Firms hold cash for various reasons, including a __________ in order to conduct normal business.

speculative motive

transaction motive

precautionary motive

compensating balance

Question 2

Firms hold cash for various reasons, including a __________ in order to meet liquidity needs.

compensating balance

speculative motive

transaction motive

precautionary motive

Question 3

Firms hold cash for various reasons, including a __________ in order to take advantage of unanticipated business opportunities.

transaction motive

speculative motive

compensating balance

precautionary motive

Question 4

Firms hold cash for various reasons, including maintenance of a __________ in order to comply with bank loans that require a minimum cash balance.

transaction motive

compensating balance

precautionary motive

speculative motive

Question 5

A __________ raises the effective interest rate on loan.

precautionary motive

transaction motive

compensating balance

speculative motive

Question 6

__________ are short-term investments in highly liquid, low-risk securities such as U.S. Treasury bills.

Marketable securities

Prepaid expenses

Bonds

Stocks

Question 7

There is no universal optimization model to determine credit policy for all firms since each firm has unique operating characteristics that affect its credit policy concerning __________.

accounts payable

accounts receivables

prepaid expenses

none of the options

Question 8

__________ is an asset pledged as security for repayment of a loan, to be forfeited in the event of a default.

Marketable securities

Collateral

Prepaid expenses

none of the options

Question 9

Supervising the collection of accounts receivable requires close monitoring of __________.

average collection period

economic order quantity

average daily sales

none of the options

Question 10

Warehousing costs would be an example of __________ are all costs.

ordering costs

none of the options

carrying costs

holding costs

Question 11

__________ are costs of placing orders for new inventory and the costs of shipping and receiving new inventory.

none of the options

Carrying costs

Holding costs

Ordering costs

Question 12

The optimal level of average inventory to minimize the total cost of maintaining inventory is determined by utilizing the __________.

Equilibrium Order Quantity Model

Equilibrium Production Quantity Model

Economic Production Quantity Model

Economic Order Quantity Model

Question 13

__________ is a form of free financing in the sense that no explicit interest rate is charged on outstanding accounts payable.

Trade credit

Trade discount

Discount credit

Discount model

Question 14

The __________ formula expresses the value of a principal sum of money invested for given number of years at give rate of interest.

compound interest

annuity

present value

future value

Question 15

__________ divided by the rate of compound interest, estimates the number of years required to double original investment.

4

62

2

72

Question 16

As interest is compounded __________, the terminal value of investment becomes __________.

more often; larger

more often; smaller

less often; smaller

less often; larger

Question 17

__________ represents "today's value" of the sum of money to be received in the future, if money in hand today can be invested at given interest rate.

Compound interest

Future value

Present value

none of the options

Question 18

A(n) __________ is a series of constant receipts that are received at end of each year for a period of time.

annuity

loan

none of the options

payment

Question 19

The __________ is the present value of a stream of future cash receipts of a fixed amount received at the end of each year for some number of years into the future, given discount rate (r).

Present Value of Annuity

Compound Value of Annuity

Future Value of Annuity

none of the options

Question 20

The __________ is the ending value of series of constant payments made at end of each year for a specified number of years that earn a given rate of interest per year.

Present Value of an Annuity

Compound Value of an Annuity

none of the options

Future Value of an Annuity

Question 21

__________ is the process by which organization evaluates and selects long-term investment projects.

Operations budgeting

Financial budgeting

none of the options

Capital budgeting

Question 22

According to payback decisions, between two mutually exclusive investment projects managers should choose the project with __________ payback period.

shortest

none of the options

largest

longest

Question 23

The difference between present value of expected benefits & present value of expected costs is called __________.

net present value

present value

net compound value

compound value

Question 24

If net present value is __________, then project is accepted, and if net present value is __________, then project is rejected.

negative; positive

small; large

large; small

positive; negative

Question 25

Between two mutually exclusive projects, a manager should choose the project with the __________ net present value.

lowest

none of the options

highest

smallest

Question 26

The __________ is the discount rate where present value of expected benefits equals cost.

