公司理财复习题
1.Which one of the following is a means by which shareholders can replace company
management?
A. stock options
B. promotion
C. Sarbanes-Oxley Act
D. agency play
E. proxy fight
2.Decisions made by financial managers should primarily focus on increasing which one of the
following?
A. size of the firm
B. growth rate of the firm
C. gross profit per unit produced
D. market value per share of outstanding stock
E. total sales
3.Which one of the following is the financial statement that shows the accounting value of a
firm's equity as of a particular date?
A. income statement
B. creditor's statement
C. balance sheet
D. statement of cash flows
E. dividend statement
4.Which one of the following is the financial statement that summarizes a firm's revenue and
expenses over a period of time?
A. income statement
B. balance sheet
C. statement of cash flows
D. tax reconciliation statement
E. market value report
5.The percentage of the next dollar you earn that must be paid in taxes is referred to as the
_____ tax rate.
A. mean
B. residual
C. total
D. average
E. marginal
EDCAE
6.The cash flow of a firm which is available for distribution to the firm's creditors and
stockholders is called the:
A. operating cash flow.
B. net capital spending.
C. net working capital.
D. cash flow from assets.
E. cash flow to stockholders.
7.Canine Supply has sales of $2,200, total assets of $1,400, and a debt-equity ratio of 0.3. Its
return on equity is 15 percent. What is the net income?
A. $138.16
B. $141.41
C. $152.09
D. $156.67
E. $161.54
8.Beach Wear has current liabilities of $350,000, a quick ratio of 1.65, inventory turnover of 3.2,
and a current ratio of 2.9. What is the cost of goods sold?
A. $980,000
B. $1,060,000
C. $1,200,000
D. $1,400,000
E. $1,560,000
9.The sustainable growth rate of a firm is best described as the:
A. minimum growth rate achievable assuming a 100 percent retention ratio.
B. minimum growth rate achievable if the firm maintains a constant equity multiplier.
C. maximum growth rate achievable excluding external financing of any kind.
D. maximum growth rate achievable excluding any external equity financing while
maintaining a constant debt-equity ratio.
E. maximum growth rate achievable with unlimited debt financing.
10.The internal growth rate of a firm is best described as the:
A. minimum growth rate achievable assuming a 100 percent retention ratio.
B. minimum growth rate achievable if the firm maintains a constant equity multiplier.
C. maximum growth rate achievable excluding external financing of any kind.
D. maximum growth rate achievable excluding any external equity financing while
maintaining a constant debt-equity ratio.
E. maximum growth rate achievable with unlimited debt financing.
DEDDC
11.What is the present value of $1,100 per year, at a discount rate of 10 percent if the first
payment is received 6 years from now and the last payment is received 28 years from now?
A. $6,067.36
B. $6,138.87
C. $6,333.33
D. $6,420.12
E. $6,511.08
12.The current yield is defined as the annual interest on a bond divided by which one of the
following?
A. coupon
B. face value
C. market price
D. call price
E. dirty price
13.Currently, the bond market requires a return of 11.6 percent on the 10-year bonds issued by
Winston Industries. The 11.6 percent is referred to as which one of the following?
A. coupon rate
B. face rate
C. call rate
D. yield to maturity
E. interest rate
14.Big Falls Tours just paid a dividend of $1.55 per share. The dividends are expected to grow at
30 percent for the next 8 years and then level off to a 7 percent growth rate indefinitely. What
is the price of this stock today given a required return of 15 percent?
A. $67.54
B. $69.90
C. $72.47
D. $77.67
E. $78.19
15.Hardwoods, Inc. is a mature manufacturing firm. The company just paid a $10 dividend, but
management expects to reduce the payout by 9 percent each year, indefinitely. How much are you willing to pay today per share to buy this stock if you require a 15 percent rate of return?
A. $34.79
B. $37.92
C. $38.27
D. $41.33
E. $42.09
ACDDB
16.You are considering the following two mutually exclusive projects. The required rate of return
is 14.6 percent for project A and 13.8 percent for project B. Which project should you accept and why?
A. project A; because it has the higher required rate of return
B. project A; because its NPV is about $4,900 more than the NPV of project B
C. project B; because it has the largest total cash inflow
D. project B; because it has the largest cash inflow in year one
E. project B; because it has the lower required return
17. Which of the following are correct according to pecking-order theory?
I. Firms stockpile internally-generated cash.
II. There is an inverse relationship between a firm's profit level and its debt level.
III. Firms avoid external debt at all costs.
IV. A firm's capital structure is dictated by its need for external financing.
A. I and III only
B. II and IV only
C. I, III, and IV only
D. I, II, and IV only
E. I, II, III, and IV
18.The optimal capital structure:
A. will be the same for all firms in the same industry.
B. will remain constant over time unless the firm changes its primary operations.
C. will vary over time as taxes and market conditions change.
D. places more emphasis on operations than on financing.
E. is unaffected by changes in the financial markets.
19.Which one of the following statements related to stock repurchases is correct?
