1) Miller and Modigliani's dividend irrelevance theory says that the percentage of its earnings a firm pays out in dividends has no effect on either its cost of capital or its stock price. *

True

False

2) A company that repurchases stock will display an increase in outstanding shares. *

True

False

3) The key factors on which external financing depends, as indicated in the AFN equation are Sales growth (S), Capital intensity (A0*/S0), and Spontaneous liabilities-to-sales ratio (L0*/S0) only. *

True

False

4) If a firm that sells on terms of net 30 changes its policy and begins offering all customers terms of 2/10, net 30, and if no change in sales volume occurs, then the firms DSO will probably increase. *

True

False

5) Accounts payable and accruals increase spontaneously with sales. *

True

False