QUESTION 1

1.Managing risk is an important issue in finance because

risk affects cash flow

risk affects earnings and profits

risk impacts shareholders value

all of the above

5 points

QUESTION 2

1.Which of the following is not a currency-risk exposure factor?

transaction risk

operating risk

political risk

translation risk

5 points

QUESTION 3

1.The principal function of financial statements is to

convey information to managers, investors, and creditors

provide benchmark information for projecting the firm's future performance

inform the firm's shareholders of its likely prospects for growth and cash flows

a, b and c

5 points

QUESTION 4

1.Which of the following is not part of financial statements?

cash flow statements

profit and loss statements

income statement

reconciliation statement

5 points

QUESTION 5

1.Which of the following is true about the cost of capital?

the rate of return required by a capital provider

also known as opportunity cost

minimum return required by investors

a, b, and c

5 points

QUESTION 6

1.Which of the following is true about acquisitions?

the value of the target company always goes up

the value of the acquiring company always goes up

the value of the acquiring company always goes down

none of the above

5 points

QUESTION 7

1.Financial ratios can be used

to compare company's performance with the rest of the industry

deterime the value of the company's assets

only to determine the company stock value

make projections for the future

5 points

QUESTION 8

1.Which is not true about the Euro-bond market?

the Euro-bond market is an external market, because it is outside the regulatory jurisdiction of any one country.

the bonds so issued are in unregistered form because the owner's name is not cited on the face of the bond itself

coupon payments are made semiannually rather than annually, as is the custom in the United States

the bonds are issued on an unsecured basis, which effectively limits the demand in this market to only the highest-quality issuers

5 points

QUESTION 9

1.Which of the following statements best defines exchange rate?

The price paid to borrow debt capital.

The actual rate charged on a loan that compensates investors for postponing consumption, inflation, and risk.

The number of units of a given currency that can be purchased for one unit of another currency.

The nominal, risk-adjusted rate of return that is actually published in financial publications.

The rate of interest that offsets inflation and provides the required real return on a riskless investment.

5 points

QUESTION 10

1.Discounted cash flow analysis

can be used to determine the attractiveness of an investment project

should never be used to make assumptions about a planned investment project

can be used to rank the projects by inspecting the cash flows

a and c are correct

5 points

QUESTION 11

1.Which of the following is not a potential benefit of an IPO?

improved access to capital markets

guaranteed dividend payment

positive employee compensation incentives

increased liquidity

5 points

QUESTION 12

1.Which of the following is true about stocks?

they are always the best investment for a risk adverse investor

their price represents the present value of the expected future cash flows

they do not have any influence on the value of a company

a and b

5 points

QUESTION 13

1.In finance WACC means

weighted-asset cost of capital

weighted-average cost of capital

weighted-average capital cost

weighted-average consumption cost

5 points

QUESTION 14

1.The capital market can be segmented into the:

stock market

bond market

money markets

a, b and c

5 points

QUESTION 15

1.Which of the following is true?

high-dividend payout is always associated with high stock prices

high-dividend payout is never associated with high stock prices

the law requires high-dividend payout when stock prices are high

none of the above

5 points

QUESTION 16

1.In finance investment policy should be designed to

make good investments

charge high interest rates

accomplish the overall goal of the organization

determine lending limits

5 points

QUESTION 17

1.Which of the following is true about financial leases?

the main parties are the lessee and the lessor

the lessee receives the right to use the asset

lessor has the right to receive rental payments

a, b, and c

5 points

QUESTION 18

1.Infinance, financial modeling can help

clarify the implications of alternative choices.

identify strengths

identify potential problems

a, b, and c

5 points

QUESTION 19

1.Which of the following is not related to investment?

net present value (NPV)

interest investment rate (IIR)

return on investment (ROI)

internal rate of return (IRR)

5 points

QUESTION 20

1.Valuations can be done based on

discounted cash flow

comparable transaction multiples

current market prices

a, b, or c