Personal and Corporate Finance: Goals, Investments, Ratios, and Budgeting, Exams of Nursing

Download Personal and Corporate Finance: Goals, Investments, Ratios, and Budgeting and more Exams Nursing in PDF only on Docsity! D076 OA Questions-with 100% verified solutions 2024- 2025 Tutor verified What are the main services offered by financial institutions? A. Soliciting charitable donations and then managing the distribution of these funds B. Accepting a wide variety of deposits, offering investment products, providing loans, and brokering financial transactions C. Deciding which assets to invest in to create wealth in the future D. Evaluating sources of funding for a business project, the capital structure of a firm, or actions managers could take to increase the value of the firm B. Accepting a wide variety of deposits, offering investment products, providing loans, and brokering financial transactions What is the main objective of personal financial goals? A. To maximize stock investments B. To maximize individual utility C. To maximize charity donations D. To maximize owner wealth B. To maximize individual utility Which task does the financial manager of a firm perform that involves the issuance of new stocks and bonds? A. Making financing decisions B. Managing working capital C. Deciding on accounting standards D. Making investing decisions A. Making financing decisions Why is understanding the definition of finance important in managing personal finances? A. It helps individuals compare the costs and benefits of an action to determine whether to take that action. B. It helps individuals act ethically with regard to finances. C.It helps individuals understand legal issues related to finance. D. It allows individuals to find an investment with the highest return possible. A. It helps individuals compare the costs and benefits of an action to determine whether to take that action. In which type of market would a company issue bonds or stocks for the first time? Dealer market Primary market Secondary market Money market Primary market Which type of financial institution is a mutual fund? Contractual institution Depository institution Investment institution Federal institution Investment institution Which financial institution specializes in managing and administering retirement funds? Investment banks Mutual funds Pension funds Private equity Holding period return Beta Standard deviation Standard deviation What is the term for the risk that changes in interest rates will impact the value of a bond? Default risk Systematic risk Interest rate risk Firm-specific risk Interest rate risk Which method of ratio analysis looks at a firm's performance over time? Trend analysis Progress measurement Cross-sectional analysis Focus Trend analysis You are a financial analyst of an investment bank, and you are doing research on equity. You are looking at a book publisher's financial ratios in comparison to its competitors and the industry average. What is this an example of? Trend analysis Cross-sectional analysis Progress measurement Performance evaluation Cross-sectional analysis Which type of ratio are suppliers interested in? Market ratios Profitability ratios Financing ratios Liquidity ratios Liquidity ratios What is the ratio that tells you on average how long it takes for a firm to collect accounts receivable? Inventory turnover Average collection period Accounts receivable turnover Fixed asset turnover Average collection period What does a debt ratio of 40% indicate? It indicates that 40% of total debt is long-term liabilities. It indicates that 40% of assets are financed by equity. It indicates that 40% of assets are financed by debt. It indicates that 40% of fixed assets are financed by debt. It indicates that 40% of assets are financed by debt. What is operating margin useful for? Understanding production cost efficiency Identifying how efficiently firms are using their assets to generate sales Assessing whether a firm can meet short-term obligations without raising external capital Comparing the profitability of firms with different capital structures Comparing the profitability of firms with different capital structures What does an average collection period of 70 tell you? On average, a firm takes 70 days to pay accounts payable. On average, a firm turns over its accounts receivable 70 times a year. On average, a firm takes 70 days to collect accounts receivable. On average, a firm takes 70 days to turn over its inventory. On average, a firm takes 70 days to collect accounts receivable. What does high inventory turnover relative to the industry and competitors indicate? The firm has mastered its asset use efficiency to generate sales. The firm does not have the ability to meet short-term obligations. The firm does not hold enough inventory and is making its customers wait longer to receive their purchased goods. The firm's production and operation costs are too high. The firm does not hold enough inventory and is making its customers wait longer to receive their purchased goods. What is the difference between return on assets (ROA) and return on equity (ROE)? ROE considers the capital structure of a company, while ROA does not. ROA considers the liquidity of a company, while ROE does not. ROE considers the profitability of a firm, while ROA does not. ROA considers asset use efficiency, while ROE does not. ROE considers the capital structure of a company, while ROA does not. MiniCo recently spun off of BigCo. Both companies have the same leverage and asset turnover ratios, but MiniCo is underperforming on its return on equity to shareholders. If MiniCo would like to improve its return on equity, which action would help? Reduce asset efficiency by idling some of its operating plants. Pay off a significant portion of its debt. Perform market-to-book analysis to determine if the trading value of its equity is undervalued. Spontaneous accounts Non-spontaneous accounts Non-spontaneous accounts Which account is a discretionary account? Fixed assets Accounts receivable Notes payable Cash Notes payable What is the rate at which a firm can grow without issuing new equity? Discount rate Internal rate of return Sustainable growth rate Retention rate Sustainable growth rate Why do fixed assets increase as a lump sum instead of in proportion to sales growth? A firm needs more fixed assets only when the DFN is negative. A firm purchases fixed assets in proportion to sales. A firm will outsource production until it can use an entire production