BMALfinance

Most pro forma statements begin with a sales forecast. One approach to deriving a sales forecast is the top-down approach. Top down sales forecasts rely heavily on a. macroeconomics & industry forecasts b. customer input c. forecasts from the sales force d. Board of Directs input

a

Most firms when planning for growth focus on a. maintaining ROI over the firm's cost of capital b. maximizing Economic Value Added c. meeting asset target growth rates d. meeting sales target growth rates

d

The ____ premium is compensation for the possibility that the borrower will not be able to pay the debt's interest and principal on time a. inflation risk b. maturity risk c. liquidity risk d. default risk

d

When a firm has no "other income" its operating profit and _____ are equal a. net income b. net profit after taxes c. EPS d. EBIT

d

Which of the following is NOT a source of equity on a firm's balance sheet? a. additional paid-in capital b. retained earnings c. common stock d. property, plant, and equipment

d

Which of the following is not an example of a financial asset a. convertible bond b. certificate of deposit c. preferred stock d. inventory

d

Which of the following statements is most correct? a. Sunk costs should be ignored in capital budgeting. b. Opportunity cost should be ignored in capital budgeting. c. Externalities should be ignored in capital budgeting. d. The tax effect from depreciation should be ignored in capital budgeting.

d

Bond ratings of ___ and higher are considered to be investment grade bonds. a. AAA b. AA c. A d. BBB

d

___ are often used as the plug figure in pro forma projections a. gross fixed assets b. cash balances c. retained earnings d. marketable securities

a

___ projects are a set of projects where the acceptance of one project means that other projects cannot be accepted. a. mutually exclusive b. independent c. replacement d. expansion

a

An American Depository Receipt (ADP) a. is debt sold to a foreign borrower that is denominated in the currency of the country where it is sold. b. is a certificate that represents ownership in stocks of foreign companies that are held in trust by a bank located in the country where the stock is traded c. represent equity instruments of one country that are sold in another country d. is a certificate that represents ownership in foreign companies that are sold in the United States

b

The key input required to build a cash budget is a. the cash disbursements plan b. the strategic plan c. the firm's sales forecast d. the sustainable growth model

c

A speedup in ___ will ____ a firm's financing needs; whereas, a slowdown in ____ will ____ a firm's financing needs. a. collections; decrease; payments; increase b. payments; increase; collections; decrease c. collections; increase; payments; decrease d. payments; increase; collections; increase

d

_____ ratios would provide the best information regarding total return to common stockholders a. profitability b. activity c. liquidity d. debt

a

When evaluating financial ratios, analysts typically first examine a firm's ratio a. compared to firms in other industries b. compared to the firm's previous years' ratios c. compared to regional averages d. compared to firms with similar net profit margins

b

Which of the following is not generally considered to be an advantage of term loans over publicly issued bonds? a. lower flotation (issuance) costs b. speed, or how long it takes to bring the issue to market c. liquidity, or how easily investors can trade them in the secondary markets d. flexibility, or the ability to adjust the bond's terms after it has been issued

c

Which of the following assets is the most liquid? a. stock b. treasury bills c. corporate bonds d. cash

d

Which of the following capital budgeting techniques does not adjust for the riskiness of the cask flows? a. IRR b. NPV c. MIRR d. Payback

d

Which of the following is NOT a cash disbursement? a. rent and lease payments b. interest payments c. payments of accounts payable d. depreciation expenses

d

As the demand for funds increases the demand curve will shift to the ___ resulting in a ___ market-clearing interest rate a. right, higher b. left, higher c. right, lower d. left, lower

a

For both managers & external financial analysts, ____ is the single most important accounting number found on the income statement a. net income (net profit after tax) b. earnings before interest and taxes (EBIT) c. gross profit d. operating profit

a

Which of the following statements is correct? a. large costs occurs at the end of a nuclear power plants' lives because these plants have to be closed down, and shutdown costs are high due to the difficulty of handling radioactive materials. For this reason, it is possible that a nuclear plant project could have two IRRs. b. If the Federal Reserve Board lowered interest rates, this would, other things held constant, tend to favor short-term as opposed to long-term projects. c. For NPV verses IRR ranking conflicts to occur, the projects under consideration must have NPV profiles which cross one another. Crossing profiles can occur only if the two projects differ in the size of the required investment outlay. d. All of the above statements are false.

a

Which of the following statements is most correct? Other things held constant a. the "liquidity preference theory" would generally lead to an upward sloping yield curve b. The "market segmentation theory" would generally lead to an upward sloping yield curve c. the "expectations theory" would generally lead to an upward sloping yield curve d. the yield curve under "normal" conditions should be horizontal (ie. flat)

a

Which of the following methods involves calculating an average beta for firms in a similar business and then applying that beta to determine the beta of its own project? a. risk premium method b. pure play method c. accounting beta method d. CAPM method

b

A cash budget is a. a sales forecast that includes the volume of business and various asset and liability accounts b. a pro forma financial statement build upon logic of proportion and risk management c. a statement of a firm's planned inflows and outflows of cash used to ensure that a firm has available cash to meet short-term financial obligations d. a measure of assets matched to liabilities and equity

c

Eurodebt is the term to designate a. a debt sold by a foreign borrower that is denominated in the currency of the country where it is sold b. European bank loans that are denominated in the new Euro currency c. debt that is denominated in a currency that is different than the currency of the country in which it is sold d. equity instruments of 1 country that are sold in another country

c

Uncertainty regarding the domestic flows that result from converting foreign cash flows is what type of risk? a. repatriation b. expropriation c. exchange rate d. political

c

Which of the following is not one of the fundamental factors that affect the cost of money? a. production opportunities b. time preferences for consumption c. exchange rates d. risk

c

Which of the following statements is false? a. Any bond sold outside the country of the borrower is called an international bond. b. Foreign bonds and Eurobonds are two important types of international bonds. c. Foreign bonds are bonds sold by a foreign borrower but denominated in the currency of the country in which the issue is sold. d. The term Eurobond specifically applies to any foreign bonds denominated in the U.S. currency.

d

Your uncle would like to restrict his interest rate risk and his default risk, but he still would like to invest in corporate bonds. Which of the possible bonds listed below satisfies your uncle's criteria? a. AA bond with 10 years to maturity. b. BBB perpetual bond c. BBB bond with 10 years to maturity d. AAA bond with 5 years to maturity

d