Finance 52 MCQs...

Question # 00004036 Posted By: expert-mustang Updated on: 11/24/2013 10:31 PM Due on: 11/25/2013
Subject Finance Topic Finance Tutorials:
Question
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1
Question: If inflation is anticipated to be 5 percent during the next year, while the real rate of interest for a one-year loan is 5 percent, then what should the nominal rate of interest be for a risk-free one-year loan?

A 5 percent

B 10 percent

C 25 percent

D None of the above


2


Question: Which one of the following statements is not true?

A The value of a dollar invested at a positive interest rate grows over time

B The further in the future you receive a dollar, the less it is worth today

C A dollar in hand today is worth more than a dollar to be received in the future

D The further in the future you receive a dollar, the more it is worth today


3
Question: Efficiency ratio: Jet, Inc., has net sales of $712,478 and accounts receivables of $167,435. What are the firm's accounts receivables turnover and days' sales outstanding?

A 0.24 times; 78.5 days

B 4.26 times; 85.7 days

C 5.2 times; 61.3 days

D None of the above


4


Question: If you have loaned capital to a firm, then you could be

A A shareholder

B A stakeholder

C A partner

D All of the above


5
Question: Which one of the following is not an advantage of using ROE as a goal?

A ROE is highly correlated with shareholder wealth maximization

B ROE and the DuPont analysis allow management to break down the performance and identify areas of strengths and weaknesses

C ROE does not consider risk

D All of the above are advantages of using ROE as a goal


6


Question: The future value of multiple cash flows is

A Greater than the sum of the cash flows

B Equal to the sum of all the cash flows

C Less than the sum of the cash flows

D None of the above


7
Question: The major players in the direct financial markets are

A Investment banks

B Money center banks

C Regional banks

D Both A and B


8
Question: One of the main services offered by investment banks to companies is

A Helping companies sell new debt or equity issues in the security markets

B Making loans to companies

C Taking deposits from companies

D All of the above


9


Question: Shane Matthews has invested in an investment that will pay him $6,200, $6,450, $7,225, and $7,500 over the next four years. If his opportunity cost is 10 percent, what is the future value of the cash flows he will receive? (Round to the nearest dollar.)

A $27,150

B $29,900

C $30,455

D $31,504


10


Question: Which of the following is a cash flow from investing activities?

A Cash payment of dividends to shareholders

B Cash from sale of products

C Purchase of plant and equipment

D Rent received from industrial property owned


11


Question: Largent Supplies Corp. has borrowed to invest in a project. The loan calls for a payment of $17,384 every month for three years. The lender quoted Largent a rate of 8.40 percent with monthly compounding. At what rate would you discount the payments to find the amount borrowed by Largent? (Round to two decimal places.)

A 8.40%

B 8.73%

C 8.95%

D None of the above


12


Question: Which of the following statements is not a limitation associated with market valuation of balance sheet accounts?

A It can be difficult to identify the market value of an asset, particularly if there are few transactions involving comparable assets

B The estimates of market value can involve complex financial modeling, and the resulting numbers can be open to manipulation and abuse

C Marking to market provides decision makers with a better chance of making the correct economic decision, given the information available

D Mark-to-market accounting can become inaccurate if market prices deviate from the fundamental values of assets and liabilities


13


Question: Which of the following reports directly to the owners of the firm (assume the firm is a public corporation)?

A CFO

B CEO

C Board of directors

D Audit committee


14


Question: Tommie Harris is considering an investment that pays 6.5 percent annually. How much must he invest today such that he will have $25,000 in seven years? (Round to the nearest dollar.)

A $23,474

B $38,850

C $26,625

D $16,088


15


Question: Which of the following stock exchange organizational forms has no physical location?

A A futures exchange

B An over-the-counter market

C An auction market

D None of the above


16
Question: Working capital management decisions involve

A How a firm's day-to-day financial matters should be managed

B How the firm should finance its assets

C Which productive assets the firm should employ

D All of the above


17
Question: Hassan Ali has made an investment that will pay him $11,455, $16,376, and $19,812 at the end of the next three years. His investment was to fetch him a return of 14 percent. What is the present value of these cash flows? (Round to the nearest dollar.)

