Corporate Finance Quiz Helper

9/15/2015 CorporateFinanceFinalExamQUESTIONSflashcards|Quizlet

https://quizlet.com/13633505/corporatefinancefinalexamquestionsflashcards/ 1/28

Corporate Finance - Final ExamQUESTIONS 78 terms by trunganhhung

Like this study set? Create a free account to save it.Create a free account

Whichoneofthefollowingbestdefinesthevarianceofaninvestment'sannualreturnsoveranumberofyears?

A.Theaveragesquareddifferencebetweenthearithmeticandthegeometricaverageannualreturns.B.Thesquaredsummationofthedifferencesbetweentheactualreturnsandtheaveragegeometricreturn.C.Theaveragedifferencebetweentheannualreturnsandtheaveragereturnfortheperiod.D.Thedifferencebetweenthearithmeticaverageandthegeometricaveragereturnfortheperiod.E.Theaveragesquareddifferencebetweentheactualreturnsandthearithmeticaveragereturn.

Theaveragesquareddifferencebetweentheactualreturnsandthearithmeticaveragereturn.



Standarddeviationisameasureofwhichoneofthefollowing?

A.averagerateofreturnB.volatilityC.probabilityD.riskpremiumE.realreturns

volatility

Whichoneofthefollowingisdefinedbyitsmeananditsstandarddeviation?

A.arithmeticnominalreturnB.geometricrealreturnC.normaldistributionD.varianceE.riskpremium

normaldistribution

Theaveragecompoundreturnearnedperyearoveramultiyearperiodiscalledthe_____averagereturn.

A.arithmeticB.standardC.variantD.geometricE.real

geometric

5.Whichofthefollowingstatementsiscorrectinrelationtoastockinvestment?I.Thecapitalgainsyieldcanbepositive,negative,orzero.II.Thedividendyieldcanbepositive,negative,orzero.III.Thetotalreturncanbepositive,negative,orzero.IV.Neitherthedividendyieldnorthetotalreturncanbenegative.

IandIIIonly



Therealrateofreturnonastockisapproximatelyequaltothenominalrateofreturn:

A.multipliedby(1+inflationrate).B.plustheinflationrate.C.minustheinflationrate.D.dividedby(1+inflationrate).E.dividedby(1inflationrate).

minustheinflationrate.

7.Whichoneofthefollowingstatementsiscorrect?A.Thegreaterthevolatilityofreturns,thegreatertheriskpremium.B.Thelowerthevolatilityofreturns,thegreatertheriskpremium.C.Thelowertheaveragereturn,thegreatertheriskpremium.D.Theriskpremiumisunrelatedtotheaveragerateofreturn.E.Theriskpremiumisnotaffectedbythevolatilityofreturns.

A.Thegreaterthevolatilityofreturns,thegreatertheriskpremium.

Ifthevariabilityofthereturnsonlargecompanystocksweretoincreaseoverthelongterm,youwouldexpectwhichofthefollowingtooccurasaresult?I.decreaseintheaveragerateofreturnII.increaseintheriskpremiumIII.increaseinthe68percentprobabilityrangeofthefrequencydistributionofreturnsIV.decreaseinthestandarddeviation

IIandIIIonly



Estimatesoftherateofreturnonasecuritybasedonahistoricalarithmeticaveragewillprobablytendto_____theexpectedreturnforthelongtermwhileestimatesusingthehistoricalgeometricaveragewillprobablytendto_____theexpectedreturnfortheshortterm.

overestimateunderestimate

Whichtwoofthefollowingarethemostlikelyreasonswhyastockpricemightnotreactatallonthedaythatnewinformationrelatedtothestockissuerisreleased?I.insidersknewtheinformationpriortotheannouncementII.investorsneedtimetodigesttheinformationpriortoreactingIII.theinformationhasnobearingonthevalueofthefirmIV.theinformationwasanticipated

IIIandIVonly

Whichoneofthefollowingmeasurestheamountofsystematicriskpresentinaparticularriskyassetrelativetothesystematicriskpresentinanaverageriskyasset?

