Financial Management - Study Mode

[#241] A fixed rate of _________ is payable on debentures
Correct Answer

(C) Interest

Explanation

Solution: A fixed rate of Interest is payable on debentures. Debentures are a debt instrument used by companies and government to issue the loan. The loan is issued to corporates based on their reputation at a fixed rate of interest.

[#242] According to traditional approach, the average cost of capital _______________.
Correct Answer

(C) Decrease up to certain point, remains unchanged for moderate increase in leverage and rises beyond a certain point

Explanation

Solution: According to traditional approach, the average cost of capital decrease up to certain point, remains unchanged for moderate increase in leverage and rises beyond a certain point.

[#243] A computerized trading network that matches buy and sell orders electronically entered by customers is a___________.
Correct Answer

(B) electronic communications networks

Explanation

Solution: A computerized trading network that matches buy and sell orders electronically entered by customers is an electronic communications networks. An electronic communication network (ECN) is a computerized system that automatically matches buy and sell orders for securities in the market.

[#244] Ownership securities are represented by _______.
Correct Answer

(A) stock

Explanation

Solution: Ownership securities consist of equity stock and preferred stock. The term 'ownership securities,' also known as 'capital stock' represents shares. Shares are the most universal form of raising long-term funds from the market. Every company, except a company limited by guarantee, has a statutory right to issue shares.

[#245] The cost of capital of a firm is ______________.
Correct Answer

(B) The weighted average of the cost of various long-term and short-term sources of finance

Explanation

Solution: The cost of capital of a firm refers to the expense a company bears to finance its operations. It is calculated as the weighted average of the cost of various long-term and short-term sources of finance. This includes the cost of equity, debt, preference shares, retained earnings, and other sources of funds. By determining the weighted average cost of each source of finance, a firm can evaluate the overall expense incurred in raising capital for its business activities. This metric is essential for making investment decisions and assessing the profitability of projects.