Quiz #1 - FINALS Flashcards
[TRUE OR FALSE] Debt Financing is more expensive than equity financing.
False
[TRUE OR FALSE] Both interest expense and cash dividends provide a tax shield.
False
[TRUE OR FALSE] Banks can be a source of both short-term and long-term funds.
True
[TRUE OR FALSE] Credit cooperatives are examples of nonbank financial institutions that provide credit facilities to their members.
True
[TRUE OR FALSE] It is faster to get loans from banks as compared to getting them from lending companies.
False
[TRUE OR FALSE] Infusion of capital by a single proprietor to expand the business is an example of equity financing.
True
[TRUE OR FALSE] Issuing bonds is a form of equity financing.
False
[TRUE OR FALSE] Short-term loans should finance the expansion of product capacity.
False
[TRUE OR FALSE] A borrower should maintain certain liquidity and stability ratios as part of a loan covenant with a bank.
True
[TRUE OR FALSE] Real estate properties can be examples of collateral that a borrower can provide its creditor.
True
[TRUE OR FALSE] Individuals prefer to receive same amount of one year from now instead of receiving the same amount now.
False
[TRUE OR FALSE] Interest is the cost for the use of money.
True
[TRUE OR FALSE] The interest is computed by multiplying the interest rate divided by the interest payment period with the outstanding principal.
False
[TRUE OR FALSE] Compound interest is always calculated on the original principal amount.
False
[TRUE OR FALSE] Using a compound interest assumption, the interest applicable for each subsequent period increases because the principal amount on which it is computed on increases by the interest earned or incurred from the previous period assuming all cash flows will be paid or received in a lump sum upon maturity.
True
