Management

Capital cost is: a) market value of all events of the company which are in circulation b) a cash equivalent of all company assets in which the attracted capital is invested c) the interest rate reflecting profitability of capital investments d) the interest rate reflecting the finance costs of the company connected with capital utilization

c) the interest rate reflecting profitability of capital investments

Choose the BEST answer to explain the results of return on assets. а) a low ratio shows favorable results. b) the lower the ratio, the better. c) the higher the ratio, the better. d) a high ratio shows unfavorable results.

c) the higher the ratio, the better.

The percentage return that individuals who purchase a company's stock expect to receive is called ____ a) cost of debt b) cost of investment c) cost of equity d) interest expense

d) interest expense

Which is an example of an investment that's subject to liquidity risk? a) mutual funds b) real estate investments c) bond mutual funds d) life insurance

b) real estate investments

The DuPont Corporation started the DuPont analysis in 1920 to measure which value? a) Return on Equity b) New Asset Purchases c) Business struggles d) Sales generation

a) Return on Equity

What is a par value of a bond? a) The amount borrowed by the issuer of the bond and returned to the investors when the bond matures b) The overall return earned by the bond investor when the bond matures c) The difference between the amount borrowed by the issuer of bond and the amount returned to investors at maturity d) The size of the coupon investors receive on an annual basis

a) The amount borrowed by the issuer of the bond and returned to the investors when the bond matures

What resources can a company use as part of its capital structure to finance its business? a) a company can use both debt and equity to finance its business b) a company must only use debt to finance its business c) a company must only use equity to finance its business d) a company can use either debt or equity to finance its business, but not both

a) a company can use both debt and equity to finance its business

How is a bond described? a) a loan with a future date of payment with interest. b) a savings account. c) a bank loan. d) a checking account.

a) a loan with a future date of payment with interest.

The limited liability company (LLC) form of business organization is: a) able to retain limited liability for its owners. b) a cross between a partnership and a corporation. c) it is taxed like a partnership. d) all of the above.

a) able to retain limited liability for its owners.

A financial investment is a) an asset you put money in with the hopes of making more money b) playing blackjack at the casino c) buying food at the grocery store for consumption d) none of the answers are correct.

a) an asset you put money in with the hopes of making more money

Using the future value formula can: a) assist individuals in calculating the estimated value of an asset in the future. b) assist individuals in calculating the actual value of an asset in the past. c) assist individuals in calculating the estimated value of an asset in the past. d) assist individuals in calculating the estimated value of an asset in the present.

a) assist individuals in calculating the estimated value of an asset in the future.

Why is net present value an important investment analysis tool? a) because money loses value over time and net present value adjusts future earnings into today's dollars. b) because we need to know exactly how much money we'll make in the future to decide if an investment is worth the risk. c) because most banks or investors set guidelines on the minimum net present value required for the companies they support. d) because anything that doesn't have a net present value of at least twice what it costs is a waste of money.

a) because money loses value over time and net present value adjusts future earnings into today's dollars.

Which of the following statements is true about bonds? a) bonds can decrease return on equity. b) bonds can increase return on equity. c) bonds can increase return on interest. d) bonds can decrease return on interest.

a) bonds can decrease return on equity.

The creation of value is driven by what factors? a) cash flow and growth b) growth and risk c) profitability and growth d) reducing risk

a) cash flow and growth

In measuring value, the firm's focus should be on: a) cash flow. b) accounting profits. c) time value of money. d) earnings per share.

a) cash flow.

