FIN 571 TUTOR Let's Do This /fin571tutor.com FIN 571 TUTOR Let's Do This /fin571tutor.com | Page 26

C. All investments earn the market rate of return.
D. Brokerage commissions are zero.
E. Security prices reflect all available information.
Question 9
Which one of these statements is correct concerning the
cash cycle?
A. Increasing the accounts payable period increases all cash cycle.
B. A positive cash cycle is preferable to a negative cash cycle.
C. The cash cycle can exceed the operating cycle if the payables period is
equal to zero.
D. The longer the cash cycle, the more likely a firm will need external
financing.
E. A dopting a more liberal accounts receivable policy will tend to
decrease the cash cycle.
Question 10 The costs of avoiding a bankruptcy filing by a financially
distressed firm are classified as _______ costs.
A. Direct bankruptcy
B. Financial solvency
C. Flotation
D. Indirect bankruptcy
E. Capital structure
Question 11 Which one of the following is an example of a
nondiversifiable risk?
A. A well-respected president of a firm suddenly resigns
B. A well-respected chairman of the Federal Reserve Bank suddenly
resigns
C. A poorly managed firm suddenly goes out of business due to lack of
sales
D. A key employee suddenly resigns and accepts employment with a key
competitor
E. A well-managed firm reduces its work force and automates several jobs
Question 12 One disadvantage of the corporate form of business
ownership is the:
A. Limited liability protection provided for all owners.
B. Unlimited life of the firm.