7. If the capital markets are efficient, then the sale or purchase of any security at the prevailing market price is:
8. Briefly describe the traditional position on capital structure.
Bambe Holdings, Inc. has debt with both a face and a market value of $ 2,000. This debt has a coupon rate of 6 % and pays interest annually. The expected earnings before interest and taxes is $ 1,200, the tax rate is 34 %, and the unlevered cost of capital is 12 %. What is the firm’ s cost of equity?
9. Profitability ratios indicate:
I) How productively is the firm utilizing its assets.
II) How liquid is the firm.
III) How profitable is the firm.
IV) How highly is the firm valued by the investors.
10. What are the primary reasons for a company to use debt in its capital structure?
11. The difference between Current Assets of a firm and its Current Liabilities is called
12. What are the three basic financial statements?
13. The cash budget is the primary short-term financial planning tool. The key reasons a cash budget is created are:
14. Firms can repurchase shares in the following ways:
I) Open market repurchase
II) Through a tender offer