《公司理财》选择题题库

公司理财选择题题库

Multiple Choice Questions:

Chapter 1 CONTROLLER

c 1. The person generally directly responsible for

overseeing the tax management, cost accounting,

financial accounting, and information system

functions is the:

a. treasurer.

b. director.

c. controller.

d. chairman of the board.

e. chief executive officer.

TREASURER

a 2. The person generally directly responsible for

overseeing the cash and credit functions,

financial planning, and capital expenditures is

the:

a. treasurer.

b. director.

c. controller.

d. chairman of the board.

e. chief operations officer.

CAPITAL BUDGETING

d 3. Th

e process o

f plannin

g and managing a firm’s

long-term investments is called:

a. working capital management.

b. financial depreciation.

c. agency cost analysis.

d. capital budgeting.

e. capital structure.

finance its operations is called:

a. working capital management.

b. financial depreciation.

c. cost analysis.

d. capital budgeting.

e. capital structure.

WORKING CAPITAL MANAGEMENT

a 5. The management of a firm’s short-term assets

and liabilities is called:

a. working capital management.

b. debt management.

c. equity management.

d. capital budgeting.

e. capital structure.

called a:

a. corporation.

b. sole proprietorship.

c. general partnership.

d. limited partnership.

e. limited liability company. GENERAL PARTNERSHIP

c 7. A business forme

d by two or mor

e individuals

who each have unlimited liability for business

debts is called a:

a. corporation.

b. sole proprietorship.

c. general partnership.

d. limited partnership.

e. limited liability company.

CORPORATION

a 9. A business created as a distinct legal entity

composed of one or more individuals or entities

is called a:

a. corporation.

b. sole proprietorship.

c. general partnership.

d. limited partnership.

e. unlimited liability company.

LIMITED LIABILITY COMPANY

a 12. A business entity operated and taxed like a

partnership, but with limited liability for the

owners, is called a:

a. limited liability company.

b. general partnership.

c. limited proprietorship.

d. sole proprietorship.

e. corporation.

a. maximize current dividends per share of the

existing stock.

b. maximize the current value per share of the

existing stock.

c. avoid financial distress.

d. minimize operational costs and maximize firm

efficiency.

e. maintain steady growth in both sales and net

earnings.

CHAPTER 4

Discounted Cash Flow Valuation ANNUITY

a 1. An annuity stream of cash flow payments is a

set of:

a. level cash flows occurring each time period for a

fixed length of time.

b. level cash flows occurring each time period

forever.

c. increasing cash flows occurring each time period

for a fixed length of time.

d. increasing cash flows occurring each time period

forever.

e. arbitrary cash flows occurring each time period

for no more than 10 years.

ANNUITIES DUE

e 2. Annuities where the payments occur at the end

of each time period are called _____ , whereas

_____ refer to annuity streams with payments

occurring at the beginning of each time period.

a. ordinary annuities; early annuities

b. late annuities; straight annuities

c. straight annuities; late annuities

d. annuities due; ordinary annuities

e. ordinary annuities; annuities due PERPETUITY

c 3. An annuity stream where the payments occur

forever is called a(n):

a. annuity due.

b. indemnity.

c. perpetuity.

d. amortized cash flow stream.

e. amortization table.

STATED INTEREST RATES

a 4. The interest rate expressed in terms of the

interest payment made each period is called the

_____ rate.

a. stated annual interest

b. compound annual interest

c. effective annual interest

d. periodic interest

e. daily interest

compounded once per year is called the _____

rate.

a. stated interest

b. compound interest

c. effective annual

d. periodic interest

e. daily interest

ANNUAL PERCENTAGE RATE

b 6. The interest rate charged per period multiplied

by the number of periods per year is called the

_____ rate.

a. effective annual

b. annual percentage

c. periodic interest

d. compound interest

e. daily interest

CHAPTER 5

Interest Rate and Bond Valuation COUPON

a 1. The stated interest payment, in dollars, made on

a bond each period is called the bond’s:

a. coupon.

b. face value.

c. maturity.

d. yield to maturity.

e. coupon rate.

