1) The part of finance concerned with design and delivery of advice and financial products to individuals, business, and government is called
A) Managerial Finance.
B) Financial Manager.
C) Financial Services.
D) none of the above.
Answer:
2) The ______of a business firm is measured by its ability to satisfy its short-term obligations as they come due.
Answer:
Note: This question is worth two points. Use the table below to answer questions 3A to 3D.
Table 2.1
Information (2005 values)
1. Sales totaled $110,000
2. The gross profit margin was 25 percent.
3. Inventory turnover was 3.0.
4. There are 360 days in the year.
5. The average collection period was 65 days.
6. The current ratio was 2.40.
7. The total asset turnover was 1.13.
8. The debt ratio was 53.8 percent.
3A) Inventory for CEE in 2005 was ______.
A) $36,667
B) $32,448
C) $27,500
D) $ 9,167
Answer:
3B) Notes payable for CEE in 2005 was ______.
A) $113,466
B) $ 52,372
C) $ 41,372
D) $ 10,609
Answer:
3C) Accounts receivable for CEE in 2005 was ______.
A) $14,056
B) $19,861
C) $14,895
D) $18,333
Answer:
3D) Total assets for CEE in 2005 were ______.
A) $ 45,895
B) $124,300
C) $ 58,603
D) $ 97,345
Answer:
4) During 2006, NICO Corporation had EBIT of $100,000, a change in net fixed assets of $400,000, an increase in net current assets of $100,000, an increase in spontaneous current liabilities of $400,000, a depreciation expense of $50,000, and a tax rate of 30%. Based on this information, NICO's free cash flow is
A) -$630,000.
B) -$50,000.
C) $650,000.
D) -$30,000.
Answer:
5) The future value of a dollar ______as the interest rate increases and ______the farther in the future an initial deposit is to be received.
A) decreases; decreases
B) decreases; increases
C) increases; increases
D) increases; decreases
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6) Capital budgeting is the process of evaluating and selecting short-term investments consistent with the firm's goal of owner wealth maximization. TRUE or FALSE?
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7) A corporation has concluded that its financial risk premium is too high. In order to decrease this, the firm can
A) increase the proportion of long-term debt to decrease the cost of capital.
B) increase short-term debt to decrease the cost of capital.
C) decrease the proportion of common stock equity to decrease financial risk.
D) increase the proportion of common stock equity to decrease financial risk.
Answer:
8) A firm has a beta of 1.2. The market return equals 14 percent and the risk-free rate of return equals 6 percent. The estimated cost of common stock equity is
A) 6 percent.
B) 7.2 percent.
C) 14 percent.
D) 15.6 percent.
Answer:
9) Interest rate risk is the chance that changes in interest rates will adversely affect the value of an investment; most investments decline in value when the interest rates rise and increase in value when interest rates fall. TRUE or FALSE?
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10) The most common motive for adding fixed assets to the firm is
A) expansion.
B) replacement.
C) renewal.
D) transformation.
Answer: