Finance final
Marcos is investing $5 today at 7 percent interest so he can have $35 later. This $35 is referred to as the:
future value
The accounting statement that measures the revenues, expenses, and net income of a firm over a period is called the:
income statement
A firm's liquidity level decreases when:
inventory is purchased with cash
When a bond's yield to maturity is less than the bond's coupon rate, the bond:
is selling at a premium.
A protective covenant:
limits the actions of the borrower.
Systematic risk is:
measured by beta
A call provision grants the bond issuer the:
option of repurchasing the bonds prior to maturity at a prespecified price.
Katlyn needs to invest $5,318 today for her savings account to be worth $8,000 six years from now. Which one of the following terms refers to the $5,318?
present value
The primary purpose of bond covenants is to:
protect the bondholders
The goal of financial management is to increase the:
current market value per share
Which one of the following is an ordinary annuity, but not a perpetuity?
$25 paid weekly for 1 year, starting one week from today
Which one of the following has the highest effective annual rate?
6 percent compounded daily
Which one of the following statements is true?
A discount bond has a coupon rate that is less than the bond's yield to maturity.
Which one of the following statements concerning the balance sheet is correct?
Assets are listed in descending order of liquidity.
The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year?
Dividend yield + Capital gains yield
Which one of the following represents the minimum rate of return a firm must earn on its assets if it is to maintain the current value of its securities?
Weighted average cost of capital
The Jones Brothers recently established a trust fund that will provide annual scholarships of $12,000 indefinitely. These annual scholarships are:
a perpetuity
The shareholders of Qiang's Markets would benefit if the firm were to be acquired by Better Foods. However, Weil's board of directors rejects the acquisition offer. This is an example of:
an agency conflict
Tomas earned $89 in interest on his savings account last year and has decided to leave the $89 in his account this coming year so it will earn interest. This process of earning interest on prior interest earnings is called:
compounding
The market value of:
an asset tends to provide a better guide to the actual worth of that asset than does the book value.
Net working capital includes:
an invoice from a supplier
Lee pays 1 percent per month interest on his credit card account. When his monthly rate is multiplied by 12, the resulting answer is referred to as the:
annual percentage rate
Travis is buying a car and will finance it with a loan that requires monthly payments of $265 for the next four years. His car payments can be described by which one of the following terms?
annuity
The financial statement that summarizes a firm's accounting value as of a particular date is called the:
balance sheet
An increase in a levered firm's tax rate will:
decrease the firm's cost of capital.
Russell's has a bond issue outstanding. The issue's indenture provision prohibits the firm from redeeming the bonds during the first five years following issuance. This provision is referred to as the __________lank provision.
deferred call
Lucas expects to receive a sales bonus of $7,500 one year from now. The process of determining how much that bonus is worth today is called:
discounting
The capital gains yield equals which one of the following?
dividend growth rate
Which one of the following is a capital structure decision?
establishing the preferred debt-equity level
The relationship between nominal returns, real returns, and inflation is referred to as the:
fisher effect
Market values:
reflect expected selling prices given the current economic situation.
If a firm has an inventory turnover of 15, the firm:
sells its entire inventory an average of 15 times each year.
For a risky security to have a positive expected return but less risk than the overall market, the security must have a beta:
that is > 0 but < 1.
Operating cash flow is defined as:
the cash that a firm generates from its normal business activities
An agency issue is most apt to develop when:
the control of a firm is separated from the firms ownership
Which one of the following features distinguishes an ordinary annuity from an annuity due?
timing of the annuity payments
Portfolio diversification eliminates:
unsystematic risk
