Corporate Finance Final 105 Questions And Answers, Exams of Nursing

Download Corporate Finance Final 105 Questions And Answers and more Exams Nursing in PDF only on Docsity! Corporate Finance Final 105 Questions And Answers. Which of these areas studies how firms decide which projects to fund, i.e., what long- term investments to make? a. International Finance b. Financial management/business finance c. Financial markets and institutions d. Investments - Correct answerB Which of the following statements are true? Check all that apply. a. C-Corporations are subject to double taxation b. A general partnership can have many owners c. LLCs eliminate all liability for owners d. Sole proprietorships have unlimited liability e. Corporations and LLCs limit the owners' liability - Correct answerA, B, E The goal of financial management is to _____. a. maximize market share b. maximize revenue c. maximize profit d. maximize shareholder value - Correct answerD The problems stemming from a conflict of interest between shareholders and executives are called _____ problems. a. Agency b. Coordination c. Incompatibility d.Opportunity - Correct answerA The common feature of brokers and dealers is that they both act as intermediaries. True or False - Correct answerFalse Business finance looks at how managers apply financial principles to maximize the value of a firm. Who benefits most when the value of the firm is maximized? a. Employees b. Management c. Customers d. Shareholders - Correct answerD Financial regulations in the United States were significantly expanded and improved beginning in the 1930s. What was the primary motivation for this regulatory reform and improvement? a. To make markets safer and increase investor confidence b. To increase unemployment c. To increase tax income for the US government d. To make investing more profitable - Correct answerA The concepts of risk and return are fundamental to finance and are seen in many applications. The relationship between risk and return is ________. a. Neutral b. Uncorrelated c. Direct and positive d. Inverse and negative - Correct answerC Corporate budgets are important because they provide what to companies? a. Financial statements to report to regulators b. A tax-planning tool c. Established financial goals for the upcoming period Tax considerations - Correct answerA What money market instrument is commonly used by high-quality corporations to raise funds over very short periods of time? a. Treasury bills b. Bankers acceptances c. Commercial paper d. Certificates of deposit - Correct answerC ________ investments tend to have ________ risk and ________ expected returns. a. Short-term; greater; smaller b. Short-term; less; greater c. Long-term; greater; greater d. Long-term; less; smaller - Correct answerA ________ is the study of the allocation of scarce resources, ________ is devoted to the study of these decisions of allocation by small or individual entities, and ________ examines decisions taken together or in the aggregate. a. Microeconomics; economics; macroeconomics b. Economics; macroeconomics; microeconomics c. Macroeconomics; microeconomics; economics d. Economics; microeconomics; macroeconomics - Correct answerD How do you calculate Gross Profit Margin? A. Net Sales (-) Cost of Goods Sold / Net Sales (x) 100 B. Net Sales (+) Cost of Goods Sold / Net Sales (x) 100 C. Net Sales (-) Operating Income / Net Sales (x) 100 D. Net Sales (-) Selling and Admin Expenses / Net Sales (x) 100 - Correct answerA How do you calculate Operating Profit Margin? - Correct answerOperating Income / Net Sales (x) 100 How do you calculate Net Profit Margin? - Correct answerNet Income / Net Sales (x) 100 How do you calculate Return on Assets? - Correct answerNet Income / (Average Total Assets) (x) 100 How do you calculate Return on Equity? - Correct answerNet Income / (Average Total Stockholders' Equity (x) 100 How do you calculate Current Ratio - Correct answerTotal Current Assets / Total Current Liabilities How do you calculate Quick Ratio? - Correct answerCash and marketable securities (+) Accounts Receivable / Total Current Liabilities How do you calculate Cash Ratio? - Correct answerCash and marketable securities / Total Current Liabilities How do you calculate the Debt to Total Assets Ratio? - Correct answerTotal Liabilities / Total Assets How do you calculate the Debt to Equity Ratio? - Correct answerTotal Liabilities / Total Stockholders' Equity How do you calculate the Times Interest Earned Ratio? - Correct answerOperating Income / Interest Expense How do you calculate the Accounts Receivable Turnover? - Correct answerNet Sales / ( Average Accounts Receivable) How do you calculate the Average Collection Period? - Correct answer(Average Accounts Receivable) / Net Sales (x) 100 How do you calculate Asset Turnover? - Correct answerNet Sales / (Average total Assets) How do you calculate Inventory Turnover? - Correct answerCost of Goods Sold / (Average Total Inventory) How do you calculate Days Sales in Inventory? - Correct answerInventory / Cost of Goods Sold What is the value of a dollar received now compared to a dollar received in the future? a. The future dollar is worth more, because of inflation. b. They have the same value. c. The current dollar is worth less, because it hasn't been invested yet. d. The current dollar is worth more, because it can be invested now. - Correct answerD The value of an investment after some time has passed is called the ________. a. Expected value b. Time value c. Future value d. Present value - Correct answerC Calculating a present value uses _________, while calculating a future value uses _________. a. division; multiplication b. discounting; compounding c. multiplication; division d. compounding; discounting - Correct answerB The interest earned on previously accumulated interest is called _______ interest. a. Growth b. Discount c. Compound d. Accumulated - Correct answerC -7.00% - Correct answerA You have $10,000 in your savings account and want to buy a car for $30,000. If you want to buy the car in 5 years, what interest rate would you need to earn? a. 22.42% b. 24.57% c. 71.88% d. 50.67% - Correct answerB You have $5,000 in your savings account, and want to buy a car for $10,000. If you are not depositing any new money into your account and the interest rate on your savings account is 7% per year, how many years do you have to wait before you can buy the car? a. 10.24 years b. 34.03 years c. 22.35 years d. 5.0 years - Correct answerA An indenture is best described as: a. a bond rating