Finding the discounted value of $1,000 to be received at the end of each of the next five
years requires calculating the:
A.future value of an annuity.
B.future value of a deferred annuity.
C.present value of an annuity.
D.present value of a deferred annuity.
The time period covered by a business plan is often called the:
A.plan’s maturity.
B.budget period.
C.planning horizon.
D.planning quarter.
The quick ratio is the same as current ratio except it does not consider:
A.cash.
B.accounts receivable.
C.prepaid items.
D.inventories.
What is the market price of a share of stock for a firm that pays dividends of $1.20 per
share, has a P/E of 14, and pays its shareholders dividends equal to 40% of earnings?
A.$16.80
B.$42
C.$3
D.$28
When accounts receivable are pledged as collateral for a loan:
A.title to the receivables is transferred to the lender.
B.the borrower’s customers are usually notified of the pledging arrangement.
C.the lender assumes the default risk on the receivables.
D.b and c.
E.None of the above
The underlying principles of portfolio theory include:
A.diversifying business-specific risk away.
B.basing decisions on stocks’ risk/return characteristics in a portfolio context rather than
on a stand-alone basis.
C.getting the highest available return for the amount of risk the investor is comfortable
with.
D.All of the above
The indirect quote for British pounds is .60 pounds. If you tried to convert $3,000 into
pounds, how many pounds would you obtain?
A.1,800 pounds
B.0.0002 pounds
C.5,000 pounds
D.None of the above
Which of the following is a correct definition of risk?
A.Risk is the probability that returns will be less than expected.
B.Risk is the variability of the probability distribution of returns.
C.Both of the above are correct.
D.Neither of the above is correct.
Which of the following correctly states the business plan types that contain the lowest
and greatest proportions of financial detail?
A.Lowest – strategic planning; greatest – budgeting
B.Lowest – forecasting; greatest – operational planning
C.Lowest – strategic planning; greatest – forecasting
D.Lowest – operational planning; greatest – budgeting
E.Lowest – forecasting; greatest – budgeting
The proportions of debt and equity used in calculating the weighted average cost of
capital (WACC) should be based on the current ____ weights of the individual
components.
A.book value
B.market value
C.replacement value
D.a and b
Assume a U.S. law is passed that prohibits the importation of sugar from China. This
protectionism law has been adopted because of which of the following reasons?
A.The U.S.€s sugar industry has been underpriced by Chinese sugar imports.
B.The sugar industry in China is deteriorating.
C.The price of sugar has increased in both countries.
D.There has been a reduction in the standard of living in the U.S.
The Gallagher Company has $1 million in excess cash it wishes to return to
stockholders. Selected financial information is as follows.
If Gallagher chooses to distribute the cash through a stock repurchase and the price
earnings ratio doesn’t change through the transaction, what will the stock’s market price
be after the shares are acquired?
A.$26.04
B.$25.00
C.$27.50
D.$25.90
If a company sells 10,000 units at $25 each, has fixed costs of $20,000, and a variable
cost of $20 per unit, what is its degree of operating leverage (DOL)?
A.1.67
B.2.5
C.2.0
D.1.6