FACE VALUE

b 2. The principal amount of a bond that is repaid at

the end of the loan term is called the bond’s:

a. coupon.

b. face value.

c. maturity.

d. yield to maturity.

e. coupon rate. MATURITY

c 3. The specifie

d dat

e on which the principal

amount of a bond is repaid is called the bond’s:

a. coupon.

b. face value.

c. maturity.

d. yield to maturity.

e.

coupon rate.

market for owning a bond is called the:

a. coupon.

b. face value.

c. maturity.

d. yield to maturity.

e. coupon rate.

COUPON RATE

e 5. The annual coupon o

f a bond divided by its face

value is called the bond’s:

a. coupon.

b. face value.

c. maturity.

d. yield to maturity.

e. coupon rate.

PAR BONDS

a 6. A bond with a face value of $1,000 that sells for

$1,000 in the market is called a _____ bond.

a. par value

b. discount

c. premium

d. zero coupon

e. floating rate

DISCOUNT BONDS

b 7. A bond with a face value of $1,000 that sells for

less than $1,000 in the market is called a _____

bond.

a. par

b. discount

c. premium

d. zero coupon

e.

floating rate

more than $1,000 in the market is called a _____

bond.

a. par

b. discount

c. premium

d. zero coupon

e. floating rate CHAPTER 6

Stock Valuation GROWING PERPETUITY

a 1. An asset characterized by cash flows that

increase at a constant rate forever is called a:

a. growing perpetuity.

b. growing annuity.

c. common annuity.

d. perpetuity du

e.

e. preferred stock.

DIVIDEND GROWTH MODEL

b 2. The stock valuation model that determines the

current stock price by dividing the next annual

dividend amount by the excess of the discount

rate less the dividend growth rate is called the

_____ model.

a. zero growth

b. dividend growth

c. capital pricing

d. earnings capitalization

e. discounted dividend

DIVIDEND YIELD

c 3. Next year’s annual dividen

d divided by the

current stock price is called the:

a. yield to maturity.

b. total yield.

c. dividend yiel

d.

d. capital gains yield.

e. earnings yield.

appreciate (or depreciate) is called the _____

yield.

a. current

b. total

c. dividend

d. capital gains

e. earnings

PREFERRED STOCK

d 5. A form of equity which receives preferential

treatment in the payment of dividends is called

_____ stock.

a. dual class

b. cumulative

c. deferred

d. preferred

e. common

PREFERRED STOCK

e 6. A _____ is a form o

f equity security that has a

stated liquidating value.

a. bond

b. debenture

c. proxy

d. common stock

e. preferred stock

Difficulty level: Medium

COMMON STOCK

e 7. A form o

f equity which receives no preferential

treatment in either the payment of dividends or

in bankruptcy distributions is called _____

stock.

a. dual class

b. cumulative

c. deferred

d. preferred

e. common

DIVIDENDS

c 12. Payments made by a corporation to its

shareholders, in the form of either cash, stock or

payments in kind, are called:

a. retained earnings.

b. net income.

c. dividends.

d. redistributions.

e. infused equity.

PRIMARY MARKET

e 13. The market in which new securities are

originally sold to investors is called the _____

market.

a. dealer

b. auction

c. over-the-counter

d. secondary

e. primary

SECONDARY MARKET

d 14. Th

e market in which previously issued securities

are traded among investors is called the _____

market.

a. dealer

b. auction

c. over-the-counter

d. secondary

e. primary

CHAPTER 10 Risk and Return Lessons from Market History RISK PREMIUM

a 1. The excess return required from a risky asset

over that required from a risk-free asset is called

the:

a. risk premium.

b. geometric premium.

c. excess return.

d. average return.

e. variance.

VARIANCE

b 2. The average squared difference between the

actual return and the average return is called the:

a. volatility return.

b. variance.

c. standard deviation.

d. risk premium.

e. excess return.

STANDARD DEVIATION

c 3. The standar

d deviation for a set of stock returns

can be calculated as the:

a. positive square root of the average return.

b. average squared difference between the actual

return and the average return.

c. positive square root of the variance.

d. average return divided by N minus one, where N

is the number of returns.

e. variance squared.