facility. A firm must purchase an entire fixed asset rather than just the portion needed to increase production. A firm must purchase an entire fixed asset rather than just the portion needed to increase production. What would an analyst predict for a potential investment with an NPV of zero? The project would add value to the firm. The project would earn exactly the rate of return required by the firm. The project would take away value from the firm, but only a small amount. The profitability index would also be equal to zero. The project would earn exactly the rate of return required by the firm. A financial analyst for the company Bobby's Books has been asked to evaluate a potential investment using a method that considers the time value of money. Is there more than one way to do this? Yes, the analyst could use both the NPV and the IRR. Yes, the analyst could use the current ratio and could compare cost of capital rates. No, there are no valuation methods that take into account the time value of money. No, the analyst could only use cash budgeting to evaluate the project. Yes, the analyst could use both the NPV and the IRR. If two projects are mutually exclusive, which decision-making criterion will help you make the best decision about which project to accept? Initial outlay (IO) Internal rate of return (IRR) Profitability index (PI) Net present value (NPV) Net present value (NPV) Why might a firm prefer to raise debt capital through bonds instead of stocks? Bonds have no expiration date. Bonds do not require a firm to give up any ownership. Bonds take advantage of upside potential. Bonds do not require the firm to pay back its loan. Bonds do not require a firm to give up any ownership. 0 / 1 Why is it appropriate to calculate the value of a bond in the same way that the present value of an annuity is calculated? Bonds pay a coupon every six months, pay a constant coupon amount, and have a maturity date. The cash flows that come from owning a bond grow at a constant rate every year, and the payments continue forever. Even though bonds have a fixed length, the cash flows differ each year. A bond is a fixed amount paid each period forever to compensate investors. Bonds pay a coupon every six months, pay a constant coupon amount, and have a maturity date. Why is it important to consider the cost of capital in an ideal evaluation method of capital investment? Because cash flows for a project may be uncertain Because it cannot be determined how a potential project enhances the firm's value without considering every cash flow of the project Because if you can receive money earlier, you can reinvest the cash into different projects earlier Because the value of a cash flow today is different from the value of a cash flow of the same amount of in 10 years Because cash flows for a project may be uncertain What must be determined in order to compare the values of two projects with differently timed cash flows that does not need to be determined for projects with similarly timed cash flows? Positive cash inflows and negative cash outflows Future value of the benefits and future value of the costs Opportunity cost Present value of the benefits Opportunity cost What is the disadvantage of debt financing? Debt financing creates a tax shield disadvantage. Why is it appropriate to calculate the value of a preferred stock in the same way that you would find the present value of a perpetuity? Preferred stocks pay a coupon every six months, the coupon amount is constant, and the stock has a maturity date. For a preferred stock, a fixed amount is paid forever to compensate the investors. Even though a preferred stock has a fixed length, the cash flows differ each year. The cash flows that come from owning a preferred stock grow at a constant rate every year and continue forever. Preferred stocks pay a coupon every six months, the coupon amount is constant, and the stock has a maturity date. Why is it important to consider the time value of money in an ideal evaluation method for capital investment? Because a project's cash flows may be uncertain Because without considering every cash flow of a potential project, you do not know how the project would enhance the firm's value Because the value of a cash flow today is different from the value of a cash flow of the same dollar amount in 10 years Because each project has different amount of risk Because the value of a cash flow today is different from the value of a cash flow of the same dollar amount in 10 years Which scenario correctly describes opportunity cost? Donatello has a side business making sculptures in addition to his regular job. If he spends more time on his side business, the opportunity cost is the money he makes from selling his sculptures. Caroline makes $25 an hour. Instead of working one night, she goes to a concert that costs $50 and lasts two hours. The opportunity cost of the concert is $50. Alexandra decides to spend $50 on some new clothes instead of using that money to pay her electric bill. The opportunity cost is having the electricity turned off. Buster buys a pizza and with the same amount of money he could have used to buy a hamburger and fries. There is no opportunity cost because they cost the same. Alexandra decides to spend $50 on some new clothes instead of using that money to pay her electric bill. The opportunity cost is having the electricity turned off. How does management choose between two projects that are seemingly the same? Management can analyze the effect each project will have on the firm's overall capital structure. As stated in the reinvestment assumption, there cannot be two projects that are the same. Management can analyze the different inherent risks that change the cost of capital to the firm. If two projects are seemingly the same, it does not matter what choice management makes. Management can analyze the different inherent risks that change the cost of capital to the firm. Which term describes the reduction in sales of a company's own products due to the introduction of another similar product? Interest cost Cost of cannibalization Opportunity cost Sunk costs Cost of cannibalization Which item is considered a sunk cost? The shipping cost of a new machine for a project The price of selling old equipment that will be replaced by new equipment The required training in order to operate new equipment The consulting cost spent three months prior to the start of a project The consulting cost spent three months prior to the start of a project