Reference no: EM131179611

1. A leveraged buyout involves individuals assuming large personal debt loads in order to purchase the company from a previous owner. True False 

2. Money managers, who are considered institutional investors in our company, have considerable influence over the CFO’s decisions because of their large number of shares under management. True False 

3. When converting from a bond to a stock security, the bondholder must consider not only the conversion ratio, but also the interest payments and dividend payments of the respective investments. True False

4. One reason for no cash dividends during the development stage of a new product or service, is so the company can use the retained earnings for research and development purposes in an effort to grow the company. True False

5. Preferred stock is considered a hybrid because the value can increase, like common stock, but it also offers interest payments, like a bond. True False

6. Default is a legal procedure where the assets of the firm are transferred to the debt-holders. True False

7. Agency problems exist when the company is owned and managed by an individual or group of individuals who work for their best interest, but reduce the value of the company through their actions. True False

8. A company should continue to add debt to the capital structure, up to some point where the tax benefits are overcome by the burden of interest payments, in order to optimize the capital structure. True False

9. At the first class meeting, six main principles of finance were discussed, which were underscored numerous times since the beginning. Explain the role of the Financial Manager in developing and working with each of these principles in the corporation. Path: p Words:0