1.Ellison corporation acquires redstone corporation because redston has unused production facilities that Ellison needs. This is an example of

a.diversification

b. vertical integration

c. Horizontal integration

d. None of the above

2. Synergy may result from which of the following?

a. Enhanced cash flow

b. Diversification

c. Excess cash

d. All of the above

3.Which of the following is not a qualitative factor?

a. Product users

b. Industry maturity

c. Sales of growth

d. Barriers to entry

e. None of the above

4.Present value calculations

a. Can help the creation of value

b. Can provide managers with a means of identifying the best investment choices.

c. Do not help in the creation of value

d. A and b

e. B and c

5. Which of the following ratios makes firm comparisons difficult?

1. EPS

2. Payout

3. Return on assets

4. ROE

5. None of the above

6. Breakeven EBIT analysis leads to

a. Issuance of debt

b. Issuance of stock

c. Both a and b

d. Either a or b

e. None of the above

7. If the bonds coupon rate is greater than the general interest rates in the market, the bond will set at a

A. premium

b. discount

c. neither a nor b

8. As the interest rate used to discount future cash flows is decreased, present value of the future inflows

a. Increases

b. Decreases

c. Stays the same

9. The ______________ matches revenues with expenses for the entire accounting period

a. Balance sheet

b. Cash flow statement

c. Statement of retained earnings

d. Income statement

e. None of the above

10. What performing sensitivity analysis

a. Statistical methods should not be employed

b. Electronic spreadsheets make the job more manageable

c. Assumptions should be changed one at a time

d. All of the above

e. B and c

11.Jones is saving for a new outboard motor. He needs to have 10,000 4 years from now. How much must he set aside not have 10,000, 4 years from now if money compounds at 12% annually.

a.$6310

b. $6355

c. $6332

d. $6106

e. None of the above

12.A firms dividend policy impacts the firms ability to finance through

a. Retained earnings

b.Stock issue

c. Long term debt

d. None of the above

13. Synergy between two companies

a. Is the complimentary situation where value is created in the joining o the firms

b. May result in the improvement of the acquirers bottom line

c. Could be defined by purely qualitative benefits

d. A and c

e. B and c

15. The percentage of net income that a company distribution in dividends is referred to as the

a. EPS

b. Payout ratio

c. ROA

d. ROE

e. None of the above

16. The statement that shows investment is the firms and the distributions to owners is the

a. Income statement

b. Balance sheet

c. Statement of retained earnings

d. None of the above

17. Which of the following methods results in a net present value of zero?

a. IRR

b. Payback

c. Discounted payback

d. None of the above

18. Ivy company acquires Reynolds company. Reynolds is in a totally unrelated business to Ivy. This is an example of

a. Vertical integration

b. Horizontal integration

c. Diversification

d. None of the above

19. Which of the following limits a firms ability to raise equity through retained earnings?

a. Set divided policy

b. Low p/e

c. High p/e

d. None of the above

20. Testing the validity of your calculations by subjecting them to change is known as

a. Qualitative testing

b. Horizontal analysis

c. Vertical analysis

d. Sensitivity analysis

e. None of the above

21. Gadsen acquires digital corporation which is upstream in the marketing chain. This is an example of

a. Diversification

b. Vertical integration

c. Horizontal integration

d. None of the above

22. Which of the following methods help to size the investment?

a. Payback

b. Present value payback

c. Present value index

d. IRR

e. None of the above

22. Aspect company acquires Penn company which is downstream in the production chain. This is an example of

a. Diversification

b. Vertical integration

c. Hortizontal integration

d. None of the above

23.The efficient market theory means to be reasonable because

a.There are fewer financial analysts valuing securities

b.There are hundreds of investors trying to make money from improperly valued securities, and the market forces which result in driving stock prices to fair value.

c. A and b

d. None of the above

24. Economic value is the same as

a. Book value/ net asset value

b. Owners equity

c. None of the above

25.When projected assets are more than projected liabilities and owners equity the plug will be

a. Notes payable

b. Notes receivable

c. Cash

d. None of the above

26. In a new issue, the ____ are those funds that remain after the neccessry fees have been deducted

a.Working capital

b.Free cash flow

c.Net proceeds

d.None of the above

27.A discount factor

a.Is the same as compounding future cash flows

b.Performs the reverse function of a compounding interest rate

c.Allows investors to quantify a figure which will assist them in comparing alternative investments

d.B and c

e.A, b, and c

28.Which of the following ratios is not a liquidity ratio?

