1.What is financial leverage?
Ans: The amount of debt used in capital structure reflects the financial leverage.
2.What is leverage?
Ans: The use of fixed cost assets or fund in an attempt to increase profitability is called leverage. 3.What is capital structure (কাঠামো)?
Ans. Capital structure refers to the mixture of long term sources of debt and equity funds.
4.What is optimum capital structure?
Ans: The is capital structure having overall cost of capital is minimum and by which value of the firm is maximized is called optimum capital structure.
5.What is minimum expected rate of return?
Ans. The lowest rate of return that the stockholders expect for their equity investment.
6. Define Arbitrage.
7. Ans: Arbitrage means finding two assets that are essentially the same buying the cheaper and selling the more expensive.
7. Long term mixture of fund is called?
Ans. Capital structure.
8. What is an indifference (fa) point (IP)?
Ans. Indifference point is that level of EBIT having equal EPS between two different capital structure plans.
9.What is an EPS?
Ans. Earning Per Share (EPS) is the amount earned during the particular period on behalf of each Outstanding chare of common stock.
10. What is Miller Model?
Ans. Merton Miller introduced a model designed to show how leverage affect firm’s values when both personal and corporate taxes are taken into account. 11.Common stock has no specific/permanent cost only?
Ans. Common stock is perpetual investment by the stockholders and it is issued once, hence it has no specific/permanent cost.
12. What is BEP?
Ans. BEP is the level of production or sale at which no profit, no loss is occurred i.BEP R=C
And BEP CM/Unit.
13. What is financial BEP?
Ans. Financial BEP- Int+Pp (1-1)
14. What is leverage or D/E ratio?
Ans. Using loan capital in capital structure side by own capital is leverage. Mixture of debt capital and
equity share capital pro a co. is D/E ratio.
15. Mention some sources of debt financing?
Ans. Some sources of debt financing are- 5
a. Corporate Bond/Debenture;
b. Treasury bond;
c. f Municipal bond;
d. Foreign bond
e. Long term loan etc.
16.What is the main theme of NOI approach.
Ans. The real meaning of NOI approach is that the capital structure decision of firm is irrelevant.
17. What is the essence of NI approach?
Ans. Capital structure decision is relevant for the valuation of the firm..
18 What is capitalization rate?
Ans. The discount rate used to determine the present value of a stream of expected future cash flows.
19.What is debt capacity ?
Ans. Debt capacity is the manimum proportion of debt that the firm can include in its capital structure and still maintain its lowest composite cast of capital.
20. What is DPS?
Ans. The amount of cash distributed during the period on behalf of cash outstanding shore of common stock.
21. What is price earning ratio (P/E ratio)?
Ans. The P/E ratio measures the amount that investors are willing to pay for cash taka of firm’s carvings. The higher the P/E ratio, the greater is investor confidence.
