The ____ the standard deviation, the ____ the investment.
A.smaller, larger the expected return on
B.larger, riskier
C.smaller, riskier
D.larger, smaller the expected return on
Which of the following is a reason why lenders insist on bond indentures?
A.To ensure that bond-issuing companies prefer debt financing to equity financing
B.To ensure that lenders of rights are comparable to the rights of stockholders
C.To make the bonds easy to sell in secondary markets
D.To ensure that bond-issuing companies do not accept risky projects
Hedging a purchase requiring settlement in a foreign currency:
A.will always result in a lower cost than just waiting to purchase the foreign currency
on the settlement date.
B.will always result in a higher cost than just waiting to purchase the foreign currency
on the settlement date.
C.increases the risk associated with international transactions.
D.decreases the risk associated with international transactions.
E.both a. and d. are correct.
Stepping Out has inventory purchases of $2,200 during the month of June. If June 1
accounts payable were $1,700 and June 30 accounts payable were $1,900, what was the
cash payment?
A.$3,900
B.$2,000
C.$1,900
D.$1,700
Which of the following is a source of short-term financing?
A.Accounts Payable
B.Accruals
C.Commercial Paper
D.Both a & c
E.All of the above
Under the customary approach, firms strive to either maintain their present capital
structure or achieve some target structure. Both the current and the target structures
must be based on:
A.market values.
B.book values.
C.intrinsic values.
D.future values.
Frazier Enterprises stock is selling for $45 today. You are expecting a dividend of $4
next year and a capital gains yield of 10%. Calculate the price of the stock 1-year from
now.
A.$45.00
B.$49.50
C.$52.00
D.$55.50
Triangle Systems had earnings after tax (EAT) of $1,000,000 last year. Included in its
expenses were $50,000 of interest, $100,000 of deferred taxes (taxes that show up on
the current year’s income statement as expenses but aren’t paid in cash in the current
year), and $150,000 of depreciation. In addition, the company paid dividends of
$200,000 to its stockholders last year. What was Triangle’s net cash flow last year?
A.$1,500,000
B.$1,300,000
C.$1,150,000
D.$1,050,000
If a project has a negative NPV, then ____.
A.the payback period is greater than the length of the project
B.the present value payback period is less than the length of the project
C.the payback period is less than the length of the project
D.the PI is less than one
Which of the following are not affected by the Sarbanes-Oxley Act of 2002?
A.Board of directors
B.Floor brokers
C.Securities analysts
D.CFOs
The following question(s) refer to the year-end account balances for UBUS, Inc. The
accounts are listed in alphabetical order, NOT in the order they appear on the financial
statements. The applicable tax rate is 40%.
UBUS Income Statement
UBUS Balance Sheet
a) What was UBUS Inc.’s earnings before interest and taxes (EBIT)?
a. $155
b. $120
c. $100
d. $215
e. $200b) What is UBUS Inc.’s tax liability?
a. $48
b. $60
c. $55
d. $40
e. $35c) What was UBUS Inc.’s Net Income?
a. $72
b. $45
c. $60
d. ($20)
e. $100d) What is UBUS Inc.’s Total Assets?
a. $420
b. $570
c. $625
d. $450
e. $490e) What is UBUS Inc.’s Total Equity?
a. $115
b. $120
c. $185
d. $205
e. $240f) What is UBUS Inc.’s Net Working Capital?
a. $35
b. $70
c. $100
d. $130
e. $170
If the DFL equals one, then ____.
A.ROCE equals ROE
B.additional debt does not affect EPS
C.there is no business risk
D.financial risk is maximized
Multidivisional companies with diverse operations should use an interest rate for
discounting a specific division’s estimated cash flows in capital budgeting that is
representative of:
A.the entire firm’s cost of capital.
B.the riskiness of the specific division’s cash flows.
C.the cost of capital obtained through the application of the pure play method.
D.Either b or c
Which of the following is a tax benefit associated with capital gains on stock?
A.Taxed at lower rates.
B.Taxes are deferred until the stock is sold.
C.Taxes are waived if the stock transfers to an heir at the owner’s death.
D.a and b.
E.All of the above
Which of the following is not a method of accelerating cash receipts?
A.Lock box systems
B.Wire transfers
C.Float management
D.Concentration banking
Which of the following best describes the dividend decision in terms of benefits for the
stockholder?
A.Paying dividends creates a short-term benefit, while retaining earnings has the
potential to be a long-term benefit.
B.Paying dividends creates a long-term benefit, while retaining earnings has the
potential to be a short-term benefit.
C.Paying dividends and retaining earnings both create short-term benefits.
D.Paying dividends and retaining earnings both create long-term benefits.
E.The decision to pay dividends or retain earnings has little impact on the stockholder.