Capital Structure Principles

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Q1
❓ MCQ📘 ACC501📑 Lec 37🏷️ Capital Structure PrinciplesMedium🔁⭐💡🌟#business finance; business risk; systematic risk; asset risk; financial leverage; financial risk🎓Midterm; Quiz 2; Past Paper🏛️VU Midterm ACC501 Quiz Past Papers🏛️VU Apex Solved Quiz File🏛️Mega Quiz File by Shahzad
Business risk depends on which of the following risk of the firm’s assets?
  1. A.Systematic Risk
  2. B.Diversifiable Risk
  3. C.Unsystematic Risk
  4. D.None of the given options
Q2
❓ MCQ📘 ACC501📑 Lec 37🏷️ Capital Structure PrinciplesEasy🔁⭐💡🌟#business finance; financial leverage; debt financing; capital structure; leverage ratios; interest obligation🎓Midterm; Quiz 2; Past Paper🏛️VU Midterm ACC501 Quiz Past Papers🏛️VU Apex Solved Quiz File🏛️Mega Quiz File by Shahzad
Which of the following terms refers to the use of debt financing?
  1. A.Operating Leverage
  2. B.Financial Leverage
  3. C.Manufacturing Leverage
  4. D.None of the given options
Q3
❓ MCQ📘 ACC501📑 Lec 37🏷️ Capital Structure PrinciplesMedium🔁⭐💡🌟#business finance; interest tax shield; debt financing; capital structure; corporate taxes🎓Midterm; Quiz 2; Past Paper🏛️VU Midterm ACC501 Quiz Past Papers🏛️Mega Quiz File by Shahzad
NZ Corporation reported earnings before interest and taxes (EBIT) of Rs. 500,000 for the current year. It has taken a long-term loan of Rs. 2 million from a local bank at a 10 percent interest rate. Corporate tax is charged at a rate of 32 percent. What will be the annual tax savings (interest tax shield) due to the presence of debt financing in the firm's capital structure?
  1. A.Rs. 60,000
  2. B.Rs. 64,000
  3. C.Rs. 72,000
  4. D.Rs. 74,000
Q4
❓ MCQ📘 ACC501📑 Lec 37🏷️ Capital Structure PrinciplesMedium🔁⭐💡🌟#business finance; debt to equity ratio; capital structure; equity ratio; financial leverage🎓Midterm; Quiz 2; Past Paper🏛️VU Midterm ACC501 Quiz Past Papers🏛️Mega Quiz File by Shahzad
Suppose Flatiron Corporation has a debt-to-equity ratio of 2/3. You are analyzing the capital structure of this corporation. Based on the debt-to-equity ratio, what proportion of the capital structure is financed through equity?
  1. A.66.67%
  2. B.33.34%
  3. C.0%
  4. D.60%
Q5
❓ MCQ📘 ACC501📑 Lec 37🏷️ Capital Structure PrinciplesEasy🔁⭐💡🌟#business finance; financial risk; fixed income securities; capital structure; debt financing🎓Midterm; Quiz 2; Past Paper🏛️VU Midterm ACC501 Quiz Past Papers🏛️Mega Quiz File by Shahzad
________ refers to the extent to which fixed-income securities (debt and preferred stock) are utilized in a firm's capital structure, placing additional risk on common equity holders.
  1. A.Financial risk
  2. B.Portfolio risk
  3. C.Operating risk
  4. D.Market risk
Q6
❓ MCQ📘 ACC501📑 Lec 37🏷️ Capital Structure PrinciplesHard🔁⭐💡🌟#business finance; break-even ebit; capital restructuring; levered eps; unlevered eps🎓Midterm; Quiz 2; Past Paper🏛️VU Midterm ACC501 Quiz Past Papers🏛️Mega Quiz File by Shahzad
Let us imagine that Sony Corporation currently uses no-debt financing and has decided to undergo capital restructuring. As a result, it will incorporate $1 billion of debt at an interest rate of 6.6% p.a. in its capital structure. Sony Corporation currently has 30 million shares outstanding priced at $125 per share. If the restructuring is expected to increase Earnings Per Share (EPS), what is the minimum level of EBIT (break-even EBIT) that Sony management must be expecting?
  1. A.$202,200,000
  2. B.$247,500,000
  3. C.$283,500,000
  4. D.$321,250,000
Q7
❓ MCQ📘 ACC501📑 Lec 37🏷️ Capital Structure PrinciplesEasy🔁⭐💡🌟#business finance; homemade leverage; financial leverage; personal borrowing; m&m proposition i🎓Midterm; Quiz 2; Past Paper🏛️VU Midterm ACC501 Quiz Past Papers🏛️Mega Quiz File by Shahzad
The use of personal borrowing by individual investors to duplicate or undo the financial leverage effects of a firm is called:
  1. A.Homemade leverage
  2. B.Financial leverage
  3. C.Operating leverage
  4. D.None of the given option
Q8
❓ MCQ📘 ACC501📑 Lec 37🏷️ Capital Structure PrinciplesEasy🔁⭐💡🌟#business finance; financial risk; fixed income securities; debt financing; capital structure🎓Midterm; Quiz 2; Past Paper🏛️VU Midterm ACC501 Quiz Past Papers🏛️Solved MCQs with Reference by Students
__________ refers specifically to the additional risk concentrated on common equity shareholders resulting from the extent to which fixed-income securities (debt and preferred stock) are used in a firm's capital structure.
  1. A.Financial risk
  2. B.Portfolio risk
  3. C.Operating risk
  4. D.Market risk
Q9
❓ MCQ📘 ACC501📑 Lec 37🏷️ Capital Structure PrinciplesHard🔁⭐💡🌟#business finance; break-even ebit; capital restructuring; earnings per share; financial leverage🎓Midterm; Quiz 2; Past Paper🏛️VU Midterm ACC501 Quiz Past Papers🏛️Solved MCQs with Reference by Students
Suppose Sony Corporation currently uses 100 percent equity financing with 30 million shares outstanding priced at $125 per share. The company decides to restructure its capital structure by issuing $1 billion in debt at 6.6 percent annual interest to repurchase common shares at $125 per share. If this restructuring is expected to increase Earnings Per Share (EPS), what is the minimum break-even level of EBIT that Sony management must be expecting?
  1. A.$202,200,000
  2. B.$247,500,000
  3. C.$283,500,000
  4. D.$321,250,000
Q10
❓ MCQ📘 ACC501📑 Lec 37🏷️ Capital Structure PrinciplesMedium🔁⭐💡🌟#business finance; debt-to-equity ratio; capital structure; equity financing proportion; financial leverage🎓Midterm; Quiz 1; Past Paper🏛️VU Midterm ACC501 Quiz Past Papers🏛️Solved MCQs with Reference by Students
Suppose Flatiron Corporation maintains a Debt-to-Equity ratio of 2/3 (0.667). What proportion of the corporation's total capital structure is financed through equity?
  1. A.66.67%
  2. B.33.34%
  3. C.0%
  4. D.60%