A.betaB.rewardtoriskratioC.riskratioD.standarddeviationE.priceearningsratio

beta



Whichoneofthefollowingisapositivelyslopedlinearfunctionthatiscreatedwhenexpectedreturnsaregraphedagainstsecuritybetas?

A.rewardtoriskmatrixB.portfolioweightgraphC.normaldistributionD.securitymarketlineE.marketrealreturns

securitymarketline

Whichoneofthefollowingisrepresentedbytheslopeofthesecuritymarketline?

A.rewardtoriskratioB.marketstandarddeviationC.betacoefficientD.riskfreeinterestrateE.marketriskpremium

marketriskpremium

Whichoneofthefollowingistheformulathatexplainstherelationshipbetweentheexpectedreturnonasecurityandthelevelofthatsecurity'ssystematicrisk?

A.capitalassetpricingmodelB.timevalueofmoneyequationC.unsystematicriskequationD.marketperformanceequationE.expectedriskformula

capitalassetpricingmodel

Standarddeviationmeasureswhichtypeofrisk?

A.totalB.nondiversifiableC.unsystematicD.systematicE.economic

total



Theexpectedreturnonaportfolioconsiderswhichofthefollowingfactors?I.percentageoftheportfolioinvestedineachindividualsecurityII.projectedstatesoftheeconomyIII.theperformanceofeachsecuritygivenvariouseconomicstatesIV.probabilityofoccurrenceforeachstateoftheeconomy

I,II,III,andIV

Whichoneofthefollowingisanexampleofsystematicrisk?

A.investorspaniccausingsecuritypricesaroundtheglobetofallprecipitouslyB.afloodwashesawayafirm'swarehouseC.acityimposesanadditionalonepercentsalestaxonallproductsD.atoymakerhastorecallitstopsellingtoyE.cornpricesincreaseduetoincreaseddemandforalternativefuels

investorspaniccausingsecuritypricesaroundtheglobetofallprecipitously

Unsystematicrisk

A.canbeeffectivelyeliminatedbyportfoliodiversification.B.iscompensatedforbytheriskpremium.C.ismeasuredbybeta.D.ismeasuredbystandarddeviation.E.isrelatedtotheoveralleconomy.

canbeeffectivelyeliminatedbyportfoliodiversification.



Theprimarypurposeofportfoliodiversificationisto:

A.increasereturnsandrisks.B.eliminateallrisks.C.eliminateassetspecificrisk.D.eliminatesystematicrisk.E.lowerbothreturnsandrisks.

eliminateassetspecificrisk.

Systematicriskismeasuredby:

A.themean.B.beta.C.thegeometricaverage.D.thestandarddeviation.E.thearithmeticaverage.

beta.

Totalriskismeasuredby_____andsystematicriskismeasuredby_____.

A.betaalphaB.betastandarddeviationC.alphabetaD.standarddeviationbetaE.standarddeviationvariance

standarddeviationbeta

Themarketrateofreturnis11percentandtheriskfreerateofreturnis3percent.Lexantstockhas3percentlesssystematicriskthanthemarketandhasanactualreturnof12percent.Thisstock:

A.isunderpriced.B.iscorrectlypriced.C.willplotbelowthesecuritymarketline.D.willplotonthesecuritymarketline.E.willplottotherightoftheoverallmarketonasecuritymarketlinegraph.

isunderpriced.



Themarketriskpremiumiscomputedby:

A.addingtheriskfreerateofreturntotheinflationrate.B.addingtheriskfreerateofreturntothemarketrateofreturn.C.subtractingtheriskfreerateofreturnfromtheinflationrate.D.subtractingtheriskfreerateofreturnfromthemarketrateofreturn.E.multiplyingtheriskfreerateofreturnbyabetaof1.0.

subtractingtheriskfreerateofreturnfromthemarketrateofreturn.

AccordingtoCAPM,theamountofrewardaninvestorreceivesforbearingtheriskofanindividualsecuritydependsuponthe:

A.amountoftotalriskassumedandthemarketriskpremium.B.marketriskpremiumandtheamountofsystematicriskinherentinthesecurity.C.riskfreerate,themarketrateofreturn,andthestandarddeviationofthesecurity.D.betaofthesecurityandthemarketrateofreturn.E.standarddeviationofthesecurityandtheriskfreerateofreturn.

marketriskpremiumandtheamountofsystematicriskinherentinthesecurity.

