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