FIN 571 multiple choice questions use it as a guide only (3)
FIN 571 multiple choice questions use it as a guide only (3)
Popular in Course
verified elite notetaker
Popular in Department
This page Study Guide was uploaded by expert Notetaker on Wednesday November 18, 2015. The Study Guide belongs to a course at a university taught by a professor in Fall. Since its upload, it has received 21 views.
Reviews for FIN 571 multiple choice questions use it as a guide only (3)
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 11/18/15
1 Occurs when a quotfollowerquot receives the bene t of an expenditure made by a quotleaderquot by imitating the leader39s behavior B The Principle of Comparative Advantage C asymmetric information Dputop on 2 Occurs when inaccurate information can falsely exist A moral hazard B The Principle of Valuable ldeas C freerider problem 3 Refers to situations wherein the agent can take unseen actions for personal bene t even though such actions are costly to the principal A adverse selection C zerosum game D The Behavioral Principle 4 The annual report refers to A a report issued annually by managers to primarily convey information about select working capital ratios B the length of time remaining until an asset39s maturity D the extent to which something can be sold for cash quickly and easily without loss of value 5 Remaining maturity refers to A the length of an asset39s life when it is issued B a technical accounting term that encompasses the conventions rules and procedures necessary to de ne accepted accounting practice at a particular time C a report issued annually by a rm that includes at a minimum an income statement a balance sheet a statement of cash ows and accompanying notes 6 Generally accepted accounting principles GAAP refers to A the length of an asset39s life when it is issued C a report issued annually by a rm that includes at a minimum an income statement a balance sheet a statement of cash ows and accompanying notes D the extent to which something can be sold for cash quickly and easily without loss of value 7 Original maturity refers to B a technical accounting term that encompasses the conventions rules and procedures necessary to de ne accepted accounting practice at a particular time C the price for which something could be bought or sold in a reasonable length of time where quotreasonable length of timequot is de ned in terms of the item39s liquidity D the net amount net book value for something shown in quarterly accounting statements 8 The rm39s assets in the balance sheet refer to A the extent to which something can be sold for cash quickly and easily without loss of value B the statement of a rm39s nancial position at one point in time including its assets and the claims on those assets by creditors liabilities and owners stockholders39 equity 9 Book value or Net book value refers to A the length of an asset39s life when it is issued B the statement of a rm39s nancial position at one point in time including its assets and the claims on those assets by creditors liabilities and owners stockholders39 equity C the price for which something could be bought or sold in a reasonable length of time where quotreasonable length of timequot is de ned in terms of the item39s liquidity 10 The return expected by equity investors is called the B dividend yield C average cost of capital D none of these 11 Assume that the par value of a bond is 1000 Consider a bond where the coupon rate is 9 and the current yield is 10 Which of the following statements is true A The market value of the bond is more than 1000 B The current yield was a lot less than 9 when the bond was rst issued C The current yield was a lot greater than 9 when the bond was rst issued 12 Preferred stock payment obligations are typically B issued with a maturity date C valued as an annuity D none of these 13 Certain countries have restrictions In practice US investors have NOT invested very much internationally Possible factors include A lower transaction costs B less political risk D all of these 14 Certain countries have restrictions In practice US investors have NOT invested very much internationally Possible factors include A nonlisting of foreign securities on US stock exchanges C ef ciency in converting currencies D all of these 15 For diversi ed investors the proper measure of a stock39s risk is A its nonsystematic risk C its speci c risk D its standard deviation 16 One problem with using negative values for w1 the proportion invested in the riskless asset to represent a borrowed amount is that the implied borrowing rate of interest is the same as B the prime rate of interest C the current rate of interest D the nominal rate of interest 17 Which of these investments would you expect to have the highest rate of return for the next 20 years A intermediateterm US government bonds B US Treasury bills D anybody s guess 18 According to the Principle of RiskReturn TradeOff investors require a higher return to compensate for A less risk B lack of diversi cation C diversi cation 19 Suppose the Ruskin Oil Corporation has 150000 for both its book balance and