Finance Final

The primary goal of a publicly owned corporation is to maximize shareholder wealth
The five basic principles of finance include al of the following EXCEPT: incremental profits determine value
All of the following measure liquidity EXCEPT operating return on assets
Williams Inc. has a current ratio equal to 3, a quick ratio equal to 1.8, and total current assets of 6 million. Williams’ inventory balance is: 2,400,000
Benkart Corporation has sales of 5,000,000, net income of 800,000, total assets of 2,000,000 and 100,000 shares of common stock outstanding. If Benkart’s P/E ratio is 12, what is the company’s current stock price? $96 per share
A firm that wants to know if it has enough cash to meet its bills would be most likely to use which kind of ratio? liquidity
The present value of a single future sum depends upon the number of discount periods
the 3 basic type of issues addressed by the study of finance are capital budgeting, capital structure decisions, and working capital management
The present value of 1,000 to be received in 5 years is _____ if the discount rate is 12.78% $548
You charged 1,000 on your credit card for christmas presents. Your credit card company charges you 26% annual interest, compounded monthly. If you make the minimum payments of 25 per month, how long will it take to pay off your balance 94 months
Your company has received a 50,000 loan from an industrial finance company. The annual payments are 6,202.70. If the company is paying 9 percent interest per year, how many loan payments must the company make? 15
You have contracted to buy a house for 250,000 paying 30,000 down and taking out a fully amortizing loan for the balance, at a 5.7% annual rate for 30 years. What will your monthly payment be if they make equal monthly installments over the next 30 years? 1,277
Stock A’s expected return is 8.2%
Stock W’s standard deviation of returns is 17%
Changes in the general economy, like changes in interest rates or tax laws represent what type of risk? market risk
Of the following different types of securities, which is typically considered most risky? Common stocks of small companies
Which of the following would NOT normally be considered a flotation cost dividends
The real rate of return is the return earned above the inflation risk premium
If you were to use the standard deviation as a measure of investment risk, which of the following has historically been the least risky investment US Treasury Bill
A typical measure for the risk-free rate of return is the US Treasury Bill rate
The basic format of an income statement is Sales – Expenses = Profits
Which of the following bond provisions will make a bond more desirable to investors, other things being equal? The bond is convertible
Two consideration that cause corporation’s cost of capital to be different than its investors’ required returns are corporate taxes and floatation costs
A firm’s cost of capital is influenced by capital structure
Shareholder wealth maximization means maximizing the price of existing common stock.
All of the following statements about balance sheets are true EXCEPT balance sheets show average asset balances over a one-year period
Which of the following accounts belongs in the equity section of a balance sheet? retained earnings
Siskiyou, Inc. has total current assets of 1,200,000; total current liabilities of 500,000; long term assets of 800,000 and long-term debt of 600,000. How much is the firm’s total equity 900,000
What information does a firm’s statement of cash flows provide to the viewing public? a report documenting a firm’s cash inflows and cash outflows from operating, financing, and investing activities for a defined period of time
Investors want a return that satisfies the following expectations: Both A and B.
In order to reduce agency problems, managers may be provided compensation that includes: an option to buy the company’s stock
Investors generally don’t like risk. Therefore, a typical investor will only take on additional risk if he expects to be compensated in the form of additional return.
The true owners of the corporation are the common stockholders.
ExxonMobil generates about $50 billion in cash annually from its operations and invests about half of that on new exploration. Therefore, ExxonMobil is an example of a(n): savings surplus unit.
Three ways that savings can be transferred through the financial markets include all of the following except: indirect transfer using the venture capital firm.
Money market transactions include which of the following? securities that have a maturity of less than one year
The investment banker performs what three basic functions? underwriting, distributing, and advising
Which of the following is not a valid theory that attempts to explain the shape of the term structure of interest rates the Fisher Effect theory
A corporation’s operating profit margin is equal to EBIT divided by Sales.
PDQ Corp. has sales of $4,000,000; the firm’s cost of goods sold is $2,500,000; and its total operating expenses are $600,000. What is PDQ’s EBIT? $900,000
The two principal sources of financing for corporations are debt and equity.
All of the following statements about balance sheets are true except: balance sheets show average asset balances over a one-year period.
Common-sized balance sheets show each balance sheet account as a percentage of total assets.
You have the choice of two equally risk annuities, each paying $5,000 per year for 8 years. One is an annuity due and the other is an ordinary annuity. If you are going to be receiving the annuity payments, which annuity would you choose to maximize your wealth? the annuity due
Most stocks have betas between 0.60 and 1.60.
) You are considering investing in Ford Motor Company. Which of the following are examples of diversifiable risk? II. Risk resulting from uncertainty regarding a possible strike against Ford.III. Risk resulting from an expensive recall of a Ford product.
Beta is a statistical measure of the relationship between an investment’s returns and the market return.
You have just purchased a share of preferred stock for $50.00. The preferred stock pays an annual dividend of $5.50 per share forever. What is the rate of return on your investment? .110
Shafer Corporation issued callable bonds. The bonds are most likely to be called if interest rates decrease.
Put the following in order of their claim on assets of a firm, starting with the LAST to have a claim: A. Subordinated debentures B. Debentures (unsubordinated)C. Common Stock D. Preferred stock Common stock, preffered stock, subordinated, unsubordianted
In an efficient securities market the market value of a security is equal to: its intrinsic value.
What is the value of a bond that has a par value of $1,000, a coupon of $120 (annually), and matures in 10 years? Assume a required rate of return of 7.8%. 1,284.38
Finance theory suggests that the current market value of a bond is based upon which of the following? The sum of the present value of the bond’s interest payments and the present value of the principal.
A $1,000 par value 14-year bond with a 10 percent coupon rate recently sold for $965. The yield to maturity is 10.49%.
What is the expected rate of return on a bond that matures in 5 years, has a par value of $1,000, a coupon rate of 11.5%, and is currently selling for $982? Assume annual coupon 12.0%
Cumulative preferred stock requires dividends in arrears to be carried over into the next period.
Many preferred stocks have a provision that entitles a company to repurchase its preferred stock from their holders at stated prices over a given time period. What is the name of this provision? Callable
Many preferred stocks have a feature that requires a firm to periodically set aside an amount of money for the retirement of its preferred stock. What is the name of this feature? sinking fund
Keyes Corporation preferred stock pays an annual dividend of $7 per share. Which of the following statements is true for an investor with a required return of 9%? The value of the preferred stock is $77.78 per share
Consider the following four types of payments that could be made by a normal operating firm: interest, common dividends, income taxes, and preferred dividends. Compared to the other payments mentioned, where would you rank common dividend payments in terms of the order of payment if the firm is liquidating? fourth
An example of the growth factor in common stock is: retaining profits in order to reinvest into the firm.
A company has preferred stock with a current market price of $18 per share. The preferred stock pays an annual dividend of 4% based on a par value of $100. Flotation costs associated with the sale of preferred stock equal $1.50 per share. The company’s marginal tax rate is 40%. Therefore, the cost of preferred stock is 24.24%.
Due to changes in regulatory requirements, the transactions costs associated with selling corporate securities increased by $1 per share. This change will cause the cost of capital to increase.

Leave a Reply

Your email address will not be published. Required fields are marked *