Financial Management Midterm

Determine a firm's total asset turnover (TAT) if its net profit margin (NPM) is 5 percent, total assets are $8 million, and ROI is 8 percent.

1.6

Kanji Company had sales last year of $265 million, including cash sales of $25 million. If its average collection period was 36 days, its ending accounts receivable balance is closest to . (Assume a 365-day year.)

23.7 million

The risk-free security has a beta equal to_______, while the market portfolio's beta is equal to_____.

zero; one

Which of the following is NOT an example of a financial intermediary?

International Business Machines, Inc. (IBM).

A corporation in which you are a shareholder has just gone bankrupt. Its liabilities are far in excess of its assets. You will be called on to pay:

Nothing

If the intrinsic value of a stock is greater than its market value, which of the following is a reasonable conclusion?

The market is undervaluing the stock.

When the market's required rate of return for a particular bond is much less than its coupon rate, the bond is selling at:

a premium

The purpose of financial markets is to:

allocate savings efficiently.

To increase a given present value, the discount rate should be adjusted

downward

Palo Alto Industries has a debt-to-equity ratio of 1.6 compared with the industry average of 1.4. This means that the company

has greater than average financial risk when compared to other firms in its industry.

The long-run objective of financial management is to:

maximize the value of the firm's common stock.

You can use to roughly estimate how many years a given sum of money must earn at a given compound annual interest rate in order to double that initial amount .

the Rule of 72

Krisle and Kringle's debt-to-total assets (D/TA) ratio is .4. What is its debt-to-equity (D/E) ratio?

.667

ou are considering investing in a zero-coupon bond that sells for $250. At maturity in 16 years it will be redeemed for $1,000. What approximate annual rate of growth does this represent?

9 percent

You are considering borrowing $10,000 for 3 years at an annual interest rate of 6%. The loan agreement calls for 3 equal payments, to be paid at the end of each of the next 3 years. (Payments include both principal and interest.) The annual payment that will fully pay off (amortize) the loan is closest to

$3741

Felton Farm Supplies, Inc., has an 8 percent return on total assets of $300,000 and a net profit margin of 5 percent. What are its sales?

$480,000

According to the capital-asset pricing model (CAPM), a security's expected (required) return is equal to the risk-free rate plus a premium

based on the systematic risk of the security.

In the formula ke = (D1/P0) + g, what does g represent?

the expected price appreciation yield from a common stock.

This type of risk is avoidable through proper diversification.

unsystematic risk

The expected rate of return on a bond if bought at its current market price and held to maturity.

yield to maturity