measure compared to PE.
Most questions answered within 3 hours.
-
Suppose X follows an exponential distribution with mean 7.5.
Determine the conditional probability P(x > 2.5...
asked 20 minutes ago -
Young softball batters are often instructed to “choke-up on the
bat” by their coach. In terms...
asked 23 minutes ago -
Suppose that you are an official with Mexico's economic
development agency. Write a one-page memo detailing...
asked 54 minutes ago -
If you were an international firm, why would you support the
concept of global free trade?...
asked 1 hour ago -
Cisco packet tracer
Q1) Do you get any changes of IP address when packet is
traversing...
asked 1 hour ago -
What is the pressure inside a 33.0 L container holding 106.4 kg
of argon gas at...
asked 2 hours ago -
Question no 2
A housekeeping support department budgets its costs at
SR 40,000 per month plus...
asked 2 hours ago -
A 1400Kg sports car accelerates from rest to 90km/h in 7.0s.
What is the average power...
asked 3 hours ago -
For the following reaction, 0.128 moles of
potassium hydrogen sulfateare mixed with
0.504 moles of potassium...
asked 6 hours ago -
1. What is the present value of $400, three years in the future
if the interest...
asked 7 hours ago -
The labor force minus the number of employed equals the number
of unemployed.
a. True
b....
asked 9 hours ago -
Determine the mass in units of grams [g] of 0.49 moles [mol]
of a new fictitious...
asked 9 hours ago