1.How does debt financing help reduce agency problems which arise when managers and shareholders have different objectives?

a)Debt financing can help prevent managers from using excess cash on perquisites.

b)Debt financing may make managers too risk-averse, therefore causing "underinvestment" in some risky but positive NPV projects.

c)Debt financing can help prevent managers from using excess cash on non-value adding acquisitions.

d)Both A and C are correct.

2.A stock split will cause a change in the total dollar amounts shown in which of the following balance sheet accounts?

a)Cash

b)Common stock

c)The number of outstanding shares

d)None of the above

3.Commercial paper are short term notes issued by large, strong companies. is bought with surplus cash by banks and other companies, then held as a marketable security for liquidity purposes.

True

False