Archives: Quiz

1) The bid price is the price that a dealer will pay for a security; the asked price is the price at which she will sell a security. 2) Accounting profits is the most relevant variable the financial manager uses […]

1) Actual returns are always less than expected returns because actual returns are determined at the end of the period and must be discounted back to present value. 2) The owners of a corporation enjoy limited liability. Answer: TRUE 3) […]

1) Statutory restrictions may prevent a company from paying dividends if the firm’s assets are less than the firm’s liabilities. 2) The decision to forgo the discount available to those customers who pay early has an advantage as well as […]

1) The speed of the collections process is determined by three types of float: mail float, processing float, and transit float. 2) One of the problems associated with maximization of total current stock value is that it ignores the timing […]

1) Additional investment in working capital, even if it may be recovered at the end of a project, must be included in capital budgeting analysis because of the time value of money. 2) If external financing needed cannot be obtained […]

1) Which of the following are examples of diversifiable risk? I. An earthquake damages Oakland, California. II. The federal government imposes an additional $1,000 fee on all business entities. III. Employment taxes increase nationally. IV. Toymakers are required to improve […]

1) Which of the following statements concerning risk are correct? I. Systematic risk is measured by beta. II. The risk premium increases as unsystematic risk increases. III. Systematic risk is the only part of total risk that should affect asset […]

1) The most common approach to developing proforma financial statements is called the: A.cash budget method. B.financial planning method C.seasonality approach D.percent-of-sales method E.market-oriented approach F.None of the above 2) Which of the following should be included in the analysis […]

1) Which of the following figures of merit does not directly take into consideration the time value of money? I. Payback period II. Internal rate of return III. Net present value (NPV) IV. Accounting rate of return A.IV only B.I […]

1) Please refer to Oscar’s financial statements. Assume a constant debt-equity ratio, net profit margin and dividend payout ratio, and further assume all of Oscar’s costs, assets and current liabilities vary directly with sales. What is the pro forma net […]

1) The following table presents forecasted financial and other information for Scott’s Miracle-Gro Co.: What is an appropriate estimate of Scott’s terminal value of equity as of the end of 2014? A.$225 million B.$3,833.0 million C.$4,205 million D.$4,365.0 million E.$6,788.1 […]

1) As CFO of Nile Holdings, a carpet wholesaler, you have the following information as of December 2011: Nile has an attractive investment opportunity, and to finance it, must decide whether to issue $100 million in new debt or new […]

1) All else constant, the weighted average cost of capital for a risky, levered firm will decrease if: A.the firm’s bonds start selling at a premium rather than at a discount B.the market risk premium increases C.the firm replaces some […]

1) Central Staircase is offering preferred stock which is commonly referred to as 10-10 stock. This stock will pay an annual dividend of $10 a share starting 10 years from now. What is this stock worth to you today if […]

1) A credit card has an annual percentage rate of 12.9 percent and charges interest monthly. The effective annual rate on this account: A.will be less than 12.9 percent B.can either be less than or equal to 12.9 percent C.is […]

1) Home Supply, Inc. has compiled the following information: For 2010, the cash flow from assets is _____ and the cash flow to shareholders is _______. A.$49,100; $62,500 B.$49,100; $76,800 C.$49,100; $81,100 D.$56,400; $76,800 E.$56,400; $79,300 2) In relation to […]

1) New Steel Products has total assets of $991,000, a total asset turnover rate of 1.1, a debt-equity ratio of 0.6, and a return on equity of 8.7 percent. What is the firm’s net income? A.$53,885.63 B.$58,303.33 C.$64,624.14 D.$70,548.09 E.$77,236.67 […]

1) Tressler Dry Cleaners has inventory of $1,700, accounts payable of $4,200, cash of $1,950, and accounts receivable of $3,680. What is the cash ratio? A.0.24 B.0.46 C.0.53 D.0.98 E.1.34 2) The excess return earned by a risky asset, for […]

1) Lockboxes should be located: A.in every town where a firm has a customer B.based on where a firm’s primary customers are located C.only in major urban areas since those are the key financial areas of the country D.close to […]

1) Donovan Brothers, Inc. would like to increase its internal rate of growth. Decreasing which one of the following will help the firm achieve its goal? A.Return on assets B.Net income C.Retention ratio D.Dividend payout ratio E.Return on equity 2) […]

1) Which one of the following players on the floor of the NYSE is obligated to maintain a fair, orderly market for a limited number of securities? A.Specialist B.Floor trader C.$2 broker D.Commission broker E.Floor broker 2) M.G. Movers can […]

1) EAC Nutrition offers a 9.5 percent coupon bond with annual payments, maturing 11 years from today. Your required return is 11.2 percent. What price are you willing to pay for this bond if the face (or par) value is […]

1) Suppose you could buy 1,320 South Korea won or 78 Pakistan rupees last year for $1. Today, $1 will buy you 1,318 won or 80 rupees. Which one of the following occurred over the past year? A.The dollar appreciated […]

1) Peter’s Motor Works has total assets of $689,400, long-term debt of $299,500, total equity of $275,000, net fixed assets of $497,800, and sales of $721,500. The profit margin is 4.6 percent. What is the current ratio? A.0.60 B.0.91 C.1.01 […]

1) Glamour Clothing charges a daily rate of 0.05 percent on its store credit cards. What interest rate is the company required by law to report to potential customers? A.17.99 percent B.18.25 percent C.19.50 percent D.20.02 percent E.20.24 percent 2) […]

1) Which of the following ratios are measures of a firm’s liquidity? I. fixed asset turnover ratio II. current ratio III. debt-equity ratio IV. acid test A.I and III only B.II and IV only C.III and IV only D.I, II, […]

