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.