WhichoneofthefollowingshouldearnthemostriskpremiumbasedonCAPM?

A.diversifiedportfoliowithreturnssimilartotheoverallmarketB.stockwithabetaof1.38C.stockwithabetaof0.74D.U.S.TreasurybillE.portfoliowithabetaof1.01

stockwithabetaof1.38



AgroupofindividualsgottogetherandpurchasedalloftheoutstandingsharesofcommonstockofDLSmith,Inc.Whatisthereturnthattheseindividualsrequireonthisinvestmentcalled?

A.dividendyieldB.costofequityC.capitalgainsyieldD.costofcapitalE.incomereturn

costofequity

TextileMillsborrowsmoneyatarateof13.5percent.Thisinterestrateisreferredtoasthe:

A.compoundrate.B.currentyield.C.costofdebt.D.capitalgainsyield.E.costofcapital.

costofdebt.

Theaverageofafirm'scostofequityandaftertaxcostofdebtthatisweightedbasedonthefirm'scapitalstructureiscalledthe:

A.rewardtoriskratio.B.weightedcapitalgainsrate.C.structuredcostofcapital.D.subjectivecostofcapital.E.weightedaveragecostofcapital.

weightedaveragecostofcapital.



Afirm'scostofcapital:

A.willdecreaseastherisklevelofthefirmincreases.B.foraspecificprojectisprimarilydependentuponthesourceofthefundsusedfortheproject.C.isindependentofthefirm'scapitalstructure.D.shouldbeappliedasthediscountrateforanyprojectconsideredbythefirm.E.dependsuponhowthefundsraisedaregoingtobespent.

dependsuponhowthefundsraisedaregoingtobespent.

WhichoneofthefollowingstatementsrelatedtotheSMLapproachtoequityvaluationiscorrect?Assumethefirmusesdebtinitscapitalstructure.

A.Thismodelconsidersafirm'srateofgrowth.B.Themodelappliesonlytonondividendpayingfirms.C.Themodelisdependentuponareliableestimateofthemarketriskpremium.D.Themodelgenerallyproducesthesamecostofequityasthedividendgrowthmodel.E.Thisapproachgenerallyproducesacostofequitythatequalsthefirm'soverallcostofcapital.

Themodelisdependentuponareliableestimateofthemarketriskpremium.



Thepretaxcostofdebt:

A.isbasedonthecurrentyieldtomaturityofthefirm'soutstandingbonds.B.isequaltothecouponrateonthelatestbondsissuedbyafirm.C.isequivalenttotheaveragecurrentyieldonallofafirm'soutstandingbonds.D.isbasedontheoriginalyieldtomaturityonthelatestbondsissuedbyafirm.E.hastobeestimatedasitcannotbedirectlyobservedinthemarket.

isbasedonthecurrentyieldtomaturityofthefirm'soutstandingbonds.

Theaftertaxcostofdebtgenerallyincreaseswhen:I.afirm'sbondratingincreases.II.themarketrateofinterestincreases.III.taxratesdecrease.IV.bondpricesrise.

IIandIIIonly

Thecostofpreferredstockiscomputedthesameasthe:

A.pretaxcostofdebt.B.returnonanannuity.C.aftertaxcostofdebt.D.returnonaperpetuity.E.costofanirregulargrowthcommonstock.

returnonaperpetuity.



Thecapitalstructureweightsusedincomputingtheweightedaveragecostofcapital:

A.arebasedonthebookvaluesoftotaldebtandtotalequity.B.arebasedonthemarketvalueofthefirm'sdebtandequitysecurities.C.arecomputedusingthebookvalueofthelongtermdebtandthebookvalueofequity.D.remainconstantovertimeunlessthefirmissuesnewsecurities.E.arerestrictedtothefirm'sdebtandcommonstock.

arebasedonthemarketvalueofthefirm'sdebtandequitysecurities.

IfafirmusesitsWACCasthediscountrateforalloftheprojectsitundertakesthenthefirmwilltendto:I.rejectsomepositivenetpresentvalueprojects.II.acceptsomenegativenetpresentvalueprojects.III.favorhighriskprojectsoverlowriskprojects.IV.increaseitsoveralllevelofriskovertime.

