Budgets are usually:
A.short-run supplements to the strategic plans.
B.quarterly updates to the annual operating plans.
C.especially important in stable industries.
D.usually done in great detail by small businesses.
According to the SML, the risk premium for stock X depends on:
A.everything about Company X.
B.Company X’s earnings only.
C.only X’s market risk.
D.X’s total risk as reflected by its beta.
Considering each action independently and holding other things constant, which of the
following would DECREASE new debt financing needed?
A.A decrease in the dividend payout ratio
B.A decrease in the tax rate
C.A decrease in fixed assets
D.Both a & b
E.All of the above
A firm’s current ratio is 1.5, and its quick ratio is 1.0. If its current liabilities are
$10,000, what are its inventories?
A.$5,000
B.$10,000
C.$15,000
D.None of the above
Loans to purchase inventory are considered self-liquidating because ____.
A.these types of loans have little risk
B.these loans are paid according to a set schedule
C.these loans are paid as soon as the inventory is sold
D.these loans have claims against the firm in general and not to a specific asset
A firm’s WACC for capital budgeting purposes for a planning period is:
A.the height of the MCC schedule at the expected level of capital spending.
B.at the intersection of the MCC and the IOS.
C.always beyond the break point of the MCC.
D.usually less than the cost of debt.
Which of the following credit and collections decisions would typically not increase the
accounts receivable balance?
A.Extending credit to less creditworthy customers
B.Increasing the discount offered for prompt payment
C.Extending the time allowed for payment of a customer’s bill
D.Delaying dunning letters from the credit department
E.All of the above would typically increase the accounts receivable balance.
Seasonal peaks in business are supported by:
A.permanent working capital.
B.long-term financing.
C.temporary working capital.
D.discretionary financing.
Which of the following is not a reason that firms typically hold cash?
A.To make routine transactions
B.To satisfy compensating balance requirements
C.To earn interest
D.To be able to respond to emergencies and opportunities
Risk in finance:
A.is variability in return.
B.can be decomposed into business-specific and market components.
C.will be accepted by some investors if higher expected returns are offered in
compensation.
D.All of the above
Which of the following would NOT be considered a capital market instrument?
A.Common Stock
B.Preferred Stock
C.Treasury Bond
D.Treasury Bill
Under the current floating exchange rate system each foreign government:
A.is responsible for holding the exchange rate between its currency and the U.S. dollar
nearly constant.
B.buys and sells its currency to support the value of the U.S. dollar.
C.buys and sells its currency to support a $35 per ounce international price of gold.
D.rarely intervenes in foreign exchange markets relying on market forces to set
exchange rates.
Which of the following are advantages of convertible debt to issuing companies?
A.Convertible bonds offer owners a chance to limit their risk of stock investment.
B.Convertible bond owners can participate in stock appreciation.
C.Convertible bonds usually have an above average number of restrictive clauses.
D.Convertible features can induce lenders to accept lower interest rates.
The _____ ratio is unusual in that, it is commonly stated as a proportion rather than as a
decimal or a percentage.
A.times interest earned
B.debt to equity
C.return on assets
D.price/earnings
Depreciation is considered in which area of the Statement of Cash Flows?
A.Operating activities
B.Investing activities
C.Financing activities
D.Income activities