Expert Answers

1. Total asset turnover indicates the firms: (a) liquidity(b)debt position (c) ability to use its assets to generate sales (d)profitability

2. Which of the following is NOT a condition under which a prudent manager would accept some risk in financing?(a)predictable cash-flow patterns (b)inventory is highly perishable (c)price of inventory is stable(d)easy access to capital markets

3. Why is the cost of debt normally lower than the cost of preferred stock?(a)preferred stock dividends are tax deductions (b)interest is tax deductible (c)preferred stock dividends must be paid before common stock dividends (d) common stock dividends are not tax deductible.

4. The floor price of a convertible bond cannot fall below the:

(a)conversion ratio (b)conversion price (c) conversion premium (d)pure bond value