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/c216766958.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

C. -8.4 percent

D. 12.0 percent

E. 13.4 percent

54.Which of the following actions help reduce unsystematic risk in a portfolio?

I. spreading the retail industry portion of a portfolio over five separate stocks

II. combining stocks with bonds in a portfolio

III. adding some international securities into a portfolio of U.S. stocks

IV. adding some U.S. Treasury bills to a risky portfolio

A. I and III only

B. I, II, and IV only

C. I, III, and IV only

D. II, III, and IV only

E. I, II, III, and IV

55.Steele Insulators is analyzing a new type of insulation for interior walls. Management has

compiled the following information to determine whether or not this new insulation should be manufactured. The insulation project has an initial fixed asset requirement of $1.3 million, which would be depreciated straight-line to zero over the 12-year life of the project. Projected fixed costs are $742,000 and the anticipated annual operating cash flow is $241,000. What is the degree of operating leverage for this project?

A. 3.78

B. 3.92

C. 4.08

D. 4.27

E. 4.53

EDCDC

56.Ratios that measure a firm's financial leverage are known as _____ ratios.

A. asset management

B. long-term solvency

C. short-term solvency

D. profitability

E. book value

57.High Mountain Foods has an equity multiplier of 1.55, a total asset turnover of 1.3, and a

profit margin of 7.5 percent. What is the return on equity?

A. 8.94 percent

B. 10.87 percent

C. 12.69 percent

D. 14.38 percent

E. 15.11 percent

58.Martin invested $1,000 six years ago and expected to have $1,500 today. He has not added or

withdrawn any money from this account since his initial investment. All interest was

reinvested in the account. As it turns out, Martin only has $1,420 in his account today. Which one of the following must be true?

A. Martin earned simple interest rather than compound interest.

B. Martin earned a lower interest rate than he expected.

C. Martin did not earn any interest on interest as he expected.

D. Martin ignored the Rule of 72 which caused his account to decrease in value.

E. The future value interest factor turned out to be higher than Martin expected.

59.A newly issued bond has a 7 percent coupon with semiannual interest payments. The bonds

are currently priced at par value. The effective annual rate provided by these bonds must be:

A. 3.5 percent.

B. greater than 3.5 percent but less than 7 percent.

C. 7 percent.

D. greater than 7 percent.

E. Answer cannot be determined from the information provided.

60.Which of the following relationships apply to a par value bond?

I. coupon rate < yield-to-maturity

II. current yield = yield-to-maturity

III. market price = call price

IV. market price = face value

A. I and II only

B. I and III only

C. II and IV only

D. I, II, and III only

E. II, III, and IV only

BEBDC

61.Control of a firm ultimately rests with the stockholders. T

62.If a firm has cash flow from assets of $12,000, dividends paid of $4,000 and net new equity

sales of $4,000, then cash flow to creditors must be $4,000. F

63.One advantage of the corporate form of organization is that you can buy shares in a

corporation such as Wal-Mart without worrying about being held personally liable for the corporation's liabilities. T

64.Money market accounts are low-risk, high-return investments. F

65.All else equal, a firm that utilizes assets inefficiently will have a higher sustainable growth

rate than a firm that does not. F

66.In most industries, planning beyond the period of one year is not very useful. F

67. Agency problems can best be characterized as differing incentives between managers and

owners. T

68.The primary goal of any company should be to maximize current period profit. F

69.According to the constant growth model, the dividend yield is equal to the required return

minus the dividend growth rate. F

70.If one uses the perpetuity model to value stock, one assumes that P0 = P1 = P3, etc., implying

that the annual return from owning the stock is zero. T

71.The primary goal of any company should be to maximize current period profit. F

72.With terms of 2/10, net 30, the net credit period is 20 days. F

73.M&M Proposition I with no tax supports the argument that the debt-equity ratio of a firm is

completely irrelevant. T

74.A firm should select the capital structure that produces the highest cost of capital. F

75.If you are given a present value, how long the money is to be invested, and the future value of

that investment, you can solve for the interest rate that was earned on the investment. T

76.Maintaining a steady dividend is a key goal of most dividend-paying firms. T

77.A stock repurchase program is essentially the same as a cash dividend program provided there

are no taxes or other costs. T

78.Long-term interest rates tend to be less volatile than short-term rates. T

79.An increase in the accounts payable period shortens the cash cycle T

80.At cash break-even point , The NPV is negative and equal to the initial cash outlay. T