QUESTION 1

In a leasing, all of these are correct, EXCEPT.

The lesser use the underlying asset

Purchase option allow the lessor to purchase the asset

The lessor retains ownership of the asset

The lesser makes regular payments to the lessor

3 points

QUESTION 2

An advantage of term loans over publicy traded debt is theirs.

Durability

Flexibility

Accountability

Risk

3 points

QUESTION 3

A bond that grants the investor the right to exchange their bonds for common stock, is called a

zero-coupon bond.

Treasury bond.

Convertible bond.

mortgage bond.

3 points

QUESTION 4

Three of the more important popular measures of growth are all of these, EXCEPT.

Operation expenses

ROI

EVA

Growth of sales or assets

3 points

QUESTION 5

Forecasts to project into the future the income statement and balance sheet are called:

Pro-forma financial statements

Budgets projections

Sales forecasts

Cash flow forecast

3 points

QUESTION 6

The________ is found by multiplying the firm s cost of capital by its investments.

Cost of funds

NPV

IRR

ROI

3 points

QUESTION 7

Unsecured loans have specific assets pledged as collateral.

True

False

3 points

QUESTION 8

ROI measures the firm s overall effectiveness in using its assets to generate returns to common stockholders.

True

False

3 points

QUESTION 9

A bond with a face value of $1,000 with a 10% coupon rate is typically callable by an amount equal to 1 years interest, at a price of _______, with a call premium of______.

$1,100 - $100

$1,000 - $100

$900 - $200

$1,100 - $0

8 points

QUESTION 10

The key items of a Lease Contract are all of these, EXCEPT.

Lease payment amount

Free gas for 1 year

Provision for maintenance

Purchase options

3 points

QUESTION 11

The major factors affecting the cost, or interest rate, of long-term debt are all of these EXCEPT.

Loan Maturity

Loan size

Borrower risk

Purpose of the loan

3 points

QUESTION 12

Positive covenants of loans prohibit borrower of certain actions.

True

False

3 points

QUESTION 13

Financial Statements for 2010 ($ thousand) for a Shoe Company shows the following data:

What would be the estimated external fund required (EFR) for 2011 pro-forma.

$4,500

$0

$8,111

$45

8 points

QUESTION 14

LIBOR rate is?

An interest rate determined by the New York Stock Exchange

Is the Lebanon interest bank offer rate

Is the London interbank offered rate

None of the above

3 points

QUESTION 15

Increasing sales volume would require additional investments in current assets, such as inventories and receivables.

True

False

3 points

QUESTION 16

Contractual clauses on long-term debt agreement that place specific operating and financial constraints on the borrowers are called?

Borrower risk constraints

Loan covenants

Payment dates

Loan size

3 points

QUESTION 17

______________ are forecast of what firms expect the income statement and balance sheets look like in a year or two ahead.

Sales volume

Pro-forma financial statements

Inventories

Salaries and Wages

3 points

QUESTION 18

The following types of bonds are unsecured, EXCEPT.

Equipment trust certificates

Debentures

Income bonds

Subordinated debentures.

3 points

QUESTION 19

The assumptions of the sustainable growth model is all of these, EXCEPT.

The only form of equity is common stock, and it will not issue new shares of common stocks next year

The Total assets turnover ratio (S/A) remains constant

Payout a growing fraction of its earnings as dividends.

3 points

QUESTION 20

: _________ is a third party to a bond indenture and can be an individual, a corporation, or, most often, a commercial bank trust department.

Bond issuer

Investor

Trustee

Rated Agency

3 points

QUESTION 21

term loan is a loan arranged between a borrower and multiple banks.

True

False

3 points

QUESTION 22

U.S public debt offerings fixed rates have coupon rates that remains constant?

True

False

3 points

QUESTION 23

In an aggressive financing strategy the company makes sure it has enough long-term financing to cover its permanent and seasonal investments in current assets.

True

False

3 points

QUESTION 24

Most firms define and measure growth targets in terms of _______?

Sales

COGS

Interest

EBIT

3 points

QUESTION 25

bottom-up approach of sales forecasts rely heavily on macroeconomic and industries forecasts.

True

False

3 points

QUESTION 26

Firms often set hurdles rates for minimum ROI based on the firm s cost of capital.

True

False

3 points

QUESTION 27

The Credit forecast maybe derived through either a top-down or bottom-up approach.

True

False

3 points

QUESTION 28

The items that commonly appears in a contract loan agreement are all of these, EXCEPT.

Maturity of the loan

Payment dates

Market premium

Interest rate

3 points

QUESTION 29

The role of finance in long-term planning are all of these, EXCEPT.

Access achievement of strategic objective

Access feasibility of a strategic action plan

Avoid making new investments

Control implementation of strategic plans

3 points

QUESTION 30

In constructing pro-forma financial statements, analyst usually leave one line item on the balance sheet as a as an adjustment after making all other projections, this is called _______

Adjusted profit

Gross loan

Plug figure

Adjusted earning