I,II,III,andIV



Theflotationcostforafirmiscomputedas:

A.thearithmeticaverageoftheflotationcostsofbothdebtandequity.B.theweightedaverageoftheflotationcostsassociatedwitheachformoffinancing.C.thegeometricaverageoftheflotationcostsassociatedwitheachformoffinancing.D.onehalfoftheflotationcostofdebtplusonehalfoftheflotationcostofequity.E.aweightedaveragebasedonthebookvaluesofthefirm'sdebtandequity.

theweightedaverageoftheflotationcostsassociatedwitheachformoffinancing.

Incorporatingflotationcostsintotheanalysisofaprojectwill:

A.causetheprojecttobeimproperlyevaluated.B.increasethenetpresentvalueoftheproject.C.increasetheproject'srateofreturn.D.increasetheinitialcashoutflowoftheproject.E.havenoeffectonthepresentvalueoftheproject.

increasetheinitialcashoutflowoftheproject.



Jones&Co.isfundedbyagroupofindividualinvestorsforthesolepurposeofprovidingfundingforindividualswhoaretryingtoconverttheirnewideasintoviableproducts.Whatisthistypeoffundingcalled?

A.greenshoefundingB.tombstoneunderwritingC.venturecapitalD.redherringfundingE.lifecyclecapital

venturecapital

Whatisanissueofsecuritiesthatisofferedforsaletothegeneralpubliconadirectcashbasiscalled?

A.besteffortsunderwritingB.firmcommitmentunderwritingC.generalcashofferD.rightsofferE.herringoffer

generalcashoffer

Tonycurrentlyowns12,000sharesofGLTools.Hehasjustbeennotifiedthatthefirmisissuingadditionalsharesofstockandthatheisbeinggivenachancetopurchasesomeofthesesharespriortothesharesbeingofferedtothegeneralpublic.Whatisthistypeofanoffercalled?

A.besteffortsofferB.firmcommitmentofferC.generalcashofferD.rightsofferE.priorityoffer

rightsoffer



SoupGaloreisapartnershipthatwasformedthreeyearsagoforthepurposeofcreating,producing,anddistributinghealthysoupsinadriedform.Thefirmhasbeenextremelysuccessfulthusfarandhasdecidedtoincorporateandoffersharesofstocktothegeneralpublic.Whatisthistypeofanequityofferingcalled?

A.venturecapitalofferingB.shelfofferingC.privateplacementD.seasonedequityofferingE.initialpublicoffering

initialpublicoffering

Whatisaseasonedequityoffering?

A.anofferingofsharesbyshareholdersforrepurchasebytheissuerB.sharesofstockthathavebeenrecommendedforpurchasebytheSECC.equitysecuritiesheldbyafirm'sfounderthatarebeingofferedforsaletothegeneralpublicD.saleofnewlyissuedequitysharesbyafirmthatiscurrentlypubliclyownedE.asetnumberofequitysharesthatareissuedandofferedtothepublicannually

saleofnewlyissuedequitysharesbyafirmthatiscurrentlypubliclyowned



ExecutiveTourshasdecidedtotakeitsfirmpublicandhashiredaninvestmentfirmtohandlethisoffering.Theinvestmentfirmisservingasa(n):

A.aftermarketspecialist.B.venturecapitalist.C.underwriter.D.seasonedwriter.E.primaryinvestor.

underwriter.

DenverLiquidWholesalersrecentlyoffered50,000newsharesofstockforsale.Theunderwriterssoldatotalof53,000sharestothepublic.Theadditional3,000shareswerepurchasedinaccordancewithwhichoneofthefollowing?

A.GreenshoeprovisionB.RedherringprovisionC.quietprovisionD.lockupagreementE.postissueagreement

Greenshoeprovision

Royowns200sharesofR.T.F.,Inc.Hehasoptednottoparticipateinthecurrentrightsofferingbythisfirm.Asaresult,Roywillmostlikelybesubjectto:

A.anoversubscriptioncost.B.underpricing.C.dilution.D.theGreenShoeprovision.E.alockedinperiod.

dilution.