A. U.S. industrial firms have increased their stock repurchases every year for each of the past
twenty years.
B. A stock repurchase can be used as a means for incumbent officers to retain control of a firm.
C. A tender offer indicates that a firm is willing and able to purchase how ever many shares
the current shareholders wish to sell.
D. All stock repurchases must be identified as such to the selling party.
E. Stock repurchases can be a relatively tax-efficient method of distributing cash to
shareholders.
20.Which of the following tend to keep dividends low?
I. shareholders desiring current income
II. terms contained in bond indenture agreements
III. the desire to maintain constant dividends over time
IV. flotation costs
A. II and III only
B. I and IV only
C. II, III, and IV only
D. I, II, and III only
E. I, II, III, and IV
BDCEC
21.Which of the following will increase the expected rate of return on an individual security as
computed by the Capital Asset Pricing Model (CAPM)? Assume that the security’s beta, the risk-free rate of return, and the market rate of return are all positive.
I. a decrease in the security’s beta
II. an increase in the security’s beta
III. a decrease in the risk premium
IV. an increase in the market rate of return
A. I and III only
B. II and IV only
C. I and IV only
D. II and III only
E. II, III, and IV only
22. A stakeholder is:
A. a person who owns shares of stock.
B. any person who has voting rights based on stock ownership of a corporation.
C. a person who initially founded a firm and currently has management control over that firm.
D. a creditor to whom a firm currently owes money.
E. any person or entity other than a stockholder or creditor who potentially has a claim on the cash flows of a firm.
23.A business created as a distinct legal entity and treated as a legal "person" is called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. unlimited liability company.
24.Which of the following accounts are included in working capital management?
I. accounts payable
II. accounts receivable
III. fixed assets
IV. inventory
A. I and II only
B. I and III only
C. II and IV only
D. I, II, and IV only
E. II, III, and IV only
25.Which one of the following best states the primary goal of financial management?
A. maximize current dividends per share
B. maximize the current value per share
C. increase cash flow and avoid financial distress
D. minimize operational costs while maximizing firm efficiency
E. maintain steady growth while increasing current profits
BEADB
26.Noncash items refer to:
A. accrued expenses.
B. inventory items purchased using credit.
C. the ownership of intangible assets such as patents.
D. expenses which do not directly affect cash flows.
E. sales which are made using store credit.
27.Which of the following are current assets?
I. patent
II. Inventory
III. accounts payable
IV. cash
A. I and III only
B. II and IV only
C. I, II, and IV only
D. I, II and III only
E. II, III, and IV only
28.Which one of the following is a type of equity security that has a fixed dividend and a priority
status over other equity securities?
A. Senior bond
B. Debenture
C. Warrant
D. Common stock
E. Preferred stock
29.An investment is acceptable if its IRR:
A. is exactly equal to its net present value (NPV).
B. is exactly equal to zero.
C. is less than the required return.
D. exceeds the required return.
E. is exactly equal to 100 percent.
30.The higher the degree of financial leverage employed by a firm, the:
A. higher the probability that the firm will encounter financial distress.
B. lower the amount of debt incurred.
C. less debt a firm has per dollar of total assets.
D. higher the number of outstanding shares of stock.
E. lower the balance in accounts payable.
DBEDA
31.The accounting manager of Gateway Inns has noted that every time the inn‘s average
occupancy rate increases by 2 percent, the operating cash flow increases by 5.3 percent. What is the degree of operating leverage if the contribution margin per unit is $47?
A. 0.38
B. 0.57
C. 1.75
D. 2.10
E. 2.65
32.The value of a firm is maximized when the:
A. cost of equity is maximized.
B. tax rate is zero.
C. levered cost of capital is maximized.
D. weighted average cost of capital is minimized.
E. debt-equity ratio is minimized.
33.Under credit terms of 1/5, net 15, customers should:
A. always pay on the 15th day.
B. take the 5 percent discount and pay immediately.
C. take the discount and pay on the day following the day of sale.
D. either take the discount or pay on the 15th day.
E. both take the discount and pay on the 15th day.
34.The EOQ model is designed to minimize:
A. production costs.
B. inventory obsolescence.
C. the carrying costs of inventory.
D. the costs of replenishing inventory.
E. the total costs of holding inventory.
35.You are considering a project that you believe is quite risky. To reduce any potentially
harmful results from accepting this project, you could:
A. lower the degree of operating leverage.
B. lower the contribution margin per unit.
C. increase the initial cash outlay.
D. increase the fixed costs per unit while lowering the contribution margin per unit.
E. lower the operating cash flow of the project.
EDDEA
36.Which of the following ratios are measures of a firm's liquidity?