its bank balance It takes 4 days for a check to clear If Ruskin writes a 3000 check which of the following statements is false A Ruskin s available balance is 150000 its book balance is 147000 and its disbursement oat is 3000 B If Ruskin writes a 3000 check that takes 4 days to clear during this period 3000 of disbursement oat has been created C Ruskin s book balance declines by the amount of the check from 150000 to 147000 but the bank balance is unchanged until the check clears 20 Stony Products has a payables turnover of six times What is Stony39s payables deferral period PDP A about 3042 days B about 5650 days D none of these The payables deferral period is the average length of time between the purchase of the materials and labor that go into inventory and the payment of cash for these materials and 365 days labor We have PDP PTO turnover and is equal to 31 51 where CS is cost of sales SGA is selling general and administrative expenses AP is account payables and WBT is wages bene ts and payroll taxes payable We have PDP 365 days 365 days PTO 6 6083333 days 6083 days where PTO is the payables 21 Stony Products has a receivables turnover of ten times What is Stony s receivables collection period RCP A about 3542 days C about 4083 days D none of these The receivables collection period RCP or days39 sales outstanding D50 is the average number of days that it takes to collect on accounts receivable We have RCP 365 days salj RTO where RTO is the receivables turnover and IS equal to AR where AR is account receivables We have RCP 36 gys 365133318 365 days 22 says to calculate the incremental aftertax cash ows connected with working capital decisions A The Principle of Time Value of Money B The Signaling Principle D The Options Principle 23 says to compare the bene ts and costs of alternative uses and sources of money using aftertax APYs A The Principle of Incremental Bene ts C The Signaling Principle D The Options Principle 24 Bank term loans represent A longterm loans that looks like shortterm debt C the pledge of receivables D all of these 25 Which if any of the below statements is false B A customer who is likely to make late payments is also more likely to default and to require extra collection efforts C Credit bureau reports give information about any legal judgments against the rm D none of these 26 Creditpolicy decisions involve all aspects of receivables management The decision does NOT include which of the following B setting evaluation methods and credit standards C the choice of credit terms D controlling and administering the rm s credit functions 27 Most credit sales are made on an open account basis which means B that customers simply purchase what they want C that suppliers dictate the terms of the purchase D that suppliers cannot dictate the terms of the purchase 28 An allequity nanced rm would A not pay corporate income taxes because it would have no interest expense B not pay any income taxes because interest would exactly offset its taxable income C pay corporate income taxes because it would have interest expense 29 A pro table rm would A pay corporate income taxes because it would have interest expense B pay corporate income taxes because it would not have interest expense D none of these 30 Whenever a rm splits itself into separate units with each unit having limited liability with respect to its nancing the capital structure of each unit becomes A an irrelevant consideration for a cost of capital C important only if the rm faces nancial distress D none of these 31 There are two important tax considerations for a capital budgeting project These include which if any of the following A It is indeed cash ow that s irrelevant B The standard cash ow estimation does not explicitly identify the nancing costs C The Principle of Incremental Bene ts reminds us that it is the incremental cash ow that s relevant 32 Projects can be classi ed into various categories These include A maintenance expenditures projects that involve replacing wornout or damaged equipment B cost savings and revenue enhancement projects that include improvements in production technology to realize cost savings and marketing campaigns to achieve revenue enhancement C capacity expansion projects that involve expanding the current business by adding new equipment and facilities 33 Ideas for capital budgeting projects come from all levels within an organization The bottom up process results in ideas percolating through the organization A sideways B downward D any way 34 In practice the rule is preferred B NPV C Pl DPayback 35 Whenever projects are both independent and conventional then the IRR and NPV methods agree Which of the following statements is true A A mutually exclusive project is one that can be chosen independently of other projects B When undertaking one project prevents investing in another project and vice versa the projects are said to have a positive payback D all of these 36 The method breaks down when evaluating projects in which the sign of the cash ow changes B NPV C Pl DPayback 37 Studies show systematic differences in capital structures across industries