Agroupoffiveprivateinvestorsrecentlyloaned$6milliontoHendersonHardwarefortenyearsat9percentinterest.Thisloanisbestdescribedasa:

A.privateplacement.B.debtSEO.C.notespayable.D.debtIPO.E.termloan.

privateplacement.

PearsonElectricrecentlyregistered250,000sharesofstockunderSECRule415.Thefirmplanstosell150,000sharesthisyearandtheremaining100,000sharesnextyear.Whattypeofregistrationwasthis?

A.standbyregistrationB.shelfregistrationC.RegulationAregistrationD.RegulationQregistrationE.privateplacementregistration

shelfregistration

Whichofthefollowingshouldbeconsideredwhenselectingaventurecapitalist?I.levelofinvolvementII.pastexperiencesIII.terminationoffundingIV.financialstrength

I,II,III,andIV



TheSecuritiesandExchangeCommission:

A.verifiestheaccuracyoftheinformationcontainedintheprospectus.B.verifiestheaccuracyoftheinformationcontainedintheredherring.C.examinestheregistrationstatementduringtheGreenShoeperiod.D.isconcernedonlythatanissuecomplieswithallrulesandregulations.E.determinesthefinalofferpriceoncetheyhaveapprovedtheregistrationstatement.

isconcernedonlythatanissuecomplieswithallrulesandregulations.

Withfirmcommitmentunderwriting,theissuingfirm:

A.isunsureofthetotalamountoffundsitwillreceiveuntilaftertheofferingiscompleted.B.isunsureofthenumberofsharesitwillactuallyissueuntilaftertheofferingiscompleted.C.knowsexactlyhowmanyshareswillbepurchasedbythegeneralpublicduringtheofferperiod.D.retainsthefinancialriskassociatedwithunsoldshares.E.knowsupfronttheamountofmoneyitwillreceivefromthestockoffering.

knowsupfronttheamountofmoneyitwillreceivefromthestockoffering.



Afirmshouldselectthecapitalstructurethat:

A.producesthehighestcostofcapital.B.maximizesthevalueofthefirm.C.minimizestaxes.D.isfullyunlevered.E.equatesthevalueofdebtwiththevalueofequity.

maximizesthevalueofthefirm.

Theunleveredcostofcapitalreferstothecostofcapitalfora(n):

A.privateentity.B.allequityfirm.C.governmentalentity.D.privateindividual.E.corporateshareholder.

allequityfirm.

Bydefinition,whichofthefollowingcostsareincludedintheterm"financialdistresscosts"?I.directbankruptcycostsII.indirectbankruptcycostsIII.directcostsrelatedtobeingfinanciallydistressed,butnotbankruptIV.indirectcostsrelatedtobeingfinanciallydistressed,butnotbankrupt

I,II,III,andIV



Thepropositionthatafirmborrowsuptothepointwherethemarginalbenefitoftheinteresttaxshieldderivedfromincreaseddebtisjustequaltothemarginalexpenseoftheresultingincreaseinfinancialdistresscostsiscalled:

A.thestatictheoryofcapitalstructure.B.M&MPropositionI.C.M&MPropositionII.D.thecapitalassetpricingmodel.E.theopenmarketstheorem.

thestatictheoryofcapitalstructure.

Theoptimalcapitalstructurehasbeenachievedwhenthe:

A.debtequityratioisequalto1.B.weightofequityisequaltotheweightofdebt.C.costofequityismaximizedgivenapretaxcostofdebt.D.debtequityratioissuchthatthecostofdebtexceedsthecostofequity.E.debtequityratioresultsinthelowestpossibleweightedaveragecostofcapital.

debtequityratioresultsinthelowestpossibleweightedaveragecostofcapital.

Whichoneofthefollowingstatementsiscorrectconcerningtherelationshipbetweenaleveredandanunleveredcapitalstructure?Assumetherearenotaxes.

Atthebreakevenpoint,thereisnoadvantagetodebt.