GEOMETRIC AVERAGE RETURN

d 5. Th

e average compound return earned per year

over a multi-year period is called the _____ average return.

a. arithmetic

b. standard

c. variant

d. geometric

e. real Difficulty level: Medium

ARITHMETIC AVERAGE RETURN

a 6. The return earned in an average year over a

multi-year period is called the _____ average return.

a. arithmetic

b. standard

c. variant

d. geometric

e. real RISK PREMIUM

c 7. The excess return you earn by moving from a

relatively risk-free investment to a risky investment is called the:

a. geometric average return.

b. inflation premium.

c. risk premium.

d. time premium.

e. arithmetic average return.

TOTAL RETURN

e 8. The capital gains yield plus the dividend yield

on a security is called the:

a. variance of returns.

b. geometric return.

c. average period return.

d. current yield.

e. total return.

(CAPM)

a b. the expected return on a risky asset. c. the expected return on a collection of risky

assets.

d. the variance of returns for a risky asset.

e. the standard deviation of returns for a collection

of risky assets.

PORTFOLIO WEIGHTS

b 2. The percentage of a portfolio’s total value

invested in a particular asset is called that

asset’s:

a. portfolio return.

b. portfolio weight.

c. portfolio risk.

d. rate of return.

e. investment value. to a greater or lesser degree, is called _____ risk.

a. idiosyncratic

b. diversifiable

c. systematic

d. asset-specific

e. total

UNSYSTEMATIC RISK

d 4. Risk that affects at most a small number of

assets is called _____ risk.

a. portfolio

b. undiversifiable

c. market

d. unsystematic

e. total

SYSTEMATIC RISK PRINCIPLE

b 6. The _____ tells us that the expected return on a

risky asset depends only on that asset’s nondiversifiable risk.

a. Efficient Markets Hypothesis (EMH)

b. systematic risk principle

c. Open Markets Theorem

d. Law of One Price

e. principle of diversification

BETA COEFFICIENT

a 7. The amount of systematic risk present in a

particular risky asset, relative to the systematic risk present in an average risky asset, is called

the particular asset’s:

a. beta coefficient.

b. reward-to-risk ratio.

c. total risk.

d. diversifiable risk.

e. Treynor index. return and its beta coefficient is the:

a. reward-to-risk ratio.

b. portfolio weight.

c. portfolio risk.

d. security market lin

e. e. market risk premium.

CHAPTER 12

Risk, Cost of Capital, and Capital Budgeting

WACC

e 1. The weighted average o

f the firm’s costs of equity, preferred stock, and after tax debt is the: a. reward to risk ratio for the firm. b. expected capital gains yield for the stock. c. expected capital gains yield for the firm. d. portfolio beta for the firm. e. weighted average cost of capital (WACC). CAPM b 2. If the CAPM is used to estimate the cost of

equity capital, the expected excess market

return is equal to the

a. return on the stock minus the risk-free rate.

b. difference between the return on the market and

the risk-free rate.

c. beta times the market risk premium.

d. beta times the risk-free rat

e.

e. market rate of return.

CHARACTERISTIC LINE

c 3. The best fit line of pairwise plot of the returns

of the security against the market index returns

is called the

a. Security Market Line.

b. Capital Market Line.

c. characteristic line.

d. risk lin

e.

e. None of the above.

CHAPTER 14

Capital Structure: Basic Concepts MM PROPOSITION I

b 2. The proposition that the value of the firm is

independent of its capital structure is called:

a. the capital asset pricing model.

b. MM Proposition I.

c. MM Proposition II.

d. the law of one pric

e.

e. the efficient markets hypothesis.

MM PROPOSITION II

c 3. The proposition that the cost of equity is a

positive linear function of capital structure is

called:

a. the capital asset pricing model.

b. MM Proposition I.

c. MM Proposition II.

d. the law of one pric

e.

e. the efficient markets hypothesis.