These are due mostly to differences in A hiring and ring practices C what the arbitrage pricing theory tells us D none of these 38 A rm cannot simply adopt the industry average debt ratio because differences exist among rms in any particular industry with respectto A tax position B size C competitive position 39 Studies show systematic differences in capital structures across industries These are due mostly to differences in B the firm s inventory turnover ratio C accounting practices D management s attitude toward what other industries are doing 40 Which of the following favors a high dividend payout policy A no legal restrictions C higher taxes D all of these 41 There can be a variety of motives for stock repurchases including A a decrease in anticipated earnings C a decrease in leverage D all of these 42 Some countries have in which shareholders39 returns are not fully taxed twice B a split tax system C a twotier tax system D none of these 43 Conditional sales contracts A are seldom issued to nance the purchase of aircraft C enable the borrower to obtain title to the assets only before it fully repays the debt D all of these 44 The Time Value of Money Principle says A to set a price and other terms that investors will nd acceptable when issuing securities C to look for the most advantageous ways to nance the rm such as the lowestcost debt alternative D that announcing the rm39s decision to issue securities conveys information about the rm 45 Stated maturity is A usually a xed rate but it can be a variable rate that s adjusted according to a speci ed formula B the amount the borrower must repay 46 The Time Value of Money Principle says to A recognize that the cancellation option in a lease is valuable to the lessee C look for pro table opportunities to lease or rent an asset rather than borrow and buy it D look for pro table opportunities to arrange project nancing or limit partnership nancing for an asset you wish to purchase 47 says to calculate the net advantage of leasing based on the incremental aftertax bene ts that leasing will provide A The Principle of Comparative Advantage C The Options Principle D The Capital Market Ef ciency 48 says to look for opportunities to develop assetbased nancing arrangements that offer new positiveNPV nancing mechanisms A The Principle of SelfInterested Behavior B The Principle of Comparative Advantage D The Time Value of Money Principle 49 The wholesale price for Captain John s is 100 per loaf and the variable cost of production is 050 per loaf Captain John s is expecting that expansion will allow them to sell an additional 50 million loaves in the next year What additional revenues minus expenses will be generated from expansion A 25000 B 250000 C 550000 Contribution margin wholesale price variable cost 100 050 050 per loaf The additional 5 million loaves would therefore generate an increase of 050 per loaf times 5 million loaves 2500000 in revenues minus expenses each yean 50 The wholesale price for Captain John s is 300 per loaf One million loaves will be sold in the next year What is the contribution margin A 3000000 C 3000000 minus xed costs D 300 We need the variable cost to determine the contribution margin which is equal to the wholesale price minus the variable cost thus we cannot tell 51 The wholesale price for Captain John s is 0612 per loaf and the variable cost of production is 0387 per loaf Captain John s is expecting that expansion will allow them to sell an additional 45 million loaves in the next ve years What additional revenues minus expenses will be generated from expansion B 1102000 C 1000500 D 912500 Contribution margin wholesale price variable cost 0612 0387 0225 per loaf The additional 45 million loaves would therefore generate an increase of 0225 per loaf times 45 million loaves 1012500 in revenues minus expenses each year 52 In ef cient markets as in the United States you should think long and hard before you conclude that a market price is B fair C followed by many analysts D all of these 53 Due to asymmetric information the market fears that a rm issuing securities will do so when the stock is A caught up in a bear market B being sold by insiders D undervalued 54 Which of the following statements is true A Soft capital rationing refers to the rationing imposed externally by limited funds for borrowing from outside sources B Hard capital rationing refers to the rationing imposed internally by the rm D all of these 55 says to forecast the rm s cash ows and analyze the incremental cash ows of alternative decisions B The Principle of RiskReturn TradeOff C The Time Value of Money Principle D The Signaling Principle 56 says to carefully evaluate and monitor the nancial plan s impact on the rm and its stakeholders A The Principle of Capital Market Ef ciency C The Principle of Diversi cation D The Principle of RiskReturn TradeOff 57 says to use common industry practices as a good starting place for the planning process A The Principle of SelfInterested Behavior B The Principle of Valuable ldeas D The Principle of Incremental Bene ts
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'