Whichofthefollowingstatementsrelatedtofinancialriskarecorrect?I.Financialriskistheriskassociatedwiththeuseofdebtfinancing.II.Asfinancialriskincreasessotoodoesthecostofequity.III.Financialriskiswhollydependentuponthefinancialpolicyofafirm.IV.Financialriskistheriskthatisinherentinafirm'soperations.

I,II,andIIIonly

Thepresentvalueoftheinteresttaxshieldisexpressedas:

A.(TCxD)/RA.B.VU+(TCxD).C.[EBITx(TCxD)]/RU.D.[EBITx(TCxD)]/RA.E.TcxD.

TcxD.

Theinteresttaxshieldisakeyreasonwhy:

A.therequiredrateofreturnonassetsriseswhendebtisaddedtothecapitalstructure.B.thevalueofanunleveredfirmisequaltothevalueofaleveredfirm.C.thenetcostofdebttoafirmisgenerallylessthanthecostofequity.D.thecostofdebtisequaltothecostofequityforaleveredfirm.E.firmspreferequityfinancingoverdebtfinancing.

thenetcostofdebttoafirmisgenerallylessthanthecostofequity.



Theoptimalcapitalstructure:

A.willbethesameforallfirmsinthesameindustry.B.willremainconstantovertimeunlessthefirmchangesitsprimaryoperations.C.willvaryovertimeastaxesandmarketconditionschange.D.placesmoreemphasisonoperationsthanonfinancing.E.isunaffectedbychangesinthefinancialmarkets.

willvaryovertimeastaxesandmarketconditionschange.

Whichoneofthefollowingreferstotheabilityofshareholderstoundoafirm'sdividendpolicyandcreateanalternativedividendpolicybyreinvestingdividendsorsellingsharesofstock?

A.perfectforesightmodelB.personalizationC.recapitalizationD.offsettingleverageE.homemadedividendpolicy

homemadedividendpolicy



ThecommonstockofPiersonEnterpriseshashistoricallyhadahighdividendyieldandisexpectedtocontinuetodoso.Asaresult,themajorityofitsshareholdersareindividualsandentitiesthatareseekingaregularsourceofcashincome.Mostoftheseshareholderspayeithernotaxesorarelativelylowamountoftaxes.Thefactthatmostoftheseshareholdershavesimilarcharacteristicsisreferredtobywhichoneofthefollowingterms?

A.informationcontenteffectB.clienteleeffectC.efficientmarketshypothesisD.distributioneffectE.marketreactioneffect

clienteleeffect

HJCorporationhasexcesscashandhasoptedtobuysomeofitssharesofoutstandingcommonstock.Whatisthisprocessofbuyingcalled?

A.stockdividendB.stocksplitC.stockrepurchaseD.stockrecapE.stockrepeal

stockrepurchase

Whichoneofthefollowinginvolvesapaymentinsharesbyastockissuerthatincreasesthenumberofsharesashareholderownsbutalsodecreasesthevaluepershare?

A.cashdividendB.stockdividendC.stockrepurchaseD.stocksplitE.reversestocksplit

stockdividend



Whichoneofthefollowingstatementsrelatedtocashdividendsiscorrect?

A.Extracashdividendscannotberepeatedinthefuture.B.Adividendisneveraliabilityuntilithasbeendeclared.C.Ifafirmhaspaidregularquarterlydividendsforatleastfiveconsecutiveyearsitislegallyobligatedtocontinuedoingso.D.Regularcashdividendsreducepaidincapital.E.Thedividendyieldexpressestheannualdividendasapercentageofnetincome.

Adividendisneveraliabilityuntilithasbeendeclared.

Allelseequal,themarketvalueofastockwilltendtodecreasebyroughlytheaftertaxvalueofthedividendonthe:

A.dividenddeclarationdate.B.exdividenddate.C.dateofrecord.D.dateofpayment.E.dayafterthedateofpayment.

exdividenddate.

Whichoneofthefollowingfavorsalowdividendpolicy?

