The federal government can always avoid default on its issues because of its unique
right to:
A.change Treasury bond yields to zero at its discretion.
B.print money.
C.tax.
D.wage war.
Pace Enterprises’ common stock sells for $29, and its dividends are expected to grow at
a rate of 9 percent annually. If investors in Pace require a return of 14%, what is the
expected dividend next year?
A.$1.33
B.$2.40
C.$1.45
D.$1.60
A firm has current liabilities of $200,000, long term debt of $500,000, and equity of
$1,200,000. Its debt ratio is_____.
A.0.37
B.0.24
C.0.42
D.0.64
Your monthly statement from your bank credit card shows that the monthly rate of
interest is 1.5%. What is the effective annual rate of interest you are being charged on
your credit card?
A.18.00%
B.18.64%
C.19.56%
D.29.74%
With respect to the statement of cash flows:
A.increasing assets is always the predominant use of cash while borrowing is the
predominant source of cash.
B.increases in assets are sources of cash and increases in liabilities are uses.
C.its most important function is to identify the principal sources and uses of cash.
D.All of the above
Risk in cash flow estimating for capital budgeting can be defined as:
A.the chance that a cash flow will turn out to be worse than the estimate.
B.the chance that a cash flow will turn out to be different than the estimate, either better
or worse.
C.the chance that the cash flows that turn out to be more favorable than the estimate
won’t totally offset the cash flows that turn out to be worse than the estimate.
D.the chance that the NPV and/or IRR will turn out to be worse than the estimate.
E.All of the above describe the risk in cash flow estimating.
The Statement of Cash Flows does not include the change in retained earnings account
as it is embedded in the statement itself. Which of the following represents the items in
the cash flow statement that, when added together, equals the change in retained
earnings?
A.Net income, Stock account changes, Dividends Paid
B.Net income, Stock account changes, Dividends Paid, Dividend Income
C.Net income, Stock account changes, Dividends Paid, Addition to Retained Earnings
from Income Statement
D.None of the above
The purpose of collateral in a secured loan agreement is to:
A.reduce the lender’s risk.
B.reduce the expense of administering the loan.
C.make borrowers indifferent to the default risk of the loan.
D.increase the rate borrowers are willing to pay for funds.
Which of the following has a “residual claim” on the firm’s resources?
A.Common shareholders
B.Preferred shareholders
C.Bond holders
D.All of the above have a residual claim
The distinction between bankruptcy and insolvency is:
A.unimportant, the terms mean essentially the same thing.
B.bankruptcy means a firm can’t pay its bills, insolvency means its liabilities exceed its
assets.
C.bankruptcy means a firm’s liabilities exceed its assets, insolvency means it can’t pay
its bills.
D.bankruptcy is a court procedure, insolvency is a financial condition that may make
bankruptcy appropriate.