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Finance 52 MCQs...

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Question;1 Question: If inflation is anticipated to be 5 percent during the next year, while the real rate of interest for a one-year loan is 5 percent, then what should the nominal rate of interest be for a risk-free one-year loan? A 5 percentB 10 percentC 25 percentD None of the above2 Question: Which one of the following statements is not true? A The value of a dollar invested at a positive interest rate grows over timeB The further in the future you receive a dollar, the less it is worth todayC A dollar in hand today is worth more than a dollar to be received in the futureD The further in the future you receive a dollar, the more it is worth today3 Question: Efficiency ratio: Jet, Inc., has net sales of $712,478 and accounts receivables of $167,435. What are the firm's accounts receivables turnover and days' sales outstanding? A 0.24 times, 78.5 daysB 4.26 times, 85.7 daysC 5.2 times, 61.3 daysD None of the above4 Question: If you have loaned capital to a firm, then you could be A A shareholderB A stakeholderC A partnerD All of the above5 Question: Which one of the following is not an advantage of using ROE as a goal? A ROE is highly correlated with shareholder wealth maximizationB ROE and the DuPont analysis allow management to break down the performance and identify areas of strengths and weaknessesC ROE does not consider riskD All of the above are advantages of using ROE as a goal6 Question: The future value of multiple cash flows is A Greater than the sum of the cash flowsB Equal to the sum of all the cash flowsC Less than the sum of the cash flowsD None of the above7 Question: The major players in the direct financial markets are A Investment banksB Money center banksC Regional banksD Both A and B8 Question: One of the main services offered by investment banks to companies is A Helping companies sell new debt or equity issues in the security marketsB Making loans to companiesC Taking deposits from companiesD All of the above9 Question: Shane Matthews has invested in an investment that will pay him $6,200, $6,450, $7,225, and $7,500 over the next four years. If his opportunity cost is 10 percent, what is the future value of the cash flows he will receive? (Round to the nearest dollar.) A $27,150B $29,900C $30,455D $31,50410 Question: Which of the following is a cash flow from investing activities? A Cash payment of dividends to shareholdersB Cash from sale of productsC Purchase of plant and equipmentD Rent received from industrial property owned11 Question: Largent Supplies Corp. has borrowed to invest in a project. The loan calls for a payment of $17,384 every month for three years. The lender quoted Largent a rate of 8.40 percent with monthly compounding. At what rate would you discount the payments to find the amount borrowed by Largent? (Round to two decimal places.) A 8.40%B 8.73%C 8.95%D None of the above12 Question: Which of the following statements is not a limitation associated with market valuation of balance sheet accounts? A It can be difficult to identify the market value of an asset, particularly if there are few transactions involving comparable assetsB The estimates of market value can involve complex financial modeling, and the resulting numbers can be open to manipulation and abuseC Marking to market provides decision makers with a better chance of making the correct economic decision, given the information availableD Mark-to-market accounting can become inaccurate if market prices deviate from the fundamental values of assets and liabilities13 Question: Which of the following reports directly to the owners of the firm (assume the firm is a public corporation)? A CFOB CEOC Board of directorsD Audit committee14 Question: Tommie Harris is considering an investment that pays 6.5 percent annually. How much must he invest today such that he will have $25,000 in seven years? (Round to the nearest dollar.) A $23,474B $38,850C $26,625D $16,08815 Question: Which of the following stock exchange organizational forms has no physical location? A A futures exchangeB An over-the-counter marketC An auction marketD None of the above16 Question: Working capital management decisions involve A How a firm's day-to-day financial matters should be managedB How the firm should finance its assetsC Which productive assets the firm should employD All of the above17 Question: Hassan Ali has made an investment that will pay him $11,455, $16,376, and $19,812 at the end of the next three years. His investment was to fetch him a return of 14 percent. What is the present value of these cash flows? (Round to the nearest dollar.) A $33,124B $36,022C $41,675D $39,20818 Question: Herm Mueller has invested in a fund that will provide him a cash flow of $11,700 for the next 20 years. If his opportunity cost is 8.5 percent, what is the present value of this cash flow stream? (Round to the nearest dollar.) A $234,000B $132,455C $110,721D $167,88419 Question: The assumption of arm's-length transaction states that A Both parties to a transaction can act independently of each other and make economically rational decisionsB Both parties to a transaction must have had previous transactionsC One of the parties to the transaction is a bank that has full knowledge of the firm's creditworthinessD None of the above20 Question: The time value of money refers to the issue of A What the value of the stream of future cash flows is todayB Why a dollar received tomorrow is worth more than a dollar received todayC Why a dollar received tomorrow is worth the same as a dollar received todayD None of the above21 Question: Which of the following does maximizing shareholder wealth not usually account for? A RiskB Government regulationC The timing of cash flowsD Amount of cash flows22 Question: Which one of the following is not true for a corporation? A Interest paid on bonds issued last year is tax deductibleB Common-stock dividends to be paid this year are not tax deductibleC Common-stock dividends to be paid this year will be tax deductible if the firm has a net loss for the yearD Preferred stock dividends to be paid this year are not tax deductible23 Question: The cash remaining after the firm has met its operating expenses, payments to creditors, and taxes is called A Earnings per shareB Capital contributed in excess of parC Residual cashD Assets24 Question: Executives that repeatedly put their own interests before that of the firm may find that they have difficulty finding another job after their current one. This is an example of A The managerial labor market disciplining managersB The market for corporate controlC The board of directors affecting the prospects of a managerD None of the above25 Question: Petry Corp. is a growing company with sales of $1.25 million this year. The firm expects to grow at an annual rate of 25 percent for the next three years, followed