A.thetaxoncapitalgainsisdeferreduntilthegainisrealizedB.few,ifany,positivenetpresentvalueprojectsareavailabletoafirmC.amajorityoftheshareholdershasalowrelevanttaxrateD.amajorityoftheshareholdershasbetterinvestmentopportunitieswithsimilarrisksE.corporatetaxratesexceedpersonaltaxrates

thetaxoncapitalgainsisdeferreduntilthegainisrealized



Whichofthefollowingshareholderstendtofavorahighdividendpolicy?I.retiredindividualsII.endowmentfundsIII.corporateinvestorsIV.investorswithhighdividendtaxratesbutlowcapitalgainstaxrates

I,II,andIIIonly

Whichoneofthefollowingstatementsiscorrect?A.Firmsprefertocutdividendpaymentsratherthanborrowmoneytofundashorttermcashneed.B.Sharerepurchasestendtoincreaseagencycosts.C.Maintainingasteadydividendisakeygoalofmostdividendpayingfirms.D.Taxratesarethekeyfactorindeterminingafirm'sdividendpolicy.E.Stockpricestendtoignoreexpectedchangesindividendpayments.

C.Maintainingasteadydividendisakeygoalofmostdividendpayingfirms.

Stocksplitscanbeusedto:

A.adjustthemarketpriceofastocksuchthatitfallswithinapreferredtradingrange.B.decreasetheexcesscashheldbyafirmtherebyloweringagencycosts.C.increaseboththenumberofsharesoutstandingandthemarketpricepershare.D.increasethetotalequityofafirm.E.adjustthedebtequityratio.

adjustthemarketpriceofastocksuchthatitfallswithinapreferredtradingrange.



Thelengthoftimebetweenthepurchaseofinventoryandthereceiptofcashfromthesaleofthatinventoryiscalledthe:

A.operatingcycle.B.inventoryperiod.C.accountsreceivableperiod.D.accountspayableperiod.E.cashcycle.

operatingcycle.

CentralSupplypurchasedatobogganforinventorythismorningandpaidcashforit.ThetimeperiodbetweentodayandthedayCentralSupplywillreceivecashfromthesaleofthistobogganiscalledthe:

A.operatingcycle.B.inventoryperiod.C.accountsreceivableperiod.D.accountspayableperiod.E.cashcycle.

cashcycle.

Whichofthefollowingdeterminesthelengthoftheoperatingcycle?I.cashcycleII.inventoryperiodIII.accountspayableperiodIV.accountsreceivableperiod

IIandIVonly

Whichofthefollowingareassociatedwitharestrictiveshorttermfinancialpolicy?I.little,ifany,investmentinmarketablesecuritiesII.liberalcredittermsforcustomersIII.lowcashbalancesIV.increasinginventorylevels

IandIIIonly



Aflexibleshorttermfinancialpolicy:

A.increasesafirm'sneedforlongtermfinancing.B.minimizesnetworkingcapital.C.avoidsbaddebtsbyonlysellingitemsforcash.D.maximizesfixedassetsandminimizescurrentassets.E.ismostappropriateforafirmwithrelativelyhighcarryingcostsandrelativelylowshortagecosts.

increasesafirm'sneedforlongtermfinancing.

Theoptimalinvestmentincurrentassetsforanoperatingfirmoccursatthepointwhere:

A.bothshortagecostsandcarryingcostsequalzero.B.shortagecostsareequaltozero.C.carryingcostsareequaltozero.D.carryingcostsexceedshortagecosts.E.thetotalcostsofholdingcurrentassetsisminimized.

thetotalcostsofholdingcurrentassetsisminimized.

Acumulativecashdeficitindicatesafirm:

A.hasatleastashorttermneedforexternalfunding.B.isfacinglongtermfinancialdistress.C.willgooutofbusinesswithintheyear.D.iscapableoffundingallofitsneedsinternally.E.isusingitscashwisely.

hasatleastashorttermneedforexternalfunding.



Afirm'soverallcostofequityis:A.isgenerallylessthatthefirm'sWACCgivenaleveragedfirm.B.unaffectedbychangesinthemarketriskpremium.C.highlydependentuponthegrowthrateandrisklevelofthefirm.D.generallylessthanthefirm'saftertaxcostofdebt.E.inverselyrelatedtochangesinthefirm'staxrate.

highlydependentuponthegrowthrateandrisklevelofthefirm.

Corporate Finance Quiz Helper

Documents

Transcript of Corporate Finance Quiz Helper