If Tobin's Q Is Greater Than 1, Then Managers Should

question 86

Multiple Choice

If Tobin's q is greater than 1, then managers should:

• A) increase the capital stock of the firm.
• B) maintain the existing capital stock of the firm.
• C) allow inventories to run down.
• D) decrease the capital stock of the firm.

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Definitions:

Accrued Interest Expense

Interest expense that has been incurred but not yet paid during an accounting period.

Installment Note

A debt instrument that requires a series of payments over time until the total debt is paid off.

Callable Bonds

Bonds that can be redeemed by the issuer before their maturity date at a predetermined price.

Bondholder's Risk

The risk faced by bond investors that the issuer may fail to make payments when due or violate terms of the bond agreement.