I. cash coverage ratio
II. interval measure
III. debt-equity ratio
IV. quick ratio
A. I and III only
B. II and IV only
C. I, III, and IV only
D. I, II, and III only
E. I, II, III, and IV
37. This is cash flow available for payments to stockholders and debtholders of a firm after the
firm has made investments in assets necessary to sustain the ongoing operations of the firm.
A. Net income available to common stockholders
B. Cash flow from Operations
C. Net cash flow
D. Cash flow from asset
38.18. If a firm has a debt-equity ratio of 1.0, then its total debt ratio must be which one of the
following?
A. 0.0
B. 0.5
C. 1.0
D. 1.5
E. 2.0
39.You are doing some comparison shopping. Five stores offer the product you want at basically
the same price. Which one of the following stores offers the best credit terms if you plan on taking the discount?
A. store A
B. store B
C. store C
D. store D
E. store E
40.What will be the approximate population of the United States, if its current population of 280
million grows at a compound rate of 2% annually for 25 years?
A.413 million
B. 430 million
C. 460 million
D. 488 million
BDBEC
41.A business owned by a solitary individual who has unlimited liability for its debt is called a:
A. corporation.
B. sole proprietorship.
C. general partnership.
D. limited partnership.
E. limited liability company.
42.Which of the following statements concerning the standard deviation are correct?
I. The greater the standard deviation, the lower the risk.
II. The standard deviation is a measure of volatility.
III. The higher the standard deviation, the less certain the rate of return in any one given year. IV. The higher the standard deviation, the higher the expected return.
A. I and III only
B. II, III, and IV only
C. I, III, and IV only
D. I, II, and III only
E. I, II, III, and IV
43.A 6 percent, annual coupon bond is currently selling at a premium and matures in 7 years. The
bond was originally issued 3 years ago at par. Which one of the following statements is
accurate in respect to this bond today?
A. The face value of the bond today is greater than it was when the bond was issued.
B. The bond is worth less today than when it was issued.
C. The yield-to-maturity is less than the coupon rate.
D. The coupon rate is greater than the current yield.
E. The yield-to-maturity equals the current yield.
44.Which one of the following is a risk that applies to most securities? C
A. unsystematic
B. diversifiable
C. systematic
D. asset-specific
E. total
45.Which one of the following terms is defined as the mixture of a firm's debt and equity
financing?
A. working capital management
B. cash management
C. cost analysis
D. capital budgeting
E. capital structure
BBCCE
46.Which one of the following terms is defined as a conflict of interest between the corporate
shareholders and the corporate managers?
A. articles of incorporation
B. corporate breakdown
C. agency problem
D. bylaws
E. legal liability
https://www.360docs.net/doc/1e14965190.html, working capital is defined as:
A. total liabilities minus shareholders' equity.
B. current liabilities minus shareholders' equity.
C. fixed assets minus long-term liabilities.
D. total assets minus total liabilities.
E. current assets minus current liabilities.
48.The cash flow of a firm which is available for distribution to the firm's creditors and
stockholders is called the:
A. operating cash flow.
B. net capital spending.
C. net working capital.
D. cash flow from assets.
E. cash flow to stockholders.
49.A firm has a debt-total asset ratio of 74 percent and a return on total assets of 13 percent.
What is the return on equity?
A. 26 percent
B. 50 percent
C. 65 percent
D. 84 percent
E. 135 percent
50.Shareholders' equity:
A. increases in value anytime total assets increases.
B. is equal to total assets plus total liabilities.
C. decreases whenever new shares of stock are issued.
D. includes long-term debt, preferred stock, and common stock.
E. represents the residual value of a firm.
CEDBE
51.A project has a net present value of zero. Which one of the following best describes this
project?
A. The project has a zero percent rate of return.
B. The project requires no initial cash investment
C. The project has no cash flows.
D. The summation of all of the project's cash flows is zero.
E. The project's cash inflows equal its cash outflows in current dollar terms.
52.Which one of the following represents the level of output where a project produces a rate of
return just equal to its requirement?
A. capital break-even
B. cash break-even
C. accounting break-even
D. financial break-even
E. internal break-even
53.Eight months ago, you purchased 400 shares of Winston, Inc. stock at a price of $54.90 a
share. The company pays dividends of $1 a share. Today, you sold all of your shares for $49.30 a share. What is your total percentage return on this investment?
A. -10.2 percent
B. -9.3 percent