Please I am asking you kindly to help me. 1 Heavy use of off balance sheet lease
ID: 2696822 • Letter: P
Question
Please I am asking you kindly to help me.
1 Heavy use of off balance sheet lease finacing will tend to
a. make a company appear more risky than it actually is be cause its stated debt ratio will increased.
b. make a company appear less risky than it actually is because its state debt ratio will appear lower.
c. affect a company's cash flow but not its degree of risk.
d. have no effect on either cash flows or risk because the cash flow are already reflected in the income statement
e. affect the lessee's cash flow but only due to tax effect.
2. Bankruptcy plays no role in settle labor disputes and product liability suits. Such issues are outside the bound of bankruptcy law are considered by other statutes. True or False
3. Thje doctrine of fairness under bankrupcy provisions states that claim must be recognized in the order of their legal and contractual priority. True or False.
4. Chapter 7 of the Bankruptcy Act is designed to do which of the following.
a. Protect sharholders against creditors.
b. Establish the rule of reorganization for firm with protected cash flow that eventually will be sufficient to meet debt payment.
c. Ensure that the firm is viable after emerging from bankrupcty.
d Allow the firm to negotiate with each creditor individually.
e. Provide safeguards against the withdrawal of assets by the owner of the bankrupt firm and allow insolvent debtors to discharge all of their obligation and to start over unhampered by a burden of prior debt.
5. Which of the following statements concerning common stock and the investment banking process is not correct?
a. The preemptive right gives each existing common shareholer the right to purchase his or her proportion share of new stock issue.
b. If a firm sell 1,000.000 new shares of Class B stock the tranaction occurs in the primary market.
c. Listing a large firm's stock is often considered to be beneficial to stockholders because the increase in liquidity and repution probably outweigh the additonal cost to the firm.
d. Stockholders have theright to elect the firm's directors who is in turn select the officers who manage the business. If stockholders are dissatified with management performance an outside group may ask the stockholders to vote for it in an effort to contorl of the business. This action is called a tender offer.
e. The announcement of a large issue of new stock could cause the stock price to fall. This loss is called market pressuer, and it is treated as a flotation cost beacause it is a cost to stockholder that is associated with the new issue.
6. Which of the following is not correct?
a. When a corpoation's shares are owned by few individual who own most of the stock or are part of the firm's management, we say that the firm is "closely or privately held.
b. Going public establishes a firm's true intrinsic value and ensure that a liquid market will always exist for the firm's shares.
c. Publicly owned companies have shares to investors who are associated with management and they must register with and report to regulatory agency as the SEC.
d. When stock in a closely held corporation is offered to the public for the first time . the transaction is called going public, and the market for such stock is called the new issue market.
e. Its is possible for a firm to go public and yet not raise any additional new capital
7. From the lessee viewpoint, the riskiness of the cash flows, with the possible exception of the residual value , is about the same as the riskiness of the lessee's .
a. equity cash flows
b. capital budgeting projected cash flows.
c. debt cash flows
d. pension fund cash flow
e. sales
8. Which of the following factors would increase the likelihood that a company would call its outstanding bonds at this time
a. The yeild on the company's outstanding bonds increases due to weakening of the firm's financial situation.
b. A provision in the bond indenture lowers the call price on specific dates, and yesterday was one of those dates.
c. Th flotation costs associated with issuing new bonds rise.
d. The firm's CFO beleives that interest rate are likely to decline in the furture.
e. The firm's CFO beleives that corporate tax rates are likely to be increase in the furture.
9.A lease versus purchase analysis should compare the cost of leasing to the cost of owning , assuming that the asst purchased
a. is financed with short term debt.
b. is financed with long term debt.
c. is financed with debt whose maturity matches term of the lease.
d. is financed with a mix debt and equity based on the firm's target capital structure, that is , at the WACC.
e. is financed with retaining earnings.
Please help me.
thanks
Explanation / Answer
1. b. make a company appear less risky than it actually is because its state debt ratio will appear lower.
2. False
3. True.
4. b. Establish the rule of reorganization for firm with protected cash flow that eventually will be sufficient to meet debt payment.
5. d. Stockholders have theright to elect the firm's directors who is in turn select the officers who manage the business. If stockholders are dissatified with management performance an outside group may ask the stockholders to vote for it in an effort to contorl of the business. This action is called a tender offer