A $33,124

B $36,022

C $41,675

D $39,208


18


Question: Herm Mueller has invested in a fund that will provide him a cash flow of $11,700 for the next 20 years. If his opportunity cost is 8.5 percent, what is the present value of this cash flow stream? (Round to the nearest dollar.)

A $234,000

B $132,455

C $110,721

D $167,884


19


Question: The assumption of arm's-length transaction states that

A Both parties to a transaction can act independently of each other and make economically rational decisions

B Both parties to a transaction must have had previous transactions

C One of the parties to the transaction is a bank that has full knowledge of the firm's creditworthiness

D None of the above


20
Question: The time value of money refers to the issue of

A What the value of the stream of future cash flows is today

B Why a dollar received tomorrow is worth more than a dollar received today

C Why a dollar received tomorrow is worth the same as a dollar received today

D None of the above


21


Question: Which of the following does maximizing shareholder wealth not usually account for?

A Risk

B Government regulation

C The timing of cash flows

D Amount of cash flows


22


Question: Which one of the following is not true for a corporation?

A Interest paid on bonds issued last year is tax deductible

B Common-stock dividends to be paid this year are not tax deductible

C Common-stock dividends to be paid this year will be tax deductible if the firm has a net loss for the year

D Preferred stock dividends to be paid this year are not tax deductible


23
Question: The cash remaining after the firm has met its operating expenses, payments to creditors, and taxes is called

A Earnings per share

B Capital contributed in excess of par

C Residual cash

D Assets


24


Question: Executives that repeatedly put their own interests before that of the firm may find that they have difficulty finding another job after their current one. This is an example of

A The managerial labor market disciplining managers

B The market for corporate control

C The board of directors affecting the prospects of a manager

D None of the above


25


Question: Petry Corp. is a growing company with sales of $1.25 million this year. The firm expects to grow at an annual rate of 25 percent for the next three years, followed by a growth of 20 percent per year for the next two years. What will be Petry's sales at the end of five years? (Round to the nearest dollar.)

A $2,160,000

B $3,515,625

C $1,875,000

D $2,929,688


26
Question: Your brother has asked you to help him with choosing an investment. He has $5,000 to invest today for a period of two years. You identify a bank CD that pays an interest rate of 4.25 percent with the interest being paid quarterly. What will be the value of the investment in two years?

A $5,434

B $5,441

C $5,107

D $5,216


27
Question: Centennial Brewery produced revenues of $1,145,227 in 2008. It has expenses (excluding depreciation) of $812,640, depreciation of $131,335, and interest expense of $81,112. It pays an average tax rate of 34 percent. What is the firm's net income after taxes?

A $120,140

B $248,475

C $79,292

D $40,848


28
Question: Which of the following individuals is typically most responsible for managing a large corporation’s financial function?

A The CEO

B The chairman of the board

C The CBO

D The CFO


29
Question: Jeff Conway wants to receive $25,000 in perpetuity and will invest his money in an investment that will earn a return of 13.5 percent annually. What is the value of the investment that he needs to make today to receive his perpetual cash flow stream? (Round to the nearest dollar.)

A $640,225

B $252,325

C $144,350

D $185,185


30


Question: The DuPont equation shows that a firm's ROE is determined by three factors

A Net profit margin, total asset turnover, and the equity multiplier

B Operating profit margin, ROA, and the ROE

C Net profit margin, total asset turnover, the ROA

D ROA, total asset turnover, and the equity multiplier


31


Question: Leverage ratio: Your firm has an equity multiplier of 2.47. What is its debt-to-equity ratio?

A 0.60

B 1.47

C 1.74

D 0


32


Question: A director who is not an employee of the firm is called

A An executive director

B An inside director

C An independent director

D An official director


33


Question: During 2008, Towson Recording Company increased its investment in marketable securities by $36,845, funded fixed assets acquisition by $109,455, and had marketable securities to the tune of $14,215 mature. What is the net cash provided (used) in investing activities?

