finance final exam

Considered alone, which of the following would increase a company’s current ratio?1. an increase in net fixed assets2. an increase in accrued liabilities3. an increase in notes payable4. an increase in accounts receivable5. an increase in accounts payable 4. an increase in accounts receivable
____________ _______________ are designed to protect bondholders and to reduce potential conflicts between stockholders and bondholders bond covenants
the ______________________ shows how much the firm’s cash, total of currency, bank deposits, and short term liquid securities (or cash equivalents) increased or decreased during a year statement of cash flows
If the stock price at the end of last year was 33.50 and the book value per share was 25.00 what was the market/book ratio? 1.34
other things held constant, which of the following actions would increase the amount of cash on a company balance sheet?a. company repurchases common stockb. company pays dividendc. company issues new common stockd. company gives customers more time to pay their bills c. company issues new common stock
which of the following would indicate an improvement in a company’s financial position holding other things constant?a. TIE declinesb. DSO increasesc. quick ratio increasesd. current ratio declinese. total assets turnover decreases c. quick ratio increases
If a company pays more in dividends than it generates in net income, its retained earnings as reported on the balance sheet will ____________ from the previous years balance decline
A company issues 300 mil. of new common stock and use the proceeds to pay off some ofits outstanding bonds that carry a 7% interest rate. Assume that the company, which does not pay any dividends, takes this action, and that the total assets, operating income (EBIT), and its tax rate all remain constant. Which of the following would occur?a. taxable income fallsb. company’s interest expense would not changec. company would have less common equity than befored. company’s net income would increase c. company would have less common equity than before
One of the advantages to forming a corporation is that the owners of the firm have _____________________ limited liability
A key conclusion of the CAPM is that the value of an asset should be measured by considering both the risk and the expected return of the asset, assuming that the asset is held in a well-diversified portfolio. The risk of the asset held in isolation is not relevant under the CAPMa. trueb. false a. true
the y axis of the SML represents the required return of a portfolio with a beta of zero, which is the risk free rate.a. trueb. false a. true
Diversification will normally reduce the riskiness of a portfolio of stocks.a. trueb. false a. true
the corporate valuation model cannot be used unless a company pays dividends.a. trueb. false b. false
according to CAPM investors are concerned with portfolio risks, not the risks of individual stocks held in isolation. thus the relevant risk of a stock is the stock’s contribution to the riskiness of a well diversified portfolio. a. trueb. false a. true
if investors become less averse to risk, the slope of the SML will increase a. trueb. fasle false
the coefficient of variation, calculated as the standard deviation of expected returns divided by the expected return standardized measure of the risk per unit of expected return.a. trueb. false a. true
because of differences in the expected returns on different investments, the standard deviation is an adequate measure of risk. however, the coefficient of variation adjusts for differences in expected returns and thus investors to make better comparisons of investments stand alone riska. trueb. false a. true
risk aversion implies that investors require higher expected returns on riskier than on less risky securities. true false true
if in the opinion of a given investor a stock’s expected return exceeds its required return, this suggests that the investor thinks a. stock experiencing supernormal growthb. stock should be soldc. stock is a good buyd. mgt is not trying to maximize the price per share c. stock is a good buy
a stocks beta measures its diversifiable risk relative to the diversifiable risk of other firmsa trueb. false false
assume that investors have recently become more risk averse, so the market risk premium has increased. also, assume the risk free rate and expected inflation have not changed. which of the following is most likely to occur:a. required rate of return for an average stock will increase by an amount equal to the increase in the market risk premiumb. the required rate of return will decline for stocks whos betas are less than 1.0 c. the required rate of return on the market, rm, will not change as a result ofthese changesd. the required rate of return on a riskless bond will decline a. the required rate of return for an average stock will increase by an amount equal to the increase in the market risk premium
Adding more randomly selected stocks will ______________ the portfolio’s unsystematic, or diversifiable, risk Reduce
inflation, recession, and high interest rates are economic events that are best characterized as beinga. systematic risk factors that that can be diversified awayb. company specific risk factors that can be diversified awayc. among the factors that are responsible for market riskd. risks that are beyond the control of investors and thus should not be considered by security analysts or porfolio managers c. among the risk factors that are responsible for market risk
the risk of a stock held in a portfolio is typically ____________ than the stocks risk when it is held alone lower
which is correct:a. the yield on a 2 year corp bond should always exceed the yield on a 2 year treasury bondb. the yield on 3 year corp bond should always exceed yield on 2 year corp bondc. if inflation increases, then yield on a 2 year bond should exceed that of a 3 year bond a. yield on 2 year corporate bond should always exceed the yeild on a 2 year treasury bond
longer treasury securities= _________ yield than shorter treasury securities bigger

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