Firms with Tangible Long-Term Assets and Less Predictable Cash Flows

question 22

Multiple Choice

Firms with tangible long-term assets and less predictable cash flows, such as auto manufacturers and steel companies, whose sales vary with changes in economic conditions, tend to use

• A)a more nearly equal mix of long-term debt and shareholders' equity financing.
• B)a greater amount of long-term debt [80%] than shareholders' equity financing [20%].
• C)a smaller amount of long-term debt [20%] than shareholders' equity financing [80%].
• D)a greater amount of long-term debt [80%] than assets [20%].
• E)a greater amount of shareholders' equity [80%] than assets [20%].

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Definitions:

Recordkeeping

The systematic process of maintaining and organizing records or documents relevant to a business, institution, or individual.

Initial Value

The beginning amount or worth of an object, financial asset, or parameter before it undergoes any changes.

Final Value

An alternative term for future value,indicating the amount of money an investment will grow to at a future date, based on specified conditions.

Airfares

The cost of a passenger flight ticket.