b. a prospectus c. a bond d. a contract - Correct answerD A bond rate Baa would be considered: a. Speculative b. Investment grade c. In default d. Junk - Correct answerB A bond issue with staggered maturities would best be described as: a. a serial bond issue b. a sinking fund bond issue c. a capital appreciation bond issue d. a term bond issue - Correct answerA A firm is most likely to call an outstanding bond issue when: a.Interest rates rise b. It needs to raise new funds c. Its cost of capital increases d. Interest rates fall - Correct answerD A convertible bond enables the holder to: a.Convert the coupon interest of the bond into shares of common stock. b. Convert the bond to cash on demand. c. Convert the bond into shares of common stock or another type of security. d. Convert the bond annual interest payments to semiannual payments. - Correct answerC With respect to sources of long-term funds, which is used the least? a. Preferred stock b. Self-liquidating bank loans c. Long-term bonds d. Common stock - Correct answerA Whether to lease or buy would be indicated by: a. The alternative with the greater tax benefit b. The alternative with the greater tax and depreciation benefit c. The alternative with the lower present value of cash outflows after taxes d. The alternative with the greater depreciation benefit - Correct answerC Which of the following is not true about an operating lease? a. It can usually be cancelled by the lessee b. After recent accounting rules changes, it now appears on the balance sheet. c. It does not appear on the income statement d. It has a term shorter than the useful life of the asset - Correct answerC Which of the following is a criterion for a lease to be classified a capital lease? a. Have a purchase option for the lessee at a premium price relative to market value b. A capital lease must meet all of the above criteria c. Have a lease period less than or equal to 50% of the asset's useful life d. Ownership of the asset is transferred to the lessee at the end of the lease term - Correct answerD The conversion value of a convertible bond equals: a. Stock price/conversion ratio b. c. A covenant d. A prospectus - Correct answerD Which of the following is true? a. None of the above is true. b. Controlling interest is ownership of more than 50% of the voting shares; majority interest is ownership of shares to control operations. c. Majority interest is ownership of more than 50% of the voting shares; controlling interest is ownership of the number of shares necessary to control operations. d. Controlling interest and majority interest are synonyms. - Correct answerC What is the primary market - Correct answerCompany and Buyer What is the secondary market? - Correct answerPreviously traded investments What is the Money Market? - Correct answerShort Term securities (Treasury Bills, Commercial Paper [only companies with high credit rating] What is the Capital Market? - Correct answerLonger term securities What is a LLC? - Correct answeroffers limited liability protection and pass-through taxation. What is a sole proprietorship? - Correct answerA sole proprietor is someone who owns an unincorporated business by himself or herself. What is a partnership? - Correct answerA partnership is the relationship between two or more people to do trade or business. What is a corporation? - Correct answerA corporation is a legal entity that is separate and distinct from its owners. Double Taxation! Risk and Return - Correct answerpositive relationship, higher the risk means higher the expected return should go up. Market Efficiency - Correct answeraccess to fair prices, ease, speed and cost of trading, lower costs Three types of efficiency - Correct answerweak, semi-strong, strong Weak form - Correct answerpublicly available, prices reflect past information Semi-Strong - Correct answerpast and present information, publicly available information Strong Form - Correct answerPrivate information Insider trading - Correct answertrading on information that is not released to the public Conflict of interest - Correct answerarises when a person chooses personal gain over duties to their employer, or to an organization in which they are a stakeholder, or exploits their position for personal gain in some way Agency problems - Correct answermanagers are the agent acting on the shareholder or principle, fiduciary responsibility Accounting equation - Correct answerassets = liability + equity Income statement - Correct answerperiod of time, has beginning and end, close revenue to retained earnings Balance sheet - Correct answerspecific date, one point in time, constant balance, never close accounts Cash flow - Correct answeroperation, investments, financing Liquidity - Correct answerhow fast you can turn something into cash, ability to meet short term obligations Efficiency - Correct answershort term performance, some long term, how well does a company uses assets to generate income or revenue Market - Correct answerearrings per share outstanding Solvency - Correct answercapital structure, how much rely on debt for financing, stockholders equity compared to liabilities Profitability - Correct answerability to generate profit How to measure total Risk - Correct answerUnsystematic- firm specific, or industry Systematic risk- Inflation, pandemic, measured by Beta How to measure total Risk - Correct answerStandard deviation, CAPM= Rrf + B ( Rm - Rrf ) How to measure total Risk - Correct answerBeta of the market = 1 Less than one means less risk More than one means more risk Risk adverse- avoid taking risk Time value of money - Correct answerPV- one time payment FV- one time payment N I/Y- PV or FV has to be a negative and or a positive PMT- annuity (mortgage, car payment) PV & N, I/Y have a inverse relationship FV & N, I/Y have a positive relationship Bonds - Correct answerDebt security Creditors have a higher priority Par value on bond = $1,000 represents principle Bonds - Correct answer1. Yield to maturity 2. Coupon rate - sets interest or interest side of debt payment 3. How does preferred stock resemble debt? Pay a fixed dividend, looks a lot like interest payment Cost of Capital - Correct answer1. Cost of debt and equity, cost of financing, raising money for projects 2. Required rate of return from a investor point of view Cost of Capital - Correct answer1. After Taxrd = Before Taxrd X ( 1 - Tax Rate ) 2. Cost of preferred stock= Rp= Dp/Pp- F all in per share Cost of Capital - Correct answer1. Re= D1/ P0-F + Growth rate 2. Can find D1 by D0 x ( 1+ growth rate )