by a growth of 20 percent per year for the next two years. What will be Petry's sales at the end of five years? (Round to the nearest dollar.) A $2,160,000B $3,515,625C $1,875,000D $2,929,68826 Question: Your brother has asked you to help him with choosing an investment. He has $5,000 to invest today for a period of two years. You identify a bank CD that pays an interest rate of 4.25 percent with the interest being paid quarterly. What will be the value of the investment in two years? A $5,434B $5,441C $5,107D $5,21627 Question: Centennial Brewery produced revenues of $1,145,227 in 2008. It has expenses (excluding depreciation) of $812,640, depreciation of $131,335, and interest expense of $81,112. It pays an average tax rate of 34 percent. What is the firm's net income after taxes? A $120,140B $248,475C $79,292D $40,84828 Question: Which of the following individuals is typically most responsible for managing a large corporation?s financial function? A The CEOB The chairman of the boardC The CBOD The CFO29 Question: Jeff Conway wants to receive $25,000 in perpetuity and will invest his money in an investment that will earn a return of 13.5 percent annually. What is the value of the investment that he needs to make today to receive his perpetual cash flow stream? (Round to the nearest dollar.) A $640,225B $252,325C $144,350D $185,18530 Question: The DuPont equation shows that a firm's ROE is determined by three factors A Net profit margin, total asset turnover, and the equity multiplierB Operating profit margin, ROA, and the ROEC Net profit margin, total asset turnover, the ROAD ROA, total asset turnover, and the equity multiplier31 Question: Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio? A 0.60B 1.47C 1.74D 032 Question: A director who is not an employee of the firm is called A An executive directorB An inside directorC An independent directorD An official director33 Question: During 2008, Towson Recording Company increased its investment in marketable securities by $36,845, funded fixed assets acquisition by $109,455, and had marketable securities to the tune of $14,215 mature. What is the net cash provided (used) in investing activities? A $132,085B $145,940C ?$132,085D None of the above34 Question: During an economic expansion, we would expect A Interest rates to increaseB Interest rates to decreaseC Interest rates to remain the sameD The price of money to decrease35 Question: Chartworth Associates' financial statements indicated that the company had EBITDA of $3,145,903. It had depreciation of $633,000, and its interest rate on debt of $1.25 million was 7.5 percent. Calculate the amount of taxes the company is likely to owe. A $1,069,607B $1,037,732C $822,512D None of the above36 Question: Using higher discount rates will A Not affect the present value of the future cash flowB Increase the present value of any future cash flowC Decrease the present value of any future cash flowD None of the above37 Question: Liquidity ratio: Zidane Enterprises has a current ratio of 1.92, current liabilities of $272,934, and inventory of $197,333. What is the firm's quick ratio? A 0.72B 1.20C 1.92D None of the above38 Question: According to the realization principle, revenue from a sale of the firm's products are recognized A When the products are shipped to the buyerB When the buyer orders the goodsC When cash is realized from the sale of the productsD At the time of the sale39 Question: Which organizational form best enables the owners of the firm to monitor the actions of other owners of the same firm? A Sole proprietorshipB PartnershipC Private corporationD Public corporation40 Question: Which organizational form best enables the owners of the firm to monitor the actions of other owners of the same firm? A Sole proprietorshipB PartnershipC Private corporationD Public corporation41 Question: Which one of the following does not change a firm's current ratio? A The firm collects on its accounts receivablesB The firm purchases inventory by taking a short-term loanC The firm pays down its accounts payablesD None of the above42 Question: You want to have $25,000 for a down payment on a house 6 years from now. If you can earn 6.5 percent, compounded annually, on your savings, how much do need to deposit today to reach your goal? A $17,133.35B $17,420.73C $17,880.69D $18,211.17E $18,886.4043 Question: The annuity transformation method is used to transform A A present value annuity to a future value annuityB A present value annuity to an annuity dueC An ordinary annuity to an annuity dueD A perpetuity to an annuity44 Question: To solve present value problems with multiple cash flows involves which of the following steps? A First, draw a time line to make sure that each cash flow is placed in the correct time periodB Second, calculate the present value of each cash flow for its time periodC Third, add up the present valuesD All of the above are necessary steps45 Question: Direct financing occurs when A A lender-saver borrows directly from a borrower-spenderB A borrower-spender borrows directly from a lender-saverC A lender-saver borrows from the federal governmentD A borrower-spender borrows from the federal government46 Question: Which of the following can help align the behavior of managers with the goals of shareholders? A Management compensationB Managerial labor marketsC An independent board of directorsD All of the above47 Question: The present value of a lump sum future amount A Is unaffected by the interest rateB Is unaffected by the timing of the future cash flowC Is inversely related to the future valueD Is directly related to the interest rateE Is inversely related to the period of time48 Question: Peer group analysis can be performed by A Management choosing a set of firms that are similar in size or sales, or who compete in the same marketB Using the average ratios of this peer group, which would then be used as the benchmarkC Identifying firms in the same industry that are grouped by size, sales, and product lines in order to establish benchmark ratiosD Only A and B relate to peer group analysis49 Question: Derek's friend, Jackson, is asking to borrow today with a promise to repay $7,418.87 in four years. If Derek could earn 5.45 percent annually on the any investment he makes today, how much would he be willing to lend Jackson today? (Round to nearest dollar.) A $6,000B $7,035C $6,500D $7,15050 Question: Your mother is trying to choose one of the following bank CDs to deposit $10,000. Which one will have the highest future value if she plans to invest for three years? A 3.5% compounded dailyB 3.25% compounded monthlyC 3.4% compounded quarterlyD 3.75% compounded annually51 Question: The price of borrowing money is called A InflationB ReturnC InterestD All of the above52 Question: A mutual fund is an example of A A commercial bankB An insurance companyC An investment fundD A pension fund

 

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