1. Which one of the following is a capital budgeting decision? A. determining how many shares of stock to issue B-deciding whether or not to purchase oil for the production line C. deciding how to refinance a debt issue that is maturing D. determining how much inventory to keep on hand E. None of the above 2. Which one of the following is the financial statement that shows the accounting value ofa firm's equity as of a particular date? balen A. income statement B. creditor's statement C. dividend statement D. statement of cash flows E none of the above 3. The higher the degree of financial leverage employed by a firm, the: A. higher the probability that the firm will be profitable. B. lower the amount of debt incurred. C. less debt a firm has per dollar of total assets. D. higher the number of outstanding shares of stock. E none of the above 4. Which one of the following is most liquid? A. inventory B. building &accounts receivable D equipmernt s. To determine if a company is earning an adequate rate of return for its owners the most important ratio is: A. Profit margin B. Return on assets C. Equity multiplier D. Total asset turnover None of the above 6. For a Taxpaying company as depreciation increases: LA Cash flow increase B. Cash flow decreases Cash flow is unaffected D. There is not enough information. E. None of the above Projects A and B are mutually exclusive. Project A has an NPV of 300 dollars and an IRR of 20% Project B has an NPV of 100 dollars and an IRR of 38% A Accept A B. Accept B C. Accept both project D. Accept neither project E. None of the above 7. Bond A and Bond B have the same coupons. Bond A has 3 years to maturity and Bond B has 20 years to maturity. If the required rate on all bond decreases by 1%; A. Bond A will have a greater rise in value than Bond B 8. Bond B will have a greater rise in value than Bond A C. Bond A will have a greater decrease than Bond B D. Bond B will have a greater decrease in value than Bond A E. None of the above You have a 9% internal growth rate. You expect sales to grow by 12%. A typical firm will have A. Negative roe 9. , A shortage of funds C. A surplus of funds D. Zero external funds needed E. None of the above 10. The internal growth rate of a firm is best described as the: A. minimum growth rate achievable assuming a 100 percent retention ratio. Bmaximum growth rate achievable excluding extermal financing of any kind. C. maximum growth rate achievable excluding any external equity financing while maintaining a constant debt-equity ratio. D, maximum growth rate achievable with unlimited debt financing. E. None of the above
