Finance Multiple Choice

You are viewing a graph that plots the NPV's of a project to various discount rates that could be applied to the project's cash flows. What is the name given to this graph?

NPV profile

Which one of the following statements concerning net working capital is correct?

Net working capital may be a negative value

Financial plans:

Often contain alternative options based on economic developments

The stream of customer orders coming through to the NYSE trading floor is called the;

Order flow

Kurt won the lottery and will receive $1,00 a year for the next 50 years. The value of his winnings today discounted at his discount rate is called which of the following?

Present value

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

Profitability

During the year, the accounts payable of a company rose from $115,200 to $134,300. This change represents a:

Source of $19,100 of cash as an operating activity

The sources and uses of cash over a stated period of time are reflected on the:

Statement of cash flows

A positive cash flow to stockholders indicates which one of the following with certainty?

The dividends paid exceeded the net new equity raised

A project has a net present value of zero. Which one of the following best describes this project?

The maximum amount you should pay for this project is equal to the actual cost of this project

Which one of the following statements related to the capital asset pricing model approach to equity valuation is correct? Assume the firm uses debt in its capital structure.

The model is dependent upon a reliable estimate of the market risk premium

Activities of a firm that require the spending of cash are known as:

Uses of cash

Which of the following questions are appropriate to address during the financial planning process?

all of the above

Which one of the following financial statements summarizes a firm's revenue and expenses during a period of time

income statement

A person on the floor of the NYSE who executes buy and sell orders on behalf of customers is called a:

Floor broker

When using the two-stage dividend growth model:

G1 can be greater than R

Which one of the following will decrease the net present value of a project?

Increasing the required discount rate

The pre-tax cost of debt:

Is based on the current yield to maturity of the firm's outstanding bonds

The aftertax cost of debt:

Is highly dependent upon the firm's tax rate

The dividend growth model:

Is only as reliable as the estimated rate of growth

When developing a common-size balance sheet to evaluate last year's performance, all accounts are expressed as a percentage of:

Last year's total assets

Russell United has 28,500 share of stock outstanding and has two open seats on its board of directors. Each share of common stock is granted one vote. How many additional votes are required to guarantee a seat on the board if the company were to use straight voting rather than cumulative voting?

4,750

High Adventure is considering a new project that is similar in risk to the firm's current operations. The firm maintains a debt-equity ratio of .55 and retains all profits to fund the firm's rapid growth. How should the firm determine its cost of equity?

By using the capital asset pricing model

Read Corporation currently pays an annual dividend of $1.46 per share and plans on increasing that amount by 2.75 percent annually. Cho, Incorporated, currently pays an annual dividend of $1.42 per share and plans on increasing its dividend by 3.1 percent higher ____ than the stock of Read.

Capital gains yield

Interest earned on both the initial principle and the interest reinvested from prior periods is called:

Compound interest

Christina invested #3,000 five years ago and earns 2 percent interest on her investment. By leaving her interest earnings in her account, she increases the amount of interest she earns each year. They way she is handling her interest income is referred to as which one of the following?

Compounding

When utilizing the percentage of sales approach, managers:

Consider the current production capacity level

Which one of the following statements related to corporate income taxes is correct?

Corporations pay the same rate of taxes regardless of the amount of taxable income

A company has four open seats on its board of directors. There are seven candidates vying for these four positions. There will be a single election to determine the winners. As the owner of 100 shares of stock, you will receive one vote per share for each open seat. You decide to cast all 400 of your votes for a single candidate. What is this type of voting called?

Cumulative

Which one of these statements related to preferred stock is correct?

Cumulative preferred shares are more valuable than comparable noncumulative shares

A firm's external financing need is met by:

Debt and/or equity

The internal rate of return is defined as the:

Discount rate which causes the net present value of a project to equal zero

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

Discounted cash flow valuation

The length of time a firm must wait to recoup, in present value terms, the money it has invested in a project is referred to as the:

Discounted payback period

What are the distributions of either cash or stock to shareholders by a corporation called?

Dividends

Which of the following accurately lists the three components of the DuPont identity?

Equity multiplier, net profit margin, and total asset turnover

A forward PE is based on:

Estimated future earnings

Which one of the following describes a noncash item?

Expenses that do not consume cash

As the degree of financial leverage increases, the:

probability a firm will encounter financial distress increases