Business Finance Quizzes 1-3 FINC 350

If interest rates increase by 30 basis points, that would be a change of

0.3%

A company with a decreasing interest expense would see what change to its times interest earned?

An increase

In trying to measure a company's effectiveness in using its assets we would use which groups of ratios?

Asset utilization ratios

Which of these financial statements provides information on a company's total liabilities (debt)?

Balance sheet

Which of these financial statements provides information on the company's capital structure?

Balance sheet

These short-term securities generally arise from foreign trade and represent a draft dawn on a bank for payment when presented to the bank.

Banker's acceptances

Who is charged with providing governance to a corporation?

Board of directors

A company with predictable sales levels would

Carry lower levels of safety stock

Which of these would be considered a current asset?

Cash Inventory Accounts Receivable All of the above

These are issued by banks, savings and loans, and other financial institutions and pay the investor a specified rate over a specified period.

Certificate of deposit

These unsecured notes are issue by large business corporations.

Commercial paper

Which of these does NOT represent an outflow of cash for the company?

Depreciation expense

Different costs of goods sold could be attributed to:

Each of these Different accounting methods Differences in the treatment of research and development costs Differences in effectiveness in sales

Which of the following are benefits of a partnership?

Easy divisibility of ownership

According to the Du Pont method of analysis increasing debt levels should

Increase return on equity

If a company has a quick ratio very close to its current ratio what might we conclude about their inventory?

Inventory makes up a small portion of their current assets

If actual sales fall below forecasted sales

Inventory will increase

Economic ordering quantity

Is the most advantageous amount for the firm to order each time

If Company XYZ sells $1,000,000 in assets to pay down $1,000,000 in debt, what impact would this have on the company's debt to total assets ratio?

It would decrease

Which theory describing the shape of the yield curve states long-term interest should be higher than short-term interest rates because long-term debt is more difficult to convert to cash?

Liquidity premium theory

In trying to measure a company's ability to pay its short-term liabilities we would use which groups of ratios?

Liquidity ratios

Which of the following has not historically been a part of the study of finance?

Making accounting entries

Financial managers should focus on what as their primary goal?

Maximizing shareholder wealth

What is the most appropriate goal for a firm?

Maximizing shareholder wealth

We can calculate the after-tax cost of a tax-deductible item with this formula:

Pre-tax expense times (1 - tax rate)

We can calculate the after-tax savings from a non-cash tax deductible item (like depreciation) with this formula:

Pre-tax expense times the tax rate

Safety stock helps

Prevent stockouts

To compare two companies of different sizes, which measure would provide the most value?

Profit margin

Asset utilization ratios include all but which of the following?

Return on assets

In the Du Pont method of analysis the two key drivers of return on equity are:

Return on assets and the financing plan

Which of these ratios would be a good focus for a company wanting to become more attractive to investors?

Return on equity

Which of these is likely to best describe a very seasonal business?

Revenue will be more cyclical and earnings per share more volatile

Retained earnings belong to

Shareholders

Insider trading occurs when

Someone uses information not publicly available to profit off stock trades

Holding excess cash causes which of the following?

The company forfeits the earnings of investing that cash in higher-earning assets

Which assets would show first on a company's balance sheet?

The most liquid

The term structure of interest rates shows us

The relative level of short-term and long-term interest rates at a point in time

All else staying equal, what impact might we assume if a company's debt to total assets increases?

Times interest earned will decrease

Why might a company hold a cash balance?

Transition balances Compensating balances for banks Precautionary needs All the above

A company with an average collection period of 30 days in an industry where the average collection period is 28 days would be said to

Underperform the industry

When financing current assets, a risker firm would likely

Use lower-cost, short-term debt

If a company's current assets increase, what might we assume about their inventory levels?

We don't have enough information to decide

Increasing a company's inventory levels would do which of the following?

Widen the gap between the current and quick ratios

Extraordinary losses

generally only impact a company in one particular period

A downward sloping, or inverted, yield would depict

short-term rates are higher than long-term rates.