Before approving a loan application, a bank is likely to analyze the applicant's a) debt ratio. b) brand preferences. c) inflation rate. d) performance goals.

a) debt ratio

Which of the following would be a reason for a stock's dividend yield to increase (assuming all other variables remained constant)? a) decline in share price b) increase in share price c) no change in share price d) decrease in dividend yield e) decrease in annual dividend

a) decline in share price

A company incorporates increasing amounts of debt finance into its capital structure while leaving its operating risk unchanged. Assuming that a perfect capital market exists with no taxation, will the company's weighted average cost of capital: a) fall slowly b) fall quickly c) remain the same d) fall to a minimum and then rise e) rise steadily

a) fall slowly

Gordon's model (model of dividends of permanent growth) is used: a) for equity value assessment; b) for forecasting of profit of the enterprise; c) for determination of need for additional financing; d) for ratio assessment risk profitability for common shares.

a) for equity value assessment;

Working capital are the funds needed to run the daily operations of a business, including: a) inventory and overhead expenses b)fixed assets c)equipment, vehicles and real estate d) office furniture purchases

a) inventory and overhead expenses and c)equipment, vehicles and real estate

The financial manager is involved in these cash-related activities in the firm: a) investing, working capital management, and financing. b) real assets, financing, and investing c) operations, profitability, and financing d) investing, operating, and financing.

a) investing, working capital management, and financing.

Which of the following is true of the beta coefficient? a) it is a measure of risk relative to the market. b) it can be any number, even negative. c) you do not have to calculate it to use it. d) all of these are true.

a) it is a measure of risk relative to the market.

What does an income statement show about a company over a period of time? a) profitability b) equity c) reliability d) liabilities

a) profitability

Which of the following is the BEST explanation of investment? a) spending money to make money b) buying assets and commodities c) buying stocks and bonds d) hiring people

a) spending money to make money

As a result of "effect of the tax shield": a) the cost of borrowed funds of the company decreases; b) the cost of borrowed funds of the company increases; c) the cost of own company funds decreases; d) the weighted average cost of capital of the company increases.

a) the cost of borrowed funds of the company decreases;

What is enterprise value of a business? a) the market value of equity of the business b) the book value of equity of the business c) the entire value of the business without giving consideration to its capital structure d) the entire value of the business considering its capital structure

a) the market value of equity of the business

What is the definition of investment risk? a) the probability of losing the value of investments due to various types of investment risks b) the chance the investor can triple his investment c) the risk of losing annuities d) risk versus return

a) the probability of losing the value of investments due to various types of investment risks

Net present value refers to the concept that: a) the value of money changes over time. b) interest rates are influenced by inflation. c) exchange rates influence return on investment d) the federal government adjusts the interest rate to influence the money supply.

a) the value of money changes over time.

Which of the following is NOT true of investors that are issued debentures? a) they hold an ownership interest in the company. b) they are creditors of the company. c) they hold a security. d) they are entitled to interest payments.

a) they hold an ownership interest in the company.

The means received from issue of corporate bonds belong: a) to long-term borrowed funds of the company; b) to short-term borrowed funds of the company; c) to own external company funds; d) all answers are not right.

a) to long-term borrowed funds of the company;

What is another name for capital expenditure? a) сарех b) capital city c) capitalization d) capset

a) сарех

How do preferred stocks differ from common stocks? a) preferred stocks are controlled by the FDA. Common by the SEC. b) preferred stock investors do not have voting rights. c) preferred stock investors do not own a percentage of the company. d) preferred stock investors are debt holders.

b) preferred stock investors do not have voting rights.

What is the end product of the accounting cycle? a) a financial transaction b) a financial statement c) a financial advisor d) a financial audit

b) a financial statement

The balance of the organization shows: a) inflows and cash outflows; b) assets and liabilities of the organization in concrete timepoint; c) financial results of activity of the organization.

b) assets and liabilities of the organization in concrete timepoint;

How are collections from current and past sales reflected on a cash budget? a) accounts receivable b) cash inflows c) cash outflows d) cash collections

b) cash inflows

The cost of financial resources usually satisfies to the following ratio: a) cost of a bonded loan <cost of retained earnings <cost of preferred shares; b) cost of a bonded loan <cost of preferred shares <cost of retained earnings, c) cost of retained earnings <cost of a bonded loan <cost of preferred shares; d) cost of retained earnings <cost of preferred shares <cost of a bonded loan.

