1.Which of the following statements is incorrect? Group of answer choices

The after-tax cost of equity (common or preferred) does not have to be adjusted by the marginal income tax rate for the firm.

The finance balance sheet is based on market values, just like the accounting balance sheet.

Right-hand side of the accounting balance sheet shows how the firm's assets were reinvested.

All the answers are correct except one.

The proportions of debt and equity used to determine the weighted average cost of capital for a firm is based on the market value of debt and equity outstanding.

2. Which of the following statements is incorrect? Group of answer choices

The value of the cash flows that the assets of a firm are expected to generate is always greater than the value of the cash flows claimed by both the equity and debt investors.

All the answers are correct except one.

Left-hand side of the accounting balance sheet shows the book value of the firms assets, based on historical costs.

The main difference between the finance balance sheet and the accounting balance sheet is that the finance balance sheet is based on market values rather than book values.

Debt with a maturity of more than one year can typically be viewed as permanent debt because firms often borrow the money to pay off this debt when it matures.

3. Which of the following statements is correct? Group of answer choices

The restrictive current asset investment strategy promotes a liberal trade credit policy for customers.

A flexible current asset investment strategy calls for levels of current assets kept to a minimum.

Days payables outstanding (DPO) is computed as number of days in a year divided by accounts payable turnover.

All the answers are correct.

Under the matching maturities working capital financing strategy, short-term assets are funded with long-term financing and long-term assets are funded with short-term financing.

4. Which of the following statements is correct? Group of answer choices

All the answers are correct.

Working capital management involves making decisions regarding the buying and selling long-term assets such as buildings, land, and machinery.

Payables represent the amount owed to the firms vendors and suppliers for materials purchased on credit. Liquidity is the ability of a company to convert debt into equity quickly without suffering a financial loss.

Commercial paper is a promissory note issued by small firms that have low credit ratings.