1. Which ratio scenario would a stock holder want most?
   1. Increase in the Stock Holder Optimization ratio
   2. Increase in ROE (return on equity) ratios
   3. Increase in the market-to-book ratio
   4. Decrease in the DSO (days sales outstanding)
   5. Decrease in the total asset turnover

2. Free cashflow of a business is best described as:
   1. The net sum of cashflows from operating, investing, and financing activities.
   2. Cashflow that does not involve costs and is therefore considered free
   3. Total cashflow that holders of liabilities and equity have claims to
   4. Usually greater than EBITDA
   5. None, some, or all of the above

3. The goal(s) of corporate financial management is/are:

1. To maximize present and future profitability
2. To minimize financing costs
3. To make the stock price as high as possible now!
4. To optimize the balance sheet for the maximum benefit to shareholders

1. III only
2. I, II and III only
3. I only
4. All are correct.
5. None are correct.

4. Which is the least compelling reason to incorporate?
   1. To limit legal liabilities
   2. To facilitate the possible future sale of the company
   3. To minimize the agency conflict for a single person corporation
   4. To minimize moral hazard for a highly motivated management team
   5. To minimize taxes for a profitable dividend paying company

5. Which of the following best illustrates an organizational problem in financial management?
   1. An employee does the best he can even though he thinks his brother-boss will never fire him.
   2. Some customers take two COVID masks from the one-free-mask-per-customer box.
   3. The CEO lets her wife use xyrs personal eco-limo to attend protest rallies.
   4. Goy solely owns and runs Boop, a printing company that sells Emory Safe Space stickers.
   5. Pat works for McDonalds and makes twenty hamburgers at closing time intending to bring them home for free since he/she/ze/ey/mx thinks no one will buy them.

6. You are analyzing Walmarts gross profit. Which of the following is/are directly relevant?

1. Purchase Agreement for monthly purchases of Coca Cola
2. Report on theft, spoilage, and other non-sales changes to inventory
3. Advertising spent in newspapers, magazines, coupons, and flyers
4. Depreciation expense from the corporate headquarters building

1. All or none
2. Three or more
3. I only
4. II only
5. I and II only

7. GAAP (generally accepted accounting principles) requires R&D to be expensed but IFRS (international financial reporting standards) capitalizes it. Which is the most compelling argument for capitalizing it on the balance sheet for financial analysis?
   1. Readiness & Deadlines are critical to managing working capital on a timely basis.
   2. Receiving & Deliveries involve shipping assets and can significantly impact asset turnover.
   3. R&D is an investment for future benefits that will hopefully last.
   4. Research expense is not like the electric bill and other non-revenue related expenses.
   5. Development results in a physical prototype which is a capitalized asset.

8. When doing an EFN (external financing needed) forecast, why can a negative debt plug be considered cash on the balance sheet?
   1. Bank loans are in cash not goods or services.
   2. Bank debt must be paid back in cash not good or services.
   3. The opposite of borrowing cash from the bank is like adding cash to your bank account.
   4. Debt is generally more readily available than equity when raising external financing.
   5. None, some, or all of the above

9. Which would be ineffective as a financial analyst?
   1. Reviewing Cashflow from Investing to analyze dividends from purchased stocks.
   2. Reviewing Cashflow from Operations to analyze changes in balance sheet line items for net working capital.
   3. Reviewing depreciation allocation data to examine how closely gross margin reflects costs of generating revenue.
   4. Reviewing costs incurred for paying salesmen salaries to analyze EBIT (earnings before interest and taxes.)
   5. None, some, or all of the above

10. Which of the following is true regarding financial markets?
    1. All else equal, the more negotiating that occurs in a market, the more liquid that market will be.
    2. Asset values probably have less uncertainty in the secondary market than in the primary market.
    3. Brokers are usually better at transacting than dealers since brokers are unburdened by ownership.
    4. Dealers are better at transacting than brokers since dealers own the inventory.
    5. None, some, or all of the above