A $132,085

B $145,940

C –$132,085

D None of the above


34


Question: During an economic expansion, we would expect

A Interest rates to increase

B Interest rates to decrease

C Interest rates to remain the same

D The price of money to decrease


35


Question: Chartworth Associates' financial statements indicated that the company had EBITDA of $3,145,903. It had depreciation of $633,000, and its interest rate on debt of $1.25 million was 7.5 percent. Calculate the amount of taxes the company is likely to owe.



A $1,069,607

B $1,037,732

C $822,512

D None of the above


36
Question: Using higher discount rates will

A Not affect the present value of the future cash flow

B Increase the present value of any future cash flow

C Decrease the present value of any future cash flow

D None of the above


37


Question: Liquidity ratio: Zidane Enterprises has a current ratio of 1.92, current liabilities of $272,934, and inventory of $197,333. What is the firm's quick ratio?

A 0.72

B 1.20

C 1.92

D None of the above


38


Question: According to the realization principle, revenue from a sale of the firm's products are recognized

A When the products are shipped to the buyer

B When the buyer orders the goods

C When cash is realized from the sale of the products

D At the time of the sale


39
Question: Which organizational form best enables the owners of the firm to monitor the actions of other owners of the same firm?

A Sole proprietorship

B Partnership

C Private corporation

D Public corporation


40
Question: Which organizational form best enables the owners of the firm to monitor the actions of other owners of the same firm?

A Sole proprietorship

B Partnership

C Private corporation

D Public corporation


41


Question: Which one of the following does not change a firm's current ratio?

A The firm collects on its accounts receivables

B The firm purchases inventory by taking a short-term loan

C The firm pays down its accounts payables

D None of the above


42


Question: You want to have $25,000 for a down payment on a house 6 years from now. If you can earn 6.5 percent, compounded annually, on your savings, how much do need to deposit today to reach your goal?

A $17,133.35

B $17,420.73

C $17,880.69

D $18,211.17

E $18,886.40


43


Question: The annuity transformation method is used to transform

A A present value annuity to a future value annuity

B A present value annuity to an annuity due

C An ordinary annuity to an annuity due

D A perpetuity to an annuity


44
Question: To solve present value problems with multiple cash flows involves which of the following steps?

A First, draw a time line to make sure that each cash flow is placed in the correct time period

B Second, calculate the present value of each cash flow for its time period

C Third, add up the present values

D All of the above are necessary steps


45


Question: Direct financing occurs when

A A lender-saver borrows directly from a borrower-spender

B A borrower-spender borrows directly from a lender-saver

C A lender-saver borrows from the federal government

D A borrower-spender borrows from the federal government


46
Question: Which of the following can help align the behavior of managers with the goals of shareholders?

A Management compensation

B Managerial labor markets

C An independent board of directors

D All of the above


47
Question: The present value of a lump sum future amount

A Is unaffected by the interest rate

B Is unaffected by the timing of the future cash flow

C Is inversely related to the future value

D Is directly related to the interest rate

E Is inversely related to the period of time


48


Question: Peer group analysis can be performed by

A Management choosing a set of firms that are similar in size or sales, or who compete in the same market

B Using the average ratios of this peer group, which would then be used as the benchmark

C Identifying firms in the same industry that are grouped by size, sales, and product lines in order to establish benchmark ratios

D Only A and B relate to peer group analysis


49


Question: Derek's friend, Jackson, is asking to borrow today with a promise to repay $7,418.87 in four years. If Derek could earn 5.45 percent annually on the any investment he makes today, how much would he be willing to lend Jackson today? (Round to nearest dollar.)

A $6,000

B $7,035

C $6,500

D $7,150


50


Question: Your mother is trying to choose one of the following bank CDs to deposit $10,000. Which one will have the highest future value if she plans to invest for three years?

A 3.5% compounded daily

B 3.25% compounded monthly

C 3.4% compounded quarterly

D 3.75% compounded annually


51


Question: The price of borrowing money is called

A Inflation

B Return

C Interest

D All of the above


52


Question: A mutual fund is an example of

A A commercial bank

B An insurance company

C An investment fund

D A pension fund


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  1. Tutorial # 00003813 Posted By: expert-mustang Posted on: 11/24/2013 10:34 PM
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