b) cost of a bonded loan <cost of preferred shares <cost of retained earnings,

Net working capital means - a) total assets minus fixed assets b) current assets minus current liabilities c) current assets minus inventories d) current assets

b) current assets minus current liabilities

Do not treat to current assets of the company: a) deferred revenues; b) deferred expenses; c) short-term financial investments; d) accounts receivable; e) work in progress.

b) deferred expenses;

The internal rate of return of the investment project depends from: a) project payback period; b) discount rate sizes; c) structures of the cash flow corresponding to this project; d) all listed factors.

b) discount rate sizes;

The three basic types of cash-related activities that every business faces are: a) investing, working capital management, and financing. b) financing, operations, and investing. c) working capital management, financing, and budgeting. d) capital budgeting, investing, and cash management.

b) financing, operations, and investing.

What does good financial management provide? Select all that apply. a) backup documentation for a loan applications b) fixed assets for a loan c)help with discussing business circumstances with a lender d) collateral for a loan

b) fixed assets for a loan and d) collateral for a loan

If managers are making decisions to maximize shareholder wealth, then they are primarily concerned with making decisions that should: a) positively affect profits. b) increase the market value of the firm's common stock. с) either increase or have no effect on the value of the firm's common stock. d) accomplish all of the above.

b) increase the market value of the firm's common stock.

Capital structure is comprised of which of the following? a) assets, human resources, and total liabilities b) long term liabilities, short term assets, and securities c) operations, finances, and investments d) cash, debt, and equity

b) long term liabilities, short term assets, and securities

What is often the incentive to motivate producers to enter a competitive market? a) good friends b) profit c) a large supply of goods, d) happy employees

b) profit

Which of the following will not reduce the agency problem experienced by shareholders? a) increased monitoring by shareholders. b) salary bonuses for management based on financial performance. c) the granting of share options to management. d) the use of restrictive covenants in bond deeds. e) the use of shorter contracts for management.

b) salary bonuses for management based on financial performance.

Stocks are a) the financial assets of a company b) shares of ownership in a company c) products that are shared d) goods that are stored by a manufacturing company

b) shares of ownership in a company

In the dividend growth model formula, D represents-which of the following? a) the required rate of return b) the expected annual dividend per share for the next year c) the dividend's expected growth rate d) the return on equity

b) the expected annual dividend per share for the next year

Is the dividend growth model formula, D represents which of the following? a) the required rate of return b) the expected annual dividend per share for the year c) the dividend's expected growth rate d) the return on equity

b) the expected annual dividend per share for the year

What is the definition of risk? a) a return on investment b) the probability of losing something of value c) the rate of return d) the potential for investment to gain value

b) the probability of losing something of value

Define in what industries traditionally multinational corporations dominate: a) High technologies, medicine, national trade. b) Construction, mineral extraction, tourism. c) High technologies, medicine, entertainments. d) Information technologies, financial services, folk art.

c) High technologies, medicine, entertainments.

Define sources of attraction of financial resources of multinational corporation: a) Joint-stock and share. b) Material and non-material. c) Internal and external. d) Reinvested and disinsectated.

c) Internal and external.

Choose the best answer to define assets. a) assets are things that have value. b) assets are things that we owe. c) assets are things that are owned that have value. d) assets are things that are owned.

c) assets are things that are owned that have value.

Assets - liability = a) profit b) working capital c) capital d) long term liability

c) capital

The following is NOT part of the DuPont analysis formula a) profit margin b) total asset turnover c) cash balance d) financial leverage

c) cash balance

What from listed is not a financial instrument: a) preferred share; b) accounts payable; c) cash flow statement; d) option

c) cash flow statement;