Profitability Index

Interest Rate

none of the options

Internal Rate of Return

Question 27

The __________ is the ratio of net present value of benefits to costs.

Profitability Index

Internal Rate of Return

none of the options

Compound Interest

Question 28

A __________ is a non-physical liquid asset that derives its value from a contractual claim against the future income or assets of the issuer.

financial debt

financial asset

capital debt

capital asset

Question 29

The value of a financial asset is determined by discounting the __________ value of expected from future cash flows.

none of the options

present

future

market

Question 30

The __________ is the minimum rate of return required to induce investors to accept that investment.

none of the options

capitalization rate

discount rate

interest rate

Question 31

The __________ is the y-intercept of the Capital Market Line, since this is return that should be earned when standard deviation is zero (i.e. no risk).

discount rate

capitalization rate

interest rate

risk-free rate

Question 32

The __________ is generally measured as short-term Treasury bill rate, which is highly responsive to __________.

capitalization rate; deflation

risk-free rate; inflation

risk-free rate; deflation

capitalization rate; inflation

Question 33

__________ stock has no maturity date (i.e. dividends go on forever), however, are technically riskier investments than bonds.

Common

Preferred

none of the options

Market

Question 34

Two major concerns for __________ stock include: 1) earnings and dividends per share are not constant, and 2) uncertainty surrounding expected future dividend payments and stock price.

common

preferred

none of the options

market

Question 35

High-growth stocks have __________ P/E ratios and __________ dividend yields.

faster; slower

lower; higher

slower; faster

higher; lower

Question 36

__________ value is determined by a valuation model, and __________ value is determined by current stock prices.

Intrinsic; market

Asset; capital

Market; intrinsic

Capital; asset

Question 37

The __________ is the percentage cost of a firm's capital structure.

cost of debt

cost of capital

none of the options

cost of asset

Question 38

__________ refers to a firm's mix of long-term debt and equity for permanent financing needs.

Asset Structure

none of the options

Capital Structure

Financial Structure

Question 39

__________ cost is equal to the __________ cost over some range of capital raised, beyond which both costs begin to rise.

Effective; capital

Capital; effective

Marginal; average

Average; marginal

Question 40

Investing in equity is __________ than investing in debt.

riskier

costlier

none of the options

safer

Question 41

When dealing with uncertainty, a financial manager should assign a __________ discount rate to riskier projects.

negative

lower

higher

positive

Question 42

When confronting conflicts regarding investment decisions, if presented with __________ a manager should rank-order projects from highest IRR to lowest and select projects that the firm has sufficient capital to accept.

insufficient capital

sufficient debt

insufficient debt

sufficient capital

Question 43

When confronting conflicts regarding investment decisions, if presented with __________ a manager should select the project with the higher NPV if cash inflows can be reinvested at cost of capital or select the project with the higher IRR if cash inflows can be reinvested at the IRR of the project.

differing costs

none of the options

differing time patterns of cash inflows

insufficient capital

Question 44

When choosing from among mutually exclusive projects with __________, a manager should give preference to the project with the highest NPV or select a substantially less expensive project if it has the highest PI and IRR.

differing time patterns of cash inflows

none of the options

differing costs

insufficient capital

Question 45

Granting credit entails which type of cost?

Bad-Debt Losses

Offering Discounts

all of the options

Financing Accounts Receivable

Question 46

Which of the following is not a benefit of leasing for the lessee?

lower payments when compared to loans

leases offer tax benefits

lease can be obtained more easily than a bank loan, thus may be attractive to businesses with low credit ratings

leasing opens credit availability

Question 47

Which of the following is not a method of financing accounts receivables?

Pledging

Assigning

Factoring

Borrowing

Question 48

Using the compound interest formula, what is the value of "m" if interest in compounded semiannually?

0.5

4

12

2

Question 49

Using the compound interest formula, what is the value of "m" if interest in compounded quarterly?

12

2

4

0.5

Question 50

Using the compound interest formula, what is the value of "m" if interest in compounded monthly?

4

2

12

0.5