Difficulty level: Medium

INTEREST TAX SHIELD

a 4. The tax savings of the firm derived from the

deductibility of interest expense is called the:

a. interest tax shield.

b. depreciable basis.

c. financing umbrella.

d. current yield.

e. tax-loss carryforward savings.

CAPITAL STRUCTURE DEFINITION

d 8. Th

e firm's capital structure refers to

a. the way a firm invests its assets.

b. the amount of capital in the firm.

c. the amount of dividends a firm pays.

d. the mix of debt and equity used to finance the

firm's assets.

e. how much cash the firm holds.

CHAPTER 15 Capital Structure: Limits to the Use of Debt DIRECT BANKRUPTCY COSTS

c 1. The explicit costs, such as the legal expenses,

associated with corporate default are classified

as _____ costs.

a. flotation

b. beta conversion

c. direct bankruptcy

d. indirect bankruptcy

e. unlevered

INDIRECT BANKRUPTCY COSTS

c 2. The costs of avoiding a bankruptcy filing by a

financially distressed firm are classified as

_____ costs.

a. flotation

b. direct bankruptcy

c. indirect bankruptcy

d. financial solvency

e. capital structure

corporate default are referred to as the _____

costs of a firm.

a. flotation

b. default beta

c. direct bankruptcy

d. indirect bankruptcy

e. financial distress

BANKRUPTCY

b 6. The legal proceeding for liquidating or

reorganizing a firm operating in default is called

a:

a. tender offer.

b. bankruptcy.

c. merger.

d. takeover.

e. proxy fight.

ACCOUNTING INSOLVENCY

d 8. A firm that has negativ

e net worth is said to be:

a. experiencing a business failure.

b. in legal bankruptcy.

c. experiencing technical insolvency.

d. experiencing accounting insolvency.

e. in Chapter 11 bankruptcy reorganization. CAPITAL STRUCTURE

d 10. Th

e value o

f a firm is maximized when the:

a. cost of equity is maximized.

b tax rate is zero.

c. levered cost of capital is maximize

d.

d. weighted average cost of capital is minimized.

e. debt-equity ratio is minimized.

CAPITAL STRUCTURE

e 11. The optimal capital structure has been achieved when the:

a. debt-equity ratio is equal to 1.

b. weight of equity is equal to the weight of debt.

c. cost of equity is maximized given a pre-tax cost of debt.

d. debt-equity ratio is such that the cost of debt exceeds the cost of equity.

e. debt-equity ratio selected results in the lowest possible weighed average cost of

capital.

Dividend and Other Payouts I. DEFINITIONS

DIVIDENDS

a 1. Paym ents made out of a firm’s earnings to its

owners in the form of cash or stock are called:

a. dividends.

b. distributions.

c. share repurchases.

d. payments-in-kind.

e. stock splits.

DISTRIBUTIONS

b 2. Payments made by a firm to its owners from

sources other than current or accumulated

earnings are called:

a. dividends.

b. distributions.

c. share repurchases.

d. payments-in-kind.

e. stock splits.

REGULAR CASH DIVIDENDS

c 3. A cash payment made by a firm to its owners in

the normal course of business is called a:

a. share repurchase.

b. liquidating dividend.

c. regular cash dividen

d.

d. special dividend.

e. extra cash dividend.

LIQUIDATING DIVIDENDS

a 4. A cash payment made by a firm to its owners

when some of the firm’s assets are sold of f is

called a:

a. liquidating dividend.

b. regular cash dividend.

c. special dividen

d.

d. extra cash dividend.

e. share repurchase.

SHARE REPURCHASE

e 12. A _____ is an alternative method to cash

dividends which is used to pay out a firm’s

earnings to shareholders.

a. merger

b. tender offer

c. payment-in-kind

d. stock split

e. share repurchase

STOCK DIVIDENDS

a 13. A payment made by a firm to its owners in the

form of new shares of stock is called a _____

dividend.

a. stock

b. normal

c. special

d. extra

e. liquidating

STOCK SPLITS

b 14. An increase in a firm’s number of shares

outstanding without any change in owners’

equity is called a:

a. special dividend.

b. stock split.

c. share repurchase.

d. tender offer.

e. liquidating dividend.