Dividends are a) votes b) shares of ownership c) earnings shared with stockholders d) jobs

c) earnings shared with stockholders

Which of the following type of capital is not traditionally reported on a balance sheet? a) plant b) equipment c) human capital d) investments

c) human capital

Patent Copyright and Trademark are a) current asset b) fixed asset c) intangible asset d) investment

c) intangible asset

Which investment analysis tool calculates a rate of return based on a net present value of zero? a) rate of return b) payback period c) internal rate of return d) inflation adjusted return

c) internal rate of return

If a company were acquiring long-term assets due to an expansion, in which category would cash be used? a) cash activities b) financing activities c) investing activities d) operating activities

c) investing activities

Financial managers work with the managers from the other functional areas of business. For example: When the financial manager provides funds for activities such as the development of products or services, they are probably working with which functional area? a) human resourses b) information technology c) marketing d) operations

c) marketing

Which of the following goals are in the best long-term interest of shareholders? a) profit maximization b) risk minimization c) maximizing the market value of the existing shareholders' common stock d) maximizing sales revenue

c) maximizing the market value of the existing shareholders' common stock

How many producers compete in a competitive market? a) none b) one c) multiple d) two

c) multiple

Profit after tax is also termed as a) real profit b) surreal profit c) net profit d) profit

c) net profit

On which financial statement does a company report its capital? a) income statement b)cash flow statement c) shareholder equity statement d) balance sheet

c) shareholder equity statement

Which type of business ownership has limited liability? a) sole proprietors b) general partners c) shareholders of a corporation d) none of the above

c) shareholders of a corporation

In the dividend growth model formula, D represents which of the following? a) the dividend's expected growth rate b) the required rate of return c) the expected annual dividend per share for the next year d) the return on equity

c) the expected annual dividend per share for the next year

Capital cost it: a) market value of all events of the company which are in circulation; b) a cash equivalent of all company assets in which the attracted capital is invested; c) the interest rate reflecting profitability of capital investments; d) the interest rate reflecting the finance costs of the company connected with capital utilization.

c) the interest rate reflecting profitability of capital investments;

The means received from issue of common shares belong: a)to long-term borrowed funds of the company b) to own internal company funds c) to own external company funds d) all answers are not right

c) to own external company funds

Which of the following helps the operations function to control costs and increase productivity: a) hiring of employees b) type of management c) use of technology d) supply of money

c) use of technology

In investment analysis, what is the minimum payback period that should be accepted for an investment to be considered a good investment? a) 2 years b) years c) we can't say; it is just a point of comparison to use between two investment options. d) at least half of the investment's useful life.

c) we can't say; it is just a point of comparison to use between two investment options.

The concept of present value relates to the idea that a) The discount rate is always higher when you invest now than in the future b) The discount rate is always higher when you invest in the future than now c) The money you have now is worth less today than an identical amount you would receive in the future d) The money you have now is worth more today than an identical amount you would receive in the future

d) The money you have now is worth more today than an identical amount you would receive in the future

Of the following financial management statements, which is the most important? a) balance sheet b) cash flow statement c) profit and loss statement d) all of the above c) none of the above

d) all of the above

Profit maximization is NOT an adequate goal of the firm when making financial decisions because: a) It does not necessarily reflect shareholder wealth maximization b) it ignores the risk inherent in different projects that will generate the profits c) it can over-emphasize a project's short-term returns d) all of the above

d) all of the above

The term "capital structure" indicates to a) long-term debt, preferred stock, and common stock equity b) shareholders equity c) total assets minus liabilities d) all of the above

d) all of the above

Which of the following is a type of business record that a firm can use to track its customers' buying habits: a) forecast b) marketing budget c) invoice d) annual report

d) annual report

Identify the best explanation for assets. a) assets are the costs of goods sold. b) assets are obligations owed. c) assets are the costs of doing business. d) assets are items that are owned.

d) assets are items that are owned.

Which of the following is an example of a lending investment: a) stocks b) antiques c) homes d) bonds

d) bonds

Which of the following are considered debt? a) loans and stock b) stock and bonds c) capital and stock d) bonds and loans

d) bonds and loans

Size WACC: a) there should not be less return on assets of the company b) characterizes the required yield of investors on common stocks of the company: c) characterizes the cost of the loan capital of the company: d) can be considered as minimum acceptable profitability of capital investments of the company.

d) can be considered as minimum acceptable profitability of capital investments of the company.

The true owners of the corporation are the. a) holders of debt issues of the firm. b) board of directors of the firm. c) creditors. d) common stockholders.

d) common stockholders.

