Which one of the following illustrates the use of a matching approach to financing? A Permanent working capital financed with long-term liabilities. B All assets financed with a 50 percent equity, 50 percent long-term debt mixture. C Fluctuating current assets financed with equity.
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5. Which one of the following illustrates the use of a matching approach to financing?
| A |
Permanent |
|
| B |
All assets financed with a 50 percent equity, 50 percent long-term debt mixture. |
|
| C |
Fluctuating current assets financed with equity. |
|
| D |
Fluctuating current assets financed with long-term liabilities. |
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- The funds invested in current assets are termed as Select one: a. None of the options b. Short-term liabilities c. Short term loans d. Gross Working Capital e. long term assetsUsing Problem 1, if Hogwarts Corp.’s policy is to employ Aggressive financing policy, which of the following statement would best describe the policy employed? a. all fixed asset and half of the permanent current assets was financed with long-term liabilities b. all the fixed assets, permanent current assets and half of the temporary current assets was financed with long-term liabilities c. all the fixed assets, and permanent current assets was financed with long-term liabilities d. none of the above 2) Using Problem 1, how much is the temporary current assets needed during April?The funds invested in current assets are termed as Select one: a. long term assets b. Short term loans c. None of the options d. Net Working Capital e. Short-term liabilities
- The financial manager has determined the following schedules for the cost of funds: Cost of the Ratio Cost of Debt Equity 0% 5% 13% 10 5 13 20 5 13 30 5 13 40 5 14 50 6 15 60 8 16 a. Determine the firm’s optimal capital structure. b. Construct a simple pro forma balance sheet that shows the firm’s opti- mal combination of debt and equity for its current level of…Choose the correct. The cost of debt capital is calculated on the basis of: A. Net proceeds B. Annual Interest C. Capital D. Arumal DepreciationWhich of the following statements is not true as regards to matching strategy? a. all assets should be financed with permanent long-term capital. b. temporary current assets should be financed with temporary working capital c. permanent current assets should be financed with permanent working capital. d. long-term assets should be financed from long-term capital.
- 8. Which of the following would be consistent with a more aggressive approach to financing working capital? a. Financing permanent needs with short-term funds. b. Financing permanent inventory buildup with long-term debt. c. Financing temporary needs with short-term funds. d. Financing some temporary needs with long-term funds.Which of the following statements are correct? Preferred equities are separate form common equities Opportunity cost should not be included in the capital budgeting decision Retained earnings are important in calculating the WACC Weights for equity in the WACC calculation are always on book values Cash from net working capital for each year is defined as NWCn- NWCn-1Only one of the methods of evaluating capital investments discussed in Chapter 26 utilizes the annual aftertax net income (and not the annual net cash flows) in its calculation. This method is which of the following? Select one: a. Payback Period Method b. Accounting Rate of Return (ARR) Method c. Net Present Value (NPV) Method d. Internal Rate of Return (IRR) Method e. None of the above
- 8.-What is the meaning of current liabilities in Working Capital Management? A) Source of financing of its current assets. B) Source of financing of its fixed assets C) Source of financing of stockholders' equity D) Source of financing of its long-term liabilities. (Choose one option)Use IFRS 9 to determine how to subsequently measure the following financial assets. Three choices of measurement basis are amortized cost, fair value through other comprehensive income, and fair value through profit or loss. Provide justification for your choice. Long-term loans that are held for collecting contractual cash flows till their maturities, but may be subsequently sold if the loans’ credit risk substantially increases. Investments in bonds that are held for collecting contractual cash flows, and may be subsequently sold to re-invest the cash in financial assets with a higher return. Subprime (high risk) mortgage loans that were originated by a mortgage-broker firm that always sell these loans to banks right after their origination. Forward contracts that an EU bank purchased to hedge the exposure to changes in fair value of US$-denominated loans. Investment in bonds that are convertible into common stock of the bond issuer. Investment in bonds that pay a variable market…Which of the following is a method of evaluating projects by first analyzing the project under all-equity financing and then adding in the effects of debt-financing? Multiple Choice Adjusted present value. Net present value. Pure play approach. Equity-debt approach. Modified IRR.
