FIN 340 Multiple Choice A-E

Which of the following statements is most likely to be correct? Please choose the best answer. A. ROE is based on (historical) book values hence it is useless for predicting future price B. As long as we can generate growth, the stock price would be higher than without growth C. Positive dividend growth may or may not help increase stock price, which has a lot to do with ROE and payout policy as well D. Positive dividend growth is always rewarded by market E. None of the rest is correct

C. Positive dividend growth may or may not help increase stock price, which has a lot to do with ROE and payout policy as well

Which of the following balance sheet items is not considered a non-operating asset? Please choose the best answer. A. Marketable securities B. Short-term investment C. Investment D. Fixed Assets

D. Fixed assets

If Firm A's notes payable (N/P) increase by $100, which of the following is most likely to be correct? Please choose the best answer.

Firm A has increased its outstanding short-term loans (typically bank loans) by the amount of $100

Firm B's basic earning power (BEP) is 10% and is expected to remain the same over time. Which of the following statements is most likely to be correct? Please choose the best answer.

If Firm B's total assets remain unchanged, then its EBIT will remain the same as well

Which of the following is most likely to be correct about financial ratio analysis? Please choose the best answer

It allows us to assess financial health and management of a firm by comparing firms of different sizes

Which of the following statements is most likely to be WRONG about the forecasting methods we have learned in this course? Please choose the best answer. A. Linear forecast assumes the increments are more or less constant every year B. None of the rest is correct C. Forecasting sales assumes that future sales have certain similarities to the past sales D. The forecasting method we have learned can be used even without any knowledge about prior sales E. Exponential forecast of sales assumes that the increments are likely bigger as sales increase

D. The forecasting method we have learned can be used even without any knowledge about prior sales

Which of the following is most likely to be correct about equity valuation? Please choose the best answer. A. Equity cash flows should be discounted by the weighted average of the cost of capital to determine equity value B. Equity value is the present value of all the future net incomes C. Equity valuation is about the equity value in the past D. There are different equity valuation models based on different information, such as sales, FCFs, dividend, etc. E. None of the rest is correct

D. There are different equity valuation models based on different information, such as sales, FCFs, dividend, etc.

Which of the following statements is most likely to be correct about the GROWTH function in Excel? Please choose the best answer.' A.GROWTH does forecasting based on exponential fitting B. None of the rest is correct C. GROWTH can forecast for up to the next three years D. GROWTH performs the same forecasting as FORECAST does E. GROWTH and LOGEST do the same thing - both tell us the constant exponential growth rate

A. GROWTH does forecasting based on exponential fitting

Which of the following statements is most likely to be correct? Please choose the best answer. . A. Pro forma forecasting is a powerful tool for making sound financial planning B. Financial planning is pro forma forecasting C. Financial planning is ratio analysis D. Financial planning is more important than financial ratio analysis E. None of the rest is correct

A. Pro forma forecasting is a powerful tool for making sound financial planning

Which of the following statements is most likely to be correct about pro forma forecast? Please choose the best answer. A. All items on balance sheet and income statement change in proportion to sales change B. Most financing items tend to change in proportion to sales change C. Retained earnings tend to change in proportion to sales change D. None of the rest is correct E. Some items on balance sheet and income statement change in proportion to sales change and some don't

D. It helps managers to foresee the potential surplus and capital shortage and thereby making good decisions

Which of the following is most likely to be correct about the corporate valuation model we have learned in this class? Please choose the best answer. A. None of the rest is correct B. It finds the PV of the Net Income that a firm is expected to generate C. It can only be applied to valuing corporations D. It should always give the same value as total assets in balance sheet E. It finds the value of operations by using forecasted free cash flows and the weighted average cost of capital

E. It finds the value of operations by using forecasted free cash flows and the weighted average cost of capital

Firm A's 2035 Net Income is $500. Its Retained Earnings (RE) have increased from $50,678 in 2034 to $50,929 in 2035. Which of the following statements is most likely to be correct? Please choose the best answer.

Firm A paid a dividend of $249 in 2035

Which of the following is most likely to be WRONG about Excel's functions or commands? Please choose the best answer. A. None of the rest is correct B. GROWTH does linear forecasting C. LINEST does exponential fitting D. FORECAST can do a linear forecast E. TREND can do a linear forecast

B. GROWTH does linear forecasting