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QUESTION 19 Which of the following is true of the degree of total leverage (DTL)?? a....

QUESTION 19

Which of the following is true of the degree of total leverage (DTL)??

a.

?It is the percentage change in EPS that results from a given percentage change in EBIT.
b.

?It is the percentage change in NOI (or EBIT) associated with a given percentage change in sales.
c.

?It represents the level of production and sales at which net operating income is zero.
d.

?It is the level of EBIT at which EPS equals zero.
e.

?It is the percentage change in EPS that results from a 1 percent change in sales.

QUESTION 20

Which of the following is a common method of disbursement or cash outflow control??

a.

Lockbox arrangement?
b.

?Preauthorized debits
c.

?Concentration banking
d.

?Zero-balance account
e.

?Net float agreement

QUESTION 27

Total cash receipts for Zinc Corporation in a month is $15,000 and total cash disbursements in a month is $10,000. Which of the following is true about Zinc's cash position if it aims to maintain minimum cash balance of $8,000??

a.

?Zinc has a cash shortfall of $23,000.
b.

?Zinc has a cash shortfall of $3,000.
c.

?Zinc has surplus cash of $6,000.
d.

?Zinc has surplus cash of $20,000.
e.

?Zinc has surplus cash of $8,000.

QUESTION 28

A change in the credit policy will be beneficial to a firm if it results in an increase in the:?

a.

?bad debt loss.
b.

?net present value.
c.

?fixed costs.
d.

?days sales outstanding.
e.

?variable costs.
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Homework Answers

Answer #1
Q19.
Answer is e. Percentage change in EPS that results from a 1% change in sales.
Q20.
Answer is b. Preauthorized debits.
Q21.
Answer is b. Zinc has a cash shortfall of $3000.
Explanation:
Cash receipts 15000
Less: disbursement 10000
Balance available 5000
Minimum Balance req 8000
Cash Shortfall -3000
Q22.
Answer is b. Net present Value.
Explanation:
An effective credit policy is one which helps in improving the net present value of the project through early realisation of Accounts receivable.
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