Answer to Question #133063 in Management for sandeep

Question

Short-term loans are generally used to:
( a ) Finance permanent additions to working capital
( b ) Finance additions to fixed assets
( c ) Finance seasonal requirements in working capital
( d ) Retire redeemable preference shares, thus changing the capital structure of the firm
( e ) None of the above.

5 Rank the following claims in order from least risk to most risk from an investor's viewpoint:
1 mortgage 2 ordinary shares 3 debentures 4 unsecured notes 5 preference shares
( a ) 1 - 3 - 2 - 4 - 5
( b ) 1 - 3 - 4 - 5 - 2
( c ) 1 - 3 - 5 - 4 - 2
( d ) 1 - 3 - 4 - 2 - 5
( e ) 1 - 3 - 2 - 5 – 4



6 Everything else held constant, a high use of debt will lead to:
( a ) High return on equity
( b ) Lower times interest-earned
( c ) Higher debt/total equity ratio
( d ) Lower profit margin
( e ) All of the above.

Answer 1

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