TRUE OR FALSE FOR ALL THESE

1.ABC Bank lends money to its customers. These are variable rate loans. That is, the monthly interest rate on these loans equals the contemporaneous prime rate of interest, which changes from month to month. Hence, ABC's interest income varies from month to month.

ABC hedges this variability by entering into interest rate swaps in which it swaps floating for fixed. That is, ABC pays a variable amount to the counterparty and receives a fixed payment from the counterparty.

When analyzing ABC's performance, we consider the assets and liabilities related to its interest rate swaps to be financial assets and financial liabilities?

2.XYZ Company borrows money from ABC Bank. These are variable rate loans. That is, the interest rate on these loans equals the contemporaneous prime rate of interest, which changes from month to month. Hence, XYZ's interest expense varies from month to month. XYZ hedges this variability by entering into interest rate swaps in which it swaps fixed for floating. That is, XYZ pays a fixed amount to the counterparty and receives a variable payment from the counterparty.

When analyzing XYZ's performance, we consider the assets and liabilities related to its interest rate swaps to be financial assets and financial liabilities?

3.All else equal, a company that pays dividends and interest has lower free cash flow than a company that does not?

4.All else equal, a company that issues debt and equity has higher free cash flow than a company that does not?

5.If we use the income statement and balance sheet to determine free cash flow, we will get the same answer as the answer we obtain if we use the income statement and the statement of cash flows?

6.Negative free cash flow is a unambiguous indicator of poor performance?

7.The typical (or average) company has a return on invested capital of 15 percent?

8.Relative to other companies, companies with high NOPAT margins tend to also have high net operating asset turnovers?

9.Relative to other companies, companies with high free cash flow tend to have low accruals?

10.On average (or for the typical company), current NOPAT is a better predictor of future free cash flows than current free cash flow.

11.Conservative accounting is an example of mandated measurement error?

12.Free cash flow is always less than cash flow from operating activities per the statement of cash flows?

13.Preferred stock is considered a financial obligation and preferred dividends are considering a financial expense?

14.The typical (or average) company has a ratio of debt to assets of approximately 0.24?