Which of the following is considered a part of financial risk? Selected Answer: Answers: A. Demand...
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Which of the following is considered a part of financial risk? |
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Homework Answers
ANSWER 1 : D : CHANGES IN INTEREST RATE ON DEBT
FINANCIAL RISK IS DEFINED AS INABILITY TO PAY INTEREST ON TIME.
ANSWER 2 : C : STRATEGIC RISK
STRATEGIC RISK ONE OF THE 5 IMPORTANT BUSINESS RISKS. BUSINESS RISK MEANS POSSIBILITY OF LOWER PROFITS OR MAY BE LOSSES DUE TO UNCERTAINTIES
ANSWER : B : HIGH OPERATING LEVERAGE
OPERATING LEVERAGE DEFINES RELATIONSHIP BETWEEN CONTRIBUTION & EBIT. THE DIFFERENCE BETWEEN TWO IS FIXED COST. IF OPERATING LEVERAGE IS HIGHER, IT INDICATES THAT FIRM WILL HAVE HIGHER OPERATING MARGINS. (THUMBS UP PLEASE)
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Which of the following is considered a part of financial risk? Selected Answer: Answers: A. Demand...
1. A_____ is an action taken by a firm to decrease the per-share price of its...
1. A_____ is an action taken by a firm to decrease the per-share price of its stock. A. stock appreciation B. stock split C. stock issue D. stock repurchase E. stock redemption 2. Which of the following leads to less business risks compared to other factors? A. High percentage of fixed costs B. High operating leverage C. More financial risk D. High interest rates E. More stable operations 3. Which of the following is an example of business risk? A....
Terms Descriptions The level and nature of risk attributable to a firm's activities and operation...
Terms Descriptions The level and nature of risk attributable to a firm's activities and operations, and ignoring the risks associated with the firm's capital structure The situation in which managers have different, and usually better, information about their firm's past, current, and future conditions and prospects, compared to outsiders, such as external investors, creditors, suppliers, and customers A firm's use of relatively high fixed, as opposed to variable, operating costs, such as capital-intensive productive processes instead of labor-intensive methods This...
Are my answers right? what is the answer for 2? The total risk in a firm...
Are my answers right? what is the answer for 2?
The total risk in a firm is determined by evaluating the firm's business risk and financial risk. True or False: All other things being equal, firms exhibiting high degrees of operating leverage exhibit lower levels of business risk This statement is: True False The use of financial leverage, or fixed-cost sources of capital, involves a trade-off between its effect on the firm's shareholders and its effect on the riskiness of...
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...
Select the correct term for each of the following descriptions. These are not necessarily complete definitions,...
Select the correct term for each of the following descriptions. These are not necessarily complete definitions, but there is only one possible answer for each term. Descriptions Terms The level and nature of risk attributable to a firm's activities and operations, and ignoring the risks associated with the firm's capital structure. The situation in which outsiders, such as external shareholders, credits, suppliers, and customers have less and inferior information about a firm's past, current, and future conditions and prospects, compared...
Integrative-Leverage and risk Firm has sales of 104.000 units at $2.05 per unit, variable operating costs...
Integrative-Leverage and risk Firm has sales of 104.000 units at $2.05 per unit, variable operating costs of $1.71 per unit, and fixed operating costs of $6,000 Interest is $10.080 per year Firm Whas sales of 104 000 units at $2.56 per unit, variable operating costs of $0.98 per unit, and fixed operating costs of $62,800 Interest is $17.900 per year. Assume that both firms are in the 40% tax bracket a. Compute the degree of operating, financial, and total leverage...
Integrative—Leverage and risk Firm R has sales of 101,000 units at $1.97 per unit, variable operating...
Integrative—Leverage and risk Firm R has sales of 101,000 units at $1.97 per unit, variable operating costs of $1.68 per unit, and fixed operating costs of $6,010. Interest is $10,080 per year. Firm W has sales of 101,000 units at $2.59 per unit, variable operating costs of $0.98 per unit, and fixed operating costs of $62,600. Interest is $17,400 per year. Assume that both firms are in the 40% tax bracket. a. Compute the degree of operating, financial, and total...
Higher operating leverage: Select one: a. means higher proportion of fixed costs within a firm’s overall...
Higher operating leverage: Select one: a. means higher proportion of fixed costs within a firm’s overall cost structure b. leads to more business risk c. leads to higher expected EBIT d. leads to higher risk e. All of the above
Which of the following methods would NOT result in a reduction of business risk? Group of...
Which of the following methods would NOT result in a reduction of business risk? Group of answer choices diversify reduce sales volatility reduce operating leverage increase fixed operating costs
Which of the following companies should have the highest beta? Multiple Choice Orange Company that has...
Which of the following companies should have the highest beta? Multiple Choice Orange Company that has low operating and financial leverage. Yellow Company that has highly cyclical revenues and uses high levels of fixed costs. Black Company that has highly cyclical business activity and low operating leverage Red Company that has low cyclical business activity and low fixed costs. Blue Company that has low cyclical business activity and high operating leverage.
Terms Descriptions The level and nature of risk attributable to a firm's activities and operations, and ignoring the risks associated with the firm's capital structure The situation in which managers have different, and usually better, information about their firm's past, current, and future conditions and prospects, compared to outsiders, such as external investors, creditors, suppliers, and customers A firm's use of relatively high fixed, as opposed to variable, operating costs, such as capital-intensive productive processes instead of labor-intensive methods This...
Are my answers right? what is the answer for 2?
The total risk in a firm is determined by evaluating the firm's business risk and financial risk. True or False: All other things being equal, firms exhibiting high degrees of operating leverage exhibit lower levels of business risk This statement is: True False The use of financial leverage, or fixed-cost sources of capital, involves a trade-off between its effect on the firm's shareholders and its effect on the riskiness of...
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...
Select the correct term for each of the following descriptions. These are not necessarily complete definitions, but there is only one possible answer for each term. Descriptions Terms The level and nature of risk attributable to a firm's activities and operations, and ignoring the risks associated with the firm's capital structure. The situation in which outsiders, such as external shareholders, credits, suppliers, and customers have less and inferior information about a firm's past, current, and future conditions and prospects, compared...
Integrative-Leverage and risk Firm has sales of 104.000 units at $2.05 per unit, variable operating costs of $1.71 per unit, and fixed operating costs of $6,000 Interest is $10.080 per year Firm Whas sales of 104 000 units at $2.56 per unit, variable operating costs of $0.98 per unit, and fixed operating costs of $62,800 Interest is $17.900 per year. Assume that both firms are in the 40% tax bracket a. Compute the degree of operating, financial, and total leverage...
Integrative—Leverage and risk Firm R has sales of 101,000 units at $1.97 per unit, variable operating costs of $1.68 per unit, and fixed operating costs of $6,010. Interest is $10,080 per year. Firm W has sales of 101,000 units at $2.59 per unit, variable operating costs of $0.98 per unit, and fixed operating costs of $62,600. Interest is $17,400 per year. Assume that both firms are in the 40% tax bracket. a. Compute the degree of operating, financial, and total...
Which of the following companies should have the highest beta? Multiple Choice Orange Company that has low operating and financial leverage. Yellow Company that has highly cyclical revenues and uses high levels of fixed costs. Black Company that has highly cyclical business activity and low operating leverage Red Company that has low cyclical business activity and low fixed costs. Blue Company that has low cyclical business activity and high operating leverage.
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