Financial Management - Study Mode
[#71] If a preferred stock issue is cumulative, this means____________.
Correct Answer
(C) unpaid dividends will be paid in the future
Explanation
Solution: If a preferred stock issue is cumulative, this means unpaid dividends will be paid in the future.
[#72] When a company uses debt fund in its financial structure, it will lead to a change in
Correct Answer
(A) Financial leverage
Explanation
Solution: When a company uses debt fund in its financial structure, it will lead to a change in Financial leverage. Financial leverage is the amount of debt that an entity uses to buy more assets. Leverage is employed to avoid using too much equity to fund operations.
[#73] Which of the following is not a characteristic of investments companies?
Correct Answer
(D) reduced expenses
Explanation
Solution: Reduced expenses is not a characteristic of investments companies.
[#74] Short term sources are
Correct Answer
(C) Commercial papers
Explanation
Solution: Short term sources are Commercial papers. Commercial paper is a money-market security issued (sold) by large corporations to obtain funds to meet short-term debt obligations (for example, payroll) and is backed only by an issuing bank or company promise to pay the face amount on the maturity date specified on the note.
[#75] A company having easy access to the capital markets can follow a ____________ dividend policy
Correct Answer
(A) liberal
Explanation
Solution: A company having easy access to the capital markets can follow a liberal dividend policy. It is a policy of distributing a major part of its earnings to its shareholders as dividend and retains a minimum amount as retained earnings.