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Which type of investment allows investors to potentially have voting and profit-sharing privileges in the company for a nominal investment of shares?

Select one:

a.Equity

b.Debt

c.Direct

d.Long-term

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Sam and his broker discuss the need to diversify Sam's investment portfolio. His broker recommends purchasing equity through an over-the-counter market. Which market is an example of an over-the-counter market?

Select one:

a.NYSE

b.NASDAQ

c.CBOE

d.None of the above

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Financial institutions use __________ to facilitate the exchange of money for securities.

Select one:

a.loans

b.exchanges

c.risks

d.transfers

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Companies use __________ to gain funds for expansion and growth.

Select one:

a.thought leadership

b.speculation

c.investment

d.debt

Question5

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Bob is reviewing his company's revenue and expenditures over the past 3 years. To do this , Bob needs to obtain copies of which financial statement?

Select one:

a.Balance sheet

b.Statement of cash flows

c.Statement of revenues and expenses

d.Income statement

Question6

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Bob is evaluating a bond issue to determine the right price for the bond. In his evaluation, he gathers the following information:

N = 8 years

INT = .025 or 2.5%

PMT = $25

FV = $1,000 (par value)

What is the above bond issue worth in today's dollars?

Select one:

a.$1,000

b.$1,181.63

c.$1,200.50

d.None of the above

Question7

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John is evaluating which investment would be best for his company. He wants to determine the future value of a certain investment that has the following information:

PV = $200

INT = 0.1 or 10%

N = 1 (years)

According to this information, what would be the future value of this investment?

Select one:

a.$110.67

b.$200.50

c.$220

d.None of the above

Question8

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How do financial managers tend to value all assets in the same terms?

Select one:

a.By evaluating cash flows

b.By qualifying cash flows

c.By interpreting cash flows

d.By estimating cash flows

Question9

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What are the three main types of business securities?

Select one:

a.Preferred, nonpreferred, and trading

b.Debt, savings, and loans

c.Preferred, common, and debt

d.Stock, equity, and debt

Question10

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Which of the following is a key component of discounted cash flows?

Select one:

a.Periods that the cash flows would affect

b.Annuity due amounts

c.Payment terms

d.Principle amounts

Question11

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What does the payback period represent?

Select one:

a.The time it takes to gain a return on investment

b.The time it takes to recover the money invested

c.The risk to the capital invested

d.The required rate of return on an investment

Question12

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The optimal capital budget represents the intersection of what two items?

Select one:

a.Marginal return on capital and marginal cost

b.Net future value and internal rate of return

c.Marginal cost and net present value

d.Internal rate of return and net present value

Question13

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Company A has an internal cost of capital of 7% annually. It is evaluating its investment options against its internal costs and has identified three potential investments:

Investment A: Bond with annual returns of 8%

Investment B: Bond with annual returns of 4%

Investment C: Bond with annual returns of 12%

Which of the above investments should the company consider taking on given its internal cost of capital?

Select one:

a.A only

b.C only

c.A and C only

d.B only

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What does the cost of debt represent?

Select one:

a.The cost of carrying debt

b.The after-tax cost of borrowing

c.The cost of financing

d.None of the above

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What measure should financial managers use when they do not know the internal rate of return?

Select one:

a.Net future value

b.Internal rate of return

c.Net present value

d.External rate of return

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Which of the following are two methods that financial managers use to determine a company's overall risk?

Select one:

a.Capital and financial methods

b.Financial and business methods

c.Time and money methods

d.Expected and unexpected methods

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A company has total revenue of $195,000 and total assets on its balance sheet of $2,015,000. What is the return on assets for this company?

Select one:

a.10%

b.12%

c.15%

d.None of the above

Question18

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What happens when companies sell a stock for more than what they paid for it?

Select one:

a.Loss

b.Dividend

c.Capital gain

d.Split

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Which of the following is not an assumption in capital structure theory?

Select one:

a.Potential investors carry the same assumptions about a company's risks.

b.Companies can measure business risk.

c.Investors trade stocks and bonds in perfect capital markets.

d.All the above are assumptions in capital structure theory.

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What do stock splits often increase?

Select one:

a.The price of shares

b.The number of shares

c.The cost of shares

d.The value of shares

Question21

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Which form of payment causes a company to pay taxes twice on the same amount?

Select one:

a.Dividends

b.Interest

c.Stock splits

d.Net present value

Question22

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Company A wants to revise its financial goals for the next 5 years. Which type of financial plan would this represent?

Select one:

a.Short-term financial plan

b.Bankruptcy

c.Mitigated financial plan

d.Long-term financial plan

Question23

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What is the term for borrowing to cover short-term capital needs?

