11. When large firms fail, leading to financial crises or failure of other firms that are creditors of the large firms, this is an example of:

Market risk

Leverage risk

Systematic risk

Company specific risk

12. Which of the following is not associated with equity financing?

a.high flotation costs

b.dilution of existing stockholders' earning power

c.an increase in debt load

d.lower risk to the firm

13. Given the following information, calculate earnings per share:

Interest expense $40,000

Net income $335,000

Common dividends paid $100,000

Number of shares of common stock outstanding 100,000

a.1.95

b.3.35

c.2.35

d.3.60

14. Which of the following is a source of cash that would appear on the statement of cash flows?

a.increase in marketable securities

b.decrease in notes payable

c.increase in gross fixed assets

d.increase in accrued expenses

15. With respect to common stock claims:

a.as long as a firm has net income it can pay a dividend

b.there must be cash available to pay a dividend

c.it is similar to long-term debt in that the claim on the firm is fixed

d.the dividends paid are tax deductible to the firm