concepts

Which one of the following is a current liability?

An invoice payable to a supplier in 45 days

Which one of the following is a use of cash

Decrease in accounts payable

Which of the following statements regarding the weighted average cost of capital is accurate?

It is the return investors require on the total assets of the firm.

When valuing an entire firm using the cash flow from assets approach, why must the tax amount be adjusted?

The tax effect of the interest expense must be removed.

M&M Proposition II, without taxes, is the proposition that:

a company's cost of equity is a linear function with a slope equal to (RA − RD).

which one of the following accounts is the most liquid

accounts receivable

bond issued by the U.S. government

are considered to be free or default risk

fixed costs:

are constant over the short run regardless of the quantity of output produced

when utilizing the percentage of sales approach, managers

consider the current production capacity level

Bowman's Boats has an interval measure of 53. This means that the firm has sufficient liquid assets to:

cover its operating costs for the next 53 days

A firm's liquidity is measured with which one of the following ratios?

current ratio

graphing the crossover point helps explain

how decisions concerning mutually exclusive projects are derived

the profitability index is most closely related to which one of the following

net present value

municipal bonds

pay interest that is free from federal taxation

The most acceptable method of evaluating the financial statements is to compare the company's current financial:

ratios to the company's historical ratios

A project has a net present value of zero. Given this information:

the projects cash inflows equal it's cash outflows in current dollar terms

Cheung Software has decided to go public and has hired an investment firm to handle the offering. The investment firm's role is to be a(n):

underwriter

which form of market efficiency would most likely offer the greatest profit potential to an outstanding professional stock analyst

weak

The ______ tax rate is the percentage of the last dollar you earned that must be paid in taxes.

marginal

decisions made by financial managers should primarily focus on increasing the

market value per share of outstanding stock

Which of the following are assumptions of the capital asset pricing model (CAPM)? I. A risk

free asset has no systematic risk. II. Beta is a reliable estimate of total risk. III. The reward-to-risk ratio is constant. IV. The market rate of return can be approximated. - I, III, and IV only

Which one of the following determines the standards and procedures with which audited financial statements are prepared?

generally accepted accounting principles

Assume a firm's flotation costs are 7.8 percent of the funding need. Accordingly, when analyzing capital projects, the firm's managers should:

increase the initial project cost by dividing that cost by (1 − .078)

to convince investors to accept greater volatility, you must

increase the risk premium

For a firm that must pay income taxes, depreciation expense:

increases expenses and lowers taxes

The cash coverage ratio directly measures the ability of a company to meet its obligation to pay:

interest to a lender.

A perpetuity is defined as:

unending equal payments paid at equal time intervals.

which of the following actions will decrease the firm's cost of equity?

A decrease in the firm's beta

Which one of the following questions involves a capital structure decision?

how much debt should the firm incur to fund a project?

which one of the following financial statements summarizes a firms revenue and expenses during a period of time

income statement

a corporation issued bonds three years ago. which one of the following is most apt to be included in the bonds indenture?

list of collateral used as bond security

dividend payout ratio is constant at 40 percent. If the firm has a positive external financing need, that need will be met by:

long term debt

According to the capital asset pricing model (CAPM), the amount of reward an investor receives for bearing the risk of an individual security depends upon the:

market risk premium and the amount of systematic risk inherent in the security.

Ratios that measure how efficiently a firm manages its assets and operations to generate net income are referred to as ______ ratios.

profitability

If a borrower receives money today and must repay the loan in a single lump sum on a future date, the loan is called a(n) ___ loan

pure discount

Valenica Corporation has a capital structure that includes bonds, preferred stock, and common stock. Which one of the following rights is most apt to be granted to the preferred shareholders?

right to share in company profits prior to other shareholders

If a security is fairly priced, its ________ divided by its beta will equal the slope of the security market line.

risk premium

Ultimately, the ______ control(s) the corporation.

shareholders

A common

size income statement is an accounting statement that expresses all of a firm's expenses as a percentage of: - sales

the secondary market is best defined as the market

where outstanding shares of stock are resold

which of the following is an example of a sunk cost

2,000 paid last year to rent equipment

According to ________, the value of a company is unrelated to its capital structure.

M&M Proposition I, no tax

Which one of the following questions involves a capital budgeting decision?

Should the firm purchase a new machine for the production line?

Which one of the following is a source of cash?

acquisition of debt

When utilizing the capital asset pricing model approach to value equity, the outcome:

assumes the reward-to-risk ratio is constant.

The process of determining the present value of future cash flows in order to know their value today is referred to as:

discounted cash flow valuation

Cash flow to stockholders is defined as:

dividend payments less net new equity raised

You recently purchased a restaurant that had equal market and book values. The purchase included the building, fixtures, and inventory. Which one of the following would be most likely to cause the market value of the restaurant to fall below its book value?

A pandemic that required restaurants to limit the number customers allowed inside

Which of the following actions would be considered an agency problem?

A shareholder in a corporation sells shares of the company's stock when the price rises

Which one of the following best states the primary goal of financial management?

Maximize the current value per share

Which form of business would be the best choice if it were necessary to raise large amounts of capital?

corporation

A firm's aftertax cost of debt will increase if there is a(n):

decrease in the company's tax rate.

a member who acts as a dealer in a limited number of securities on the floor of the nyse is called a

designated market maker

When a firm announces an upcoming seasoned stock offering, the market price of the firm's existing shares tends to:

decrease

Andrew just calculated the present value of a $15,000 bonus he will receive next year. The interest rate he used in his calculation is referred to as the:

discount rate.

of the options listed below, which is the best example of systematic risk?

investors panic causing security prices around the globe to fall precipitously

With firm commitment underwriting, the issuing firm:

knows upfront the amount of money it will receive from the stock offering.

given a well diversified stock portfolio, the variance of the portfolio

may be less than the variance of the least risky stock in the portfolio

a project that has a project IRR of negative 100% will also have a

net present value that is negative and equal to the initial investment