Assume That a Yield Curve's Shape Is Caused by Liquidity

question 30

Multiple Choice

Assume that a yield curve's shape is caused by liquidity. An MNC may be tempted to finance with a maturity that is less than the expected life of the project when the yield curve is:

• A) flat.
• B) inverted.
• C) upward-sloping.
• D) downward sloping.

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Definitions:

Inventory Turnover

A metric that measures the efficiency of a company in managing its stock of goods through the calculation of the cost of goods sold divided by average inventory.

Accounts Receivable Period

The average number of days it takes for a company to collect payment from its credit sales.

Cash Cycle

The period between the outlay of cash for raw materials and receiving payment from customers for goods or services sold.

Inventory Period

The average time it takes for a company to sell through its inventory, calculated by dividing the total inventory by the cost of goods sold and then multiplying by 365 days.