Questions and Answers of Essentials Managerial Finance

At year-end 2009, total assets for Shome Inc. were $1.2 million and accounts payable were $375,000. Sales, which in 2009 were $2.5 million, are expected to increase by 25 percent in 2010. Total
In January 2006, the yield on AAA-rated corporate bonds averaged approximately 5 percent; one year later, the yield on these same bonds had climbed to about 6 percent because the Federal Reserve
Martell Corporation’s 2008 sales were $12 million. Sales were $6 million five years earlier. To the nearest percentage point, at what rate have sales grown?
What would be the effect of each of the following on a firm’s operating and financial break-even point? Indicate the effect in the space provided by placing a plus sign (+) for an increase, a
What data are necessary to construct a financial break-even chart?
Firm A’s management is very conservative whereas Firm B’s is more aggressive. Is it true that, other things the same, Firm B would probably have larger holdings of marketable securities? Explain.
On January 2, 2007, a Sunny Communications $1,000 face value, six-year bond sold for $889. Investors who bought this particular bond will be paid interest equal to $40 every six months. Market
If a firm’s earnings per share grew from $1 to $2 over a 10-year period, the total growth would be 100 percent, but the annual growth rate would be less than 10 percent. True? Explain. Under what
Your boss, the chief financial officer (CFO) for Southern Textiles, has just handed you the estimated cash flows for two proposed projects. Project L involves adding a new item to the
What data are necessary to construct an operating break-even chart?
What does the term liquidity mean? Which would be more important to a firm that held a portfolio of marketable securities as a precautionary balance against the possibility of losing a major
It is now January 1, 2008, and you are considering the purchase of an outstanding Puckett Corporation bond that was issued on January 1, 2006. The Puckett bond has a 9.5 percent annual coupon and a
Intercontinental Baseball Manufacturers (IBM) has an outstanding bond that matures in 10 years. The bond, which pays $25 interest every six months ($50 per year), is currently selling for $598.55.
Use the model in File C16 to work this problem. Refer back to Problem 16-13.a. Would it be to Cooley’s advantage to offer to pay the factor a commission of 2.5 percent if it would lower the
C. Charles Smith recently was hired as president of Dellvoe Office Equipment Inc., a small manufacturer of metal office equipment. As his assistant, you have been asked to review the company’s
A bond that pays interest forever and has no maturity date is a perpetual bond. How is the yield to maturity on such a bond determined?

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