FIN 301 Session 3

Market Cap is equal to _________

# of Shares * Price per Share

Company XYZ currently has a stock price of $25.00, 500 million shares outstanding, and earnings per share of $1.50. What is its market cap? A. 37 million B. 750 million C. 12.5 billion D. 25 billion E. 100 billion

$12.5 billion

Given the following information, what is Macy's market capitalization? Annual Sales $27.5B Annual Net Income $1.5B Earnings Per Share $3.93 Number of Shares 360 million Price Per Share $60 A. 27.5 b B. 50.0 b C. 21.6 b D. 10.5 b E. 5.3 b

$21.6B

As indicated by Gordon Gekko, the best defense against a takeover is A. Good lawyers B. A high stock price C. Better production facilities D. A high growth rate E. Low costs

A high stock price

Which of the following is a Current Asset category? A. Property, plant, and equipment B. Equity C. Accounts payable D. Accounts receivable E. Retained earnings

Accounts Receivable

Which of the following is an example of a long-term asset? A. Cash B. 1 year treasury bonds C. An iPod factory D. Accounts receivable

An iPod factory

Which company would you expect to invest the most in plant & equipment? A. Bank B. Technology start up C. Box retailer D. Consulting firm E. Oil and gas company

An oil & gas company

Academic advancements over the past several decades, such as the CAPM and Black-Scholes model: A. Are used by managers but have little impact on markets B. Brought on the popularity of behavioral finance C. Have had little impact outside of the academic community D. Are widely used by markets E. Led to an M&A wave with their introduction

Are widely used by markets

Which of the following duties do NOT fall under the CFO's role as Treasurer? A. Financial planning B. Short-term capital requirements C. Audits D. Capital budgets E. None of the above

Audits

Communication with markets is the responsibility of which role? A. CEO B. CFO C. Treasurer D. Controller E. VP of communications

CFO

Which of the following is an example of a Short-Term Asset? A. An iPod factory B. A patent C. 10 year loan D. A house E. Cash

Cash

Which of the following duties do NOT fall under the CFO's role as Controller? A. Financial systems B. Taxes C. Operating budgets D. Cash management E. None of the above

Cash Management

Which of the following CFO roles pertain to the Accounting department? A. Chief Operating Officer B. Vice President of Production C. Controller D. Cash managers E. None of the above

Controller

Which of the following is NOT one of the CFO's responsibilities as the company's treasurer? A. Cash management B. Working capital management C. Capital budgeting D. Long term financial planning E. Cost accounting

Cost Accounting

Working capital management requires monitoring the difference between Current Assets and ___________ A. Shareholder's equity B. Current liabilities C. Capital expenditures D. Inventory E. Total debt

Current Liabilities

Which of the following is NOT a balance sheet account associated with working capital? A. Cash B. Equipment C. Short-term loan D. Accounts payable E. Inventory

Equipment

Capital structure decisions are concerned with: A. Short term assets and liabilities B. Long term assets C. Communication with the markets D. Debt and equity E. Debt only

Debt & Equity

Which of the following is NOT one of the elements of the new corporate finance environment? A. Market institutionalization B. Advances in IT and telecommunications C. Emphasis on executive bonuses D. Greater economic volatility E. None of the above

Emphasis on executive bonuses

True or False The new environment of corporate finance is characterized by an increase in global regulation.

False

True or False: Market Cap is equal to shareholder's equity

False

True or False: The CFO is typically involved in only accounting and short term management activities and is not involved in the long term strategy of the company.

False

True or false: In Gordan Gekko's "Greed is Good" speech, Gekko is arguing that management has made decisions that have been beneficial to shareholder value

False

Over the past several decades to the 1960's, what is true regarding the financial environment? A. The economy has been up and down but on average there is negative growth B. There has been minimal growth whole volatility was high C. Growth has been high with only minor volatility D. Growth and volatility have both been low E. Growth and volatility have both been high

Growth and volatility have both been high

Which of the following is an element of the new corporate finance environment? A. Outsourcing B. Growth in trade and direct investment C. Growth in financial legislation and regulation D. Bankruptcy E. Lack of debt issuance

Growth in Trade and Direct Investment

Which of the following is NOT a correct example of working capital management? A. Increasing inventory turnover by carefully monitoring specific product categories B. Lowering days payable by keeping up to date supply chain information C. Lowering outstanding inventory by selling it in bulk to retail customers D. Issuing long-term debt to finance a new line of products E. None of the above

Issuing long-term debt to finance a new line of products

Why is investing in long-term assets important? A. It directly increases the company's market value B. It will increase the efficiency of a firm in the short run C. It allows companies to grow their revenue in the long run D. It decreases a company's long-term liabilities E. It increases a firm's free cash flow

It allows companies to grow their revenue in the long run

Which of the following is NOT a reason a company aims to grow their market cap? A. Firms can utilize equity financing to make investments B. Companies can utilize their stock to make acquisitions C. It allows them to pay off owed liabilities to debt holders D. They can compensate management with shares of the company E. It increases shareholder value

It allows them to pay off owed liabilities to debt holders

Companies attempt to create shareholder value by A. Diversifying their product portfolio B. Lowering their interest expense C. Increasing employee compensation D. Making decisions aimed at increasing the value of the firm E. Increasing management's compensation

Making decisions aimed at increasing the value of the firm

Which of the following is NOT a management tenet according to Gordon Gekko? A. Management must be accountable to stock holders B. Management must grow the company C. Management must have a stake in the company D. Management must be efficient E. All of the above are true

Management must grow the company

Capital structure management is managing a company's A. Mix between debt and equity financing B. Current assets and liabilities C. Outstanding market value D. Inventory turnover E. Corporate strategy

Mix between debt and equity financing

Which of the following is a Long-Term Asset category? A. Inventory B. Property, plant, and equipment C. Securities D. Cash E. Accounts receivable

Property, Plant & Equipment

Which if the following is a capital structure decision? A. Raising capital using debt and equity B. Investing in additional plant capacity C. Arranging for a bank line of credit D. Providing for credit terms for customers E. Managing the company's cash flow needs

Raising capital using debt and equity

Which of the following is NOT an element of the new corporate finance environment? A. Institutionalization of markets B. Shrinking equity markets C. Advances in IT and telecommunications technologies D. Greater Risk E. None of the above

Shrinking equity markets

What does the market capitalization of a company represent? A. The value of a company to its debt holders B. The aggregate stock market value of a company C. The intrinsic value of a firm D. The value of a company's long and short term assets E. The accumulated profit earned over the lifetime of the company

The aggregate stock market value of a company

Corporate raiders showed that: A. The best defense against a takeover is a high stock price B. The role of the CFO must be expanded C. Management compensation is fair and management need not worry about stock price D. Managers should never be compensated with equity in the company E. Sales growth is the most important measure of management effectiveness

The best defense against a takeover is a high stock price

Working Capital is best described as A. The cash flow from a company's operational activities B. The total cash balance of a company C. The blend of debt and equity financing used to finance investment D. A company's long term investments E. The short term financial position of a firm

The short-term financial position of a firm

True or False: Capital budgeting is when companies manage their investments in long-term assets:

True

True or False: In addition to overseeing the functions of the Treasurer and Controller, the CFO hedges risks and insures that capital is available to fund strategic plans.

True

Making sales to a customer on credit is an example of a ________ decision, and would be the responsibility of the __________. A. Working capital ; treasurer B. Working capital ; controller C. Capital budgeting ; treasurer D. Capital structure ; controller E. Capital structure ; treasurer

Working Capital; Treasurer