a.ROE

b.Current

c.Quick

d.Receivable turnover

e.None of the above

29.Adrian Ardeel is saving for a new guitar. How much must Adrian set aside now to receive $4000, 7 years from now using a compound interest rate of 7% annually.

a.$2400

b.$2491

c.$2411

d.$2500

e.None of the above

30.The bonds yield to maturity calculation is similar to a ______ calculation

a.NPV

b.IRR

c.Payback

d.Discounted payback

e.None of the above

31.Eric sets aside $100. If this money compounds at a 5%annual rate how much will Eric have 6 years from now?

a.$110

b.$121

c.$134

d.$138

e.None of the above

32.Which of the following methods does not consider the time value of money?

a.IRR

b.NPV

c.Payback

d.None of the above

33.Assessing key ratios of the company is an example of

a.Qualitative analysis

b.Quantitative analysis

c.Price level effect

d.Fixed cost

e.None of the above

34.The ratio which may observers use to quantify the stock markets opinion of a firm is the

a.ROE

b.EPS

c.D/E

d.P/E

e.None of the above

35.A bond which is valued at par has a yield to maturity which is _____ to its coupon rate

a.Equal to

b.Greater than

c.Less than

d.None of the above

36.Many coverage ratios include

a.Sinking fund obligations

b.Dividends

c.Both a and b

d.None of the above

37.The cost of capital can be defined as

a.The weighted average cost of attracting investors to the firm

b.The price of obtaining funding for the firm weighed according to target ratios in the capital structure

c.Less than the weighted average that investors in the firm require

d.A and b

e.A, b, and c

38.Most bonds pay interest

a.Monthly

b.Quarterly

c.Semiannually

d.Annually

e.None of the above

39.The quantitative method that often serves as an indicator of a firms ability to meet contractual obligations is

a.Receivables turnover

b.Inventory turnover

c.ROE

d.Coverage ratio

e.None of the above

40. Which of the following would be included among the investment numbers of a capital budget?

a. purchase price of the asset

b. trade in value of and asset being replaced

c. investment tax credit from acquisition

d. all of the above

41. Projected sales growth assumes

a. adequate asset base

b. decrease in property, plant, and equipment

c. drecrease in accoubt receivable

d. decrease in inventory

e. none of the above

41. Earl Jason is saving for a pair of Jet skis. How much money must Earl put aside now to receive $14,000 six years from now if the money is compounding at an 8% annual compound rate?

a. $8846

b.$8800

c.$8822

d.$8810

e.none of the above

42.When projected assets are less than projected liabilities and equity, the firm will have

a.needed for debt

b. need for equity

c. excess cash

d. none of the above

43. A differential analysis

a. can be used to compare an alternative to the status quo

b. can be used to compare any set of alternatives

c. is easier to comprehend if a consistent frame of reference is employed

d. B and C

e. A, B, C

44. If the bonds coupon rate is equal to the general rates in the market, the bond will sell at a

a. premium

b. discount

c. neither a nor b

45. Typically, the minimum value the target firm is willing to accept is the

a. liquidation value

b. book value

c. earnings valuation

d. none of the above

46. Sales less cost of goods sold yields

a. operating income

b. EBIT

c. gross margin

d. none of the above

47. flexibility issues are those which

a. deal with a companys financing reserves

b. impact the debt capacity that a firm should maintain

c. all of the above

48.The DuPont formula combines three ratios in yield

a. debt to equity

b. ROA

C. ROE

D. Debt to assets

e. none of the above

49. NPV is the preferred method for ranking investments because

a. it does not consider the time value of money

b. it measures the creation of value

c. it is sensitive to change in the hurdle rate assumption

d. A and B

e. B and C

50. If Carla Rice puts $200 in the bank for nine years and the money compounds at 7% annually how much will Carla have at the end of the nine years?

a. $362

b.$368

c.$374

d.$381

e. none of the above