Answer the following statements true (T) or false (F)
Preferred stockholders are residual equity holders.
ANSWER: F
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Tavella Company is ready to sell its bonds. Which one of the following financial questions is most relevant to the issue of the bonds and that investors will most likely want answered before they purchase the bonds?
a. How many product lines did Clip Joint Company have last year? b. What will be Clip Joint Company's cost to start operations in another city? c. How much debt does Clip Joint Company already have? d. Will Clip Joint Company pay dividends?
Last year Rennie Industries had sales of $270,000, assets of $175,000 (which equals total invested capital), a profit margin of 5.3%, and an equity multiplier of 1.2. The CFO believes that the company could reduce its assets by $51,000 without affecting either sales or costs. The firm finances using only debt and common equity. Had it reduced its assets by this amount, and had the debt/total invested capital ratio, sales, and costs remained constant, how much would the ROE have changed? Do not round your intermediate calculations.
A. 4.08% B. 3.03% C. 4.52% D. 3.07% E. 4.04%
Moral hazard may occur when a firm or individual takes on more risk when it knows that someone else will "pick up the tab."
Indicate whether the statement is true or false.
Which of the following describes Immanuel Kant's Categorical Imperative?
A) If an action cannot be taken repeatedly, then it is not right to be taken at any time. B) One should take the action that produces the least harm or incurs the least cost. C) One can put values in rank order and understand the consequences of various courses of action. D) If an action is not right for everyone to take, it is not right for anyone to take. E) You should act towards others as you would like them to act towards you.