Question 1
4 / 4 pts
Agency costs refer to:
the costs of any
conflicts of interest between stockholders and management
corporate income
subject to double taxation
the costs that
result from default and bankruptcy of a firm
the total interest
paid to creditors over the lifetime of the firm
Question 2
4 / 4 pts
The decisions made by financial managers should all be ones
which increase the:
market value of the
existing owners’ equity
size of the firm
marketability of the
managers
financial distress
of the firm
Question 3
4 / 4 pts
The mixture of debt and equity used by a firm to finance its
operations is called
capital structure
working capital
management
financial
depreciation
cost analysis
Question 4
4 / 4 pts
Which one of the following is a capital budgeting decision?
Deciding whether or
not to open a new store
Deciding when to
repay a long-term debt
Determining how much
inventory to keep on hand
Determining how much
money should be kept in the checking account
Question 5
4 / 4 pts
The financial ratio measured as earnings before interest and
taxes, divided by interest expense is the:
times interest
earned ratio
debt-equity ratio
cash coverage ratio
gross margin
Question 6
4 / 4 pts
A firm’s market capitalization is equal to:
firm’s stock price
multiplied by number of shares outstanding
total book value of
assets less book value of debt
par value of common
equity
firm’s stock price
multiplied by the number of shares authorized.
Question 7
4 / 4 pts
Ratios that measure how efficiently a firm’s management uses
its assets and equity to generate bottom line net income are known as _______
ratios.
profitability
asset management
long-term solvency
short-term solvency
Question 8
4 / 4 pts
Projected future financial statements are called:
pro forma statements
reconciled
statements
aggregated
statements
plug statements
Question 9
4 / 4 pts
The short-term financial policy that a firm adopts will be
reflected in:
Both the size of the
firm’s investment in current assets and the financing of current assets
the size of the
firm’s investment in current assets
the financing of
current assets
the financing of
fixed assets
Question 10
4 / 4 pts
The length of time between the sale of inventory and the
collection of cash from receivables is called the:
accounts receivable
period
operating cycle
inventory period
accounts payable
period
Question 11
4 / 4 pts
Firms would need to hold zero cash when transactions related
needs are:
perfectly
synchronized with cash inflows
greater than cash
inflows
less than cash
inflows
not perfectly
synchronized with cash inflows
Question 12
4 / 4 pts
A flexible short-term financial policy:
incurs an
opportunity cost due to the rate of return that applies to short-term assets
increases the
likelihood that a firm will face financial distress
advocates a smaller
investment in net working capital than a restrictive policy does.
increases the
probability that a firm will earn high returns on all of its assets.
Question 13
4 / 4 pts
A bond that makes no coupon payments and is initially priced
at a deep discount is called a _____ bond
zero coupon
Treasury
municipal
floating-rate
Question 14
4 / 4 pts
The _____ premium is that portion of a nominal interest rate
or bond yield that represents compensation for expected future overall price
appreciation.
inflation
default risk
taxability
liquidity
Question 15
4 / 4 pts
he relationship between nominal rates, real rates, and
inflation is known as the:
Fisher effect
Miller and
Modigliani theorem.
Gordon growth model
interest rate risk
premium
Question 16
4 / 4 pts
Payments made by a corporation to its shareholders, in the
form of either cash, stock or payments in kind, are called:
dividends
retained earnings
net income
redistributions
Question 17
4 / 4 pts
The time value of money concept can be defined as:
the relationship
between a dollar to be received in the future and a dollar today
the relationship
between the supply and demand of money
the relationship
between money spent versus money received
the relationship
between interest rate stated and amount paid
Question 18
4 / 4 pts
An annuity stream of cash flow payments is a set of:
level cash flows
occurring each time period for a fixed length of time
level cash flows
occurring each time period forever
increasing cash
flows occurring each time period for a fixed length of time
increasing cash
flows occurring each time period forever
Question 19
4 / 4 pts
An annuity stream where the payments occur forever is called
a(n):
perpetuity
annuity due
indemnity
amortization table
Question 20
4 / 4 pts
Discounting cash flows involves:
discounting all
expected future cash flows to reflect the time value of money
discounting only
those cash flows that occur at least 10 years in the future
estimating only the
cash flows that occur in the first 4 years of a project
multiplying expected
future cash flows by the cost of capital
Question 21
4 / 4 pts
Which one of the following statements concerning net present
value (NPV) is correct?
An investment should
be accepted if the NPV is positive and rejected if it is negative
An investment should
be accepted if, and only if, the NPV is exactly equal to zero.
An investment should
be accepted only if the NPV is equal to the initial cash flow
An investment with
greater cash inflows than cash outflows, regardless of when the cash flows
occur, will always have a positive NPV and therefore should always be accepted
Question 22
4 / 4 pts
Interest rates or rates of return on investments that have
been adjusted for the effects of inflation are called _____ rates.
real
nominal
effective
stripped
Question 23
4 / 4 pts
All else constant, the net present value of a typical
investment project increases when:
the rate of return
decreases
the discount rate
increases
each cash inflow is
delayed by one year
the initial cost of
a project increases
Question 24
4 / 4 pts
An investment is acceptable if its IRR:
exceeds the required
return
is exactly equal to
its net present value (NPV)
is exactly equal to
zero
is less than the
required return
Question 25
4 / 4 pts
A pro forma financial statement is one that:
projects future
years’ operations
is expressed as a
percentage of the total assets of the firm
is expressed as a
percentage of the total sales of the firm
is expressed
relative to a chosen base year’s financial statement