Select one:

a.Long-term financing

b.Short-term financing

c.Loans

d.Long-term float

Question24

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Which of the following is a base tool for financial controls within companies?

Select one:

a.Pro forma statements

b.Budgets

c.Financial statements

d.Both pro forma statements and budgets

Question25

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What is the first step in a long-term financial plan?

Select one:

a.Establish financial statements.

b.Estimate the sales.

c.Evaluate the monitoring process.

d.Reinvest the company's funds.

Question26

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Which of the following does not describe long-term financial plans?

Select one:

a.Plans that span more than one period

b.Near-term financial plans

c.Plans that are longer than 12 months in duration

d.All the above

Question27

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What is a credit policy?

Select one:

a.The difference between a bank's record of a company's cash balance and the company's record of its balance

b.A company's set of guidelines for establishing and carrying credit on an ongoing basis

c.Any investment that has a maturity of 1 year or less

d.The right to purchase secondary issue shares

Question28

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Which of the following is typically a nonearning asset for a company?

Select one:

a.Buildings

b.Plant property and equipment

c.Cash

d.Intangible assets

Question29

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Banks do not offer which of the following services?

Select one:

a.Risk mitigation

b.Check clearing

c.Lockboxes

d.Banks offer all the above services.

Question30

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Company YY offers a 3% yield on all its savings deposits. It then reinvests these amounts by loaning to its customers at 8%. What is the profit margin?

Select one:

a.3%

b.5%

c.8%

d.11%

Question31

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What is a line of credit?

Select one:

a.An interest-free loan

b.A long-term loan

c.A bank opening a short-term loan for a company

d.A sale of assets

Question32

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Bob is trying to decide which bank to deposit his checks into and narrows down three options. Which bank would he choose based on the principle of convenience?

Bank A is right next door to his house.

Bank B pays 11% on all deposits.

Bank C is giving away an iPad to new customers.

Select one:

a.Bank A

b.Bank B

c.Bank C

d.All the above represent convenience terms.

Question33

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Company X is trying to raise additional capital to expand into Europe. In determining the best method of raising capital, the company's management finds that paying dividends is better than paying interest. Given this, which type of investment is best?

Select one:

a.Bonds

b.Line of credit

c.Loans

d.Preferred stock

Question34

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What is a key disadvantage of going public?

Select one:

a.Flexibility

b.The cost of reporting

c.More funds

d.Access to new capital

Question35

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Investment banking helps companies obtain which of the following?

Select one:

a.Lower risk

b.New risk

c.Stock in other companies

d.New capital

Question36

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What does common stock often pay to shareholders?

Select one:

a.Stock warrants

b.Dividends

c.Interest

d.None of the above

Question37

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Investor A is reviewing the different options available on the open market and identifies one that has a strike price of $25. The investor establishes that the underlying asset's value is $45. What is the value of the option?

Select one:

a.$15

b.$20

c.$25

d.$45

Question38

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Company Y decides to lease its new equipment rather than purchase it outright. The lease contains the following information:

The lessor must maintain and service the equipment. The lease cannot be amortized, and has no ownership rights. The lease comes with a cancellation clause.

Based on this information, which type of lease did Company Y enter into?

Select one:

a.Financial

b.Sale and leaseback

c.Operating

d.None of the above

Question39

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Investor A reviews foreign currency exchange rates and tries to determine how many euros 100 U.S. dollars (USD) will buy. At the current exchange rate, 1 euro equals 1.37 USD. How many euros does 100 USD equal?

Select one:

a.73 euros

b.100 euros

c.137 euros

d.None of the above

Question40

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Which of the following is not a type of merger?

Select one:

a.Sideways

b.Horizontal

c.Conglomerate

d.Vertical

Question41

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Which advantage of multinational operations allows companies to expand to other countries when they exhaust growth in their own country?

Select one:

a.Production

b.Diversification

c.New technologies

d.Additional sales and revenues

Question42

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The International Monetary Fund sets guidelines for which of the following?

Select one:

a.Trade

b.Loans

c.Risk

d.Exchange

Question43

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Chapter 11 allows a company to do which of the following?

Select one:

a.Rename itself

b.Close

c.Wash itself of all debt

d.Reorganize

Question44

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Which of the following is a challenge for multinational operations?

Select one:

a.Political concerns

b.Government regulations

c.Language differences

d.All of the above

Question45

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What does corporate scope define?

Select one:

a.The company's line of business

b.The company's objectives

c.The company's approach to profit

d.None of the above