1) Gabriel Furniture has a profit margin of 8.2 percent and a dividend payout ratio of 30 percent. What is the plowback ratio? A.10.66 percent B.27.33 percent C.54.60 percent D.70.00 percent E.78.20 percent 2) Which of the following are examples […]

1) Turner Industries started a new project three months ago. Sales arising from this project are exceeding all expectations. Given this, which one of the following is management most apt to implement? A.Option to wait B.Soft rationing C.Strategic option D.Option […]

1) Andersen’s Nursery has sales of $318,400, costs of $199,400, depreciation expense of $28,600, interest expense of $1,100, and a tax rate of 34 percent. The firm paid out $16,500 in dividends. What is the addition to retained earnings? A.$36,909 […]

1) Which of the following are true statements? I. Venture capitalists tend to be long-term investors in a firm. II. Venture capital is relatively easy to obtain for most new firms. III. Venture capitalists generally have an exit strategy. IV. […]

1) Currently, you can exchange $1 for Sf1.14. Assume that the average inflation rate in the U.S. over the next two years will be 2.5 percent annually as compared to 3 percent in Switzerland. Based on this information and relative […]

1) Highly liquid assets: A.increase the probability a firm will face financial distress B.appear on the right side of a balance sheet C.generally produce a high rate of return D.can be sold quickly at close to full value E.include all […]

1) Which one of the following statements is correct? A.Oral offers can be made for new securities during the waiting period B.A Green Shoe letter must be provided to all investors who purchase shares of a new equity offering C.Corporate […]

1) A real rate of return is defined as a rate that has been adjusted for which one of the following? A.Inflation B.Interest rate risk C.Taxes D.Liquidity E.Default risk 2) Which one of the following tends to be true for […]

1) A project has expected cash inflows, starting with year 1, of $2,200, $2,900, $3,500 and finally in year four, $4,000. The profitability index is 1.14 and the discount rate is 12 percent. What is the initial cost of the […]

1) Delfino’s expects to pay an annual dividend of $1.50 per share next year. What is the anticipated dividend for year 5 if the firm increases its dividend by 2 percent annually? A.$1.50 (1.02)1 B.$1.50 (1.02)2 C.$1.50 (1.02)3 D.$1.50 (1.02)4 […]

1) What is the effective annual rate of 13.9 percent compounded quarterly? A.13.23 percent B.13.82 percent C.14.37 percent D.14.64 percent E.15.01 percent 2) Travis recently purchased a callable bond. However, that bond cannot be currently redeemed by the issuer. Thus, […]

1) Which one of the following is the need to hold cash simply as a financial reserve? A.Precautionary motive B.Opportunistic motive C.Speculative motive D.Activity motive E.Transaction motive 2) You plan to buy a new Mercedes four years from now. Today, […]

1) A corporation: A.is ultimately controlled by its board of directors B.is a legal entity separate from its owners C.is prohibited from entering into contractual agreements D.has its identity defined by its bylaws E.has its existence regulated by the rules […]

1) Taylor Farms is borrowing $75,000 for 3 years at an APR of 9 percent. The loan calls for the principal balance to be reduced by equal amounts over the life of the loan. Interest is to be paid in […]

1) A bond trader just purchased and resold a bond. The amount of profit earned by the trader from this purchase and resale is referred to as the: A.market yield B.yield-to-call C.bid-ask spread D.current yield E.bond premium 2) Marcos & […]

1) The common stock of Western Hill Farms has yielded 16.3 percent, 7.2 percent, 11.8 percent, -3.6 percent, and 9.9 percent over the past five years, respectively. What is the geometric average return? A.7.91 percent B.8.03 percent C.8.11 percent D.8.27 […]

1) The clientele effect states that investors fall into various groups because of differences in their preferences for which one of the following? A.Share price levels B.Risk level C.Short-term versus long-term investments D.Rates of return E.Dividends 2) Based on the […]

1) Lamey Headstones increases its annual dividend by 1.5 percent annually. The stock sells for $28.40 a share at a required return of 14 percent. What is the amount of the last dividend this company paid? A.$3.50 B.$3.55 C.$3.60 D.$3.65 […]

1) Better Plastics is a mature manufacturing firm. The company just paid a $4 annual dividend, but management expects to reduce the payout by 3 percent per year, indefinitely. If you require a 12 percent return on this stock, what […]

1) Boone Brothers remodels homes and replaces windows. Ace Builders constructs new homes. If Boone Brothers considers expanding into new home construction, it should evaluate the expansion project using which one of the following as the required return for the […]

1) Valerie bought 200 shares of Able stock today. Able stock has been trading for some time on the NYSE. Valerie’s purchase occurred in which market? A.Dealer market B.Over-the-counter market C.Secondary market D.Primary market E.Tertiary market 2) Mark is analyzing […]

1) Figure 9.1 In March of 2011, Macklemore Corp. considered an acquisition of Blue Scholar Learning, Inc. (BSL), a privately-held educational software firm. As a first step in deciding what price to bid for BSL, Macklemore’s CFO, Ryan Lewis, has […]

1) Aaron’s Tea House has a 32 percent tax rate and an interest tax shield valued at $6,728 for the year. How much did the firm pay in annual interest? A.$2,153 B.$2,304 C.$2,468 D.$20,507 E.$21,025 2) What is the payback […]

1) Letitia borrowed $6,000 from her bank 2 years ago. The loan term is 4 years. Each year, she must repay the bank $1,500 plus the annual interest. Which type of loan does she have? A.Amortized B.Blended discount C.Interest-only D.Pure […]