15. IHK Co. is considering a shift in its capital structure, which comprises only debt and equity. The company has decided to expand the proportion of debt f inancing in order to move the capital structure toward what the company identif ies as the optimal structure. IHK has also lately experienced a decline in its marg inal tax rate. If the costs of debt and equity capital remain unchanged, what impact will the change in capital structure and tax rate have on IHK Co.'s weighted average cost of capital?Capital structure / Tax

A. Rise Rise

B. Decline Rise

C. Decline Decline

D. Rise Decline

16. IHK Co. just suffered a decrease in revenue of 10%. In response, operating income and net income both declined by 25%. Which of the following is TRUE about IHK Co.?

A. The company has high operating leverage but no f inancial leverage.

B. The company has no operating leverage but high f inancial leverage.

C. The company has high operating leverage and high f inancial leverage.

D. The company has no operating leverage and no f inancial leverage.

17. Which actions will be appropriate to make use of the surplus?

A. Pay supplier earlier to take advantage of any prompt payment discounts

B. Buy back the company's shares

C. Increase payables by delaying payment to suppliers

D. Invest in a long term deposit bank account

18. Deviations in monetary policy will impact which factors?

1 Level of exchange rates 2 Cost of finance 3 Level of consumer demand 4 Level of inflation

A. 1 and 2 only

B. 2 and 3 only

C. 2, 3 and 4 only

D. 1, 2 and 3 and 4

19. An increase in IHK Corp's cash conversion cycle and a decrease in IHK's operating cycle could result from:

A. Cash conversion cycle increase Operating cycle decrease

B. Decreased receivables turnover Increased payables turnover

C. Decreased receivables turnover Decrease in days of inventory

D. Increased inventory turnover Increased payables turnover

20. Which of the following is NOT a result of rapid business expansion?

A. An rise in the current ratio

B. A rapid growth in revenue

C. A rapid upsurge in the volume of current assets

D. Increase in current assets being f inanced by credit

21. Which of the regarding the valuation of bonds is correct? *

A. When interest rates rise so that the required rate of return increases, the market value of the bond will rise.

B. The market value of a discount bond is greater than its face value during a period of increasing interest rates.

C. When the market rate of return is less than the stated coupon rate, the market value of the bond will be more than its face value, and the bond will be selling at a premium.

D. For a given change in the required return, the shorter a bond's maturity, the greater the change in the market value of the bond.