The true owners of the corporation are the: a) holders of debt issues of the firm. b) board of directors of the firm. c) creditors. d) common stockholders.

d) common stockholders.

Net Working Capital is a) capital budget b) current liabilities c) current assets d) current assets current liabilities

d) current assets current liabilities

In finance, "working capital" means the same thing as - a) fixed assets. b) total assets. c) current assets d) current assets minus current liabilities.

d) current assets minus current liabilities.

Which of the following would be a reason for a stock's dividend yield to increase (assuming all other variables remained constant)? a) no change in share price b) decrease in dividend yield c) decrease in annual dividend d) decline in share price e) increase in share price

d) decline in share price

The Accounting equation is Asset = liabilities + ______ a) capital b) current asset c) total expense d) equity

d) equity

Choose the BEST answer to explain the correlation between risk and return. a) low risk investors require a higher return. b) high risk investors require a low return. c) there is not a correlation between risk and return. d) high risk investors require a higher return.

d) high risk investors require a higher return.

The creation of value: a) implies that one firm will gain at the expense of others. b) provides benefits to society as scarce resources are directed to their most productive use. c) is not a practical goal since it cannot be measured effectively. d) is achieved only if cash flows exceed accounting profits.

d) is achieved only if cash flows exceed accounting profits.

Limited partnerships are not as prevalent as corporations because: a) limited partners can lose up to three times the amount they invested in the partnership if the business goes bankrupt. b) limited partnerships have the disadvantage of double taxation. c) the general partner has no liability, making it difficult for the partnership to borrow money. d) it is easier to transfer ownership by selling common stock than it is to sell the partnership.

d) it is easier to transfer ownership by selling common stock than it is to sell the partnership.

Given the following corporate objectives, provide a reasoned argument explaining which of them should be the main goal of the financial manager: a) profit maximisation; b) sales maximisation; c) maximisation of benefit to employees and the local community; d) maximisation of shareholder wealth.

d) maximisation of shareholder wealth.

How are preferred stocks different from regular stocks? a) preferred stockholders have the right of say while regular stockholders have no right of say in the company b) preferred stocks are sold with less profit compared to regular stocks. c) preferred stockholders have the right to vote while regular stockholders have no right to vote. d) preferred stockholders obtain their dividends first before regular stockholders.

d) preferred stockholders obtain their dividends first before regular stockholders.

Return on equity is a ratio that shows a company's a) return on investment b) tax liability c) assets d) property equity

d) property equity

Types of financial investments include a) real estate b) precious metals c) mutual funds d) stocks е) all the answers are correct.

d) stocks

Which of the following is the BEST description of cash provided by financing activities? a) the business is being efficient in collecting money from its customers. b) the business purchased some new long-term assets, such as machinery. c) the business paid off a bank loan. d) the business received a loan from the bank.

d) the business received a loan from the bank.

Which of the following is a considered an advantage of bond financing? a) bond financing reflects ownership in a company. b) bonds can decrease return on equity. с) bonds invite others to help in decision making. d) the interest of bonds is tax deductible.

d) the interest of bonds is tax deductible.

What is the best definition of cost of capital? a) the overall financial policy of an investment firm. b) the total of fixed expenses associated with a project. c) the value of the current exchange rate. d) the opportunity cost of funds that a company invests.

d) the opportunity cost of funds that a company invests.

What is the purpose of financial reports? a) to give the projected financial standing of a company b) to give the current financial standing of a company c) to give the budgeted financial standing of the company d) to give the historic financial standing of a company

d) to give the historic financial standing of a company

Liquidity rates show... а) capability to cover the current obligations at the expense of the current assets; b) availability of current debts at the enterprise; c) degree of profitability of the main financial transactions; d) property condition of the enterprise; d) the term during which assets can be turned into money.

а) capability to cover the current obligations at the expense of the current assets;

Which typically have the lowest costs associated with it? a) preferred stock b) common stock с) bonds d) loans

с) bonds