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1) if a company has a liabilities to equity ratio of 0.5, then its assets to equity ratio is
a.0.5
b.1.0
c.1.5
d.2.0
2) consider the cash receipts projections of emma inc. that is developing a cash budget
for october , november and december; sales in august and september were $200,000 and
$500,000 respectively. the forecast sales are $800,000, $900,000 and $200,000 for
october, november and december respectively. 15 % of sales are cash sales and 85% are
credit sales; collects about 60% of each months sales in the next month but waiting until
the following month for the remaining 25% of sales. bad debts are negligible. the firm
is expectsing cash dividend of $25,000 in december from a subsidiary.what are the total
cash receipts in november? (in thousands)
a.$605
b.$470
c.$765
d.$740
3) in order to move forward in a financial crisis without many of the costs of legal
bankruptcy, a firm may seek
a.a consent procedure
b.a cram-down procedure
c.a chapter 11 reorganization
d.a voluntary settlement
4) suppose you take out a loan from the local mob boss for $10,000. being a generous
banker, the mob boss offers you an apr of 60% with monthly compounding. the length
of the loan is 3 years with monthly payments. however, you want to get out of this
arrangement as quickly as possible. you decide to pay off whatever balance remains
after the first year of payments. what is your remaining balance after one year?
a.$8,124.46
b.$8,339.13
c.$9,233.06
d.$9,342.47
5) asset 1 has a beta of 1.2 and asset 2 has a beta of 0.6. which of the following
statements is correct?
a.asset 1 is more volatile than asset 2
b.asset 1 has a higher expected return than asset 2
c.in a regression with individual assets return as the dependent variable and the markets
return as the independent variable, the r-squared value is higher for asset 1 than it is for
asset 2
d.all of the above statements are correct
6) which type of risk affects many different securities?
a.return risk
b.variance risk
c.unsystematic risk
d.systematic risk
7) the time between the points at which a firm pays for raw materials and at which it
receives payment for finished goods is
a.the average age of inventory
b.the cash conversion cycle
c.the average collection period
d.the operating cycle
8) the slope of the security market line is:
a.e(rm) - rf
b.1/(e(rm) - rf)
c.rf - e(rm)
d.rf
9) narrbegin: competitive mesh shirts
competitive mesh shirts
competitive mesh shirts is considering a plan to ease its credit terms in order to generate
greater revenues. last year, competitive had sales of 1,000,000 units at a price and
variable cost of $20 and $15, respectively. its current average collection period is 20
days and its percentage of bad debt expense is 2% while it required return on
investment is 10%. if competitive were to ease its credit terms, the firm anticipates that
its sales would increase to 1,200,000 units without a change in price or variable costs.
however, the average collection period is expected to increase to 30 days and bad debt
expense is expected to increase to 3%.
narrend
what is competitives marginal profit from increased sales?
a.$1,000,000
b.$5,000,000
c.$6,000,000
d.$7,000,000
10) smith enterprises stock currently sells for $150. a put option on the stock has a
strike price of $15 and currently sells at $4.50. what is the intrinsic value of the option?
a.$0
b.$2.50
c.$4.50
d.$1.25
11) warrants attached to another security offering that give investors more upside
potential are known as:
a.convertible bonds
b.kicker values
c.equity kickers
d.up warrants
e.convertible warrants
