Finance for Managers
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Course Introduction
Finance for Managers is designed to provide non-financial managers with a solid foundation in financial principles, concepts, and analytical tools needed for effective decision-making within organizations. The course covers essential topics such as financial statement analysis, budgeting, forecasting, cost management, capital investment decisions, and funding strategies. By combining theory with practical case studies, students will learn how to interpret financial information, understand the impact of financial decisions on business performance, and communicate effectively with financial professionals, empowering them to contribute to their organizations financial health and strategic objectives.
Recommended Textbook
Corporate Finance Core Principles and Applications 5th Edition by Stephen Ross
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1630 Verified Questions
1630 Flashcards
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Page 2
Chapter 1: Introduction to Corporate Finance
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Sample Questions
Q1) The issuance of new equity shares is a cash flow from
A)long-term creditors to a firm.
B)a firm to its shareholders.
C)a firm's suppliers to the firm.
D)the financial markets to a firm.
E)any one of a firm's stakeholders to the firm.
Answer: D
Q2) Insider trading is
A)illegal.
B)impossible to have in our efficient market.
C)legal.
D)discouraged,but legal.
E)defined as the trading of stock by a corporate director based on publicly available information.
Answer: A
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Chapter 2: Financial Statements AMCQ Cash Flow
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Sample Questions
Q1) ________ refers to a firm's dividend payments minus any net new equity raised.
A)Operating cash flow
B)Capital spending
C)Net working capital
D)Cash flow to stockholders
E)Cash flow from creditors
Answer: D
Q2) Free cash flow is
A)equal to net income.
B)equal to net income plus taxes.
C)a term used to describe an increase in net working capital.
D)cash that is available to distribute to creditors and equity holders.
E)another term for operating cash flow.
Answer: D
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Chapter 3: Financial Statements Analysis Amcq Financial
Models
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Sample Questions
Q1) The return on equity can be calculated as
A)Profit margin × 1 / Capital intensity ratio × Equity multiplier
B)Return on assets × b
C)Profit margin × Total asset turnover × Debt-equity ratio
D)Profit margin × 1 / Equity multiplier × (1 + Debt-equity ratio)
E)Return on assets × Debt-equity ratio
Answer: A
Q2) Last year,Bennett's had a PE ratio of 5.4.This year,the PE ratio is 4.9.Based on this information,it can be stated with absolute certainty that
A)the price per share increased.
B)the earnings per share decreased.
C)either the price per share,the earnings per share,or both,changed.
D)investors are receiving a lower rate of return this year.
E)investors are paying a lower price for each share of stock purchased.
Answer: C
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Page 5
Chapter 4: Discounted Cash Flow Valuation
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Sample Questions
Q1) East Coast Investors invested $28,000 a year into a project for the past 7 years.Today,the project was sold for a net of $324,000.What is the rate of return,ignoring taxes?
A)17.43%
B)17.06%
C)15.59%
D)16.67%
E)16.44%
Q2) Today,the Future Trust Co.purchased an investment that will pay $6,000 at the end of 5 years.Every year thereafter,the payment will increase by 1.6 percent.What is the value of this investment today if the required rate of return is 7.4 percent?
A)$62,300.00
B)$73,894.23
C)$65,647.81
D)$77,751.03
E)$83,984.23
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Chapter 5: Interest Rates AMCQ Bomcq Valuation
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Sample Questions
Q1) If the nominal rate of return on a bond is 7.47 percent and the real rate is 3.49 percent,what is the rate of inflation?
A)3)85%
B)3)92%
C)3)98%
D)10.96%
E)11.22%
Q2) A zero coupon bond has a yield to maturity of 7.48 percent,semiannual compounding,a $1,000 face value,and a market quote of 41.0932.How many years is it until this bond matures?
A)24.22 years
B)23.18 years
C)12.11 years
D)24.66 years
E)12.33 years
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7
Chapter 6: Stock Valuation
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Sample Questions
Q1) Dille Inc.pays no dividend at the present time.In Years 2 and 3,the firm will pay annual dividends of $4 a share.After that,it will pay a constant $2 a share dividend indefinitely.What is this stock worth at a required return of 17 percent?
A)$12.29
B)$11.81
C)$12.77
D)$12.50
E)$11.07
Q2) Blasco just paid an annual dividend of $1.63 a share.What is one share of this stock worth to you if the dividends increase by 3 percent annually and you require a rate of return of 14 percent?
A)$12.40
B)$11.99
C)$10.54
D)$15.26
E)$11.64
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8
Chapter 7: Net Present Value AMCQ Other Investment Rules
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Sample Questions
Q1) Uptown Developers is considering two projects.Project A consists of building a wholesale book outlet on the firm's downtown lot.Project B consists of building a sit-down restaurant on that same lot.The lot can only accommodate one of the projects.When trying to decide whether to build the book outlet or the restaurant,management should rely most heavily on the analysis results from which one of these methods?
A)Profitability index
B)Internal rate of return
C)Payback
D)Net present value
E)Accounting rate of return
Q2) A firm should accept projects with positive net present values primarily because those projects will
A)produce cash inflows that exceed the cash outflows.
B)return the firm's initial cash outlay within 1 year.
C)create value for the firm's current stockholders.
D)produce only positive cash flows after the initial investment period.
E)increase the current liquidity of the firm.
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Chapter 8: Making Capital Investment Decisions
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Sample Questions
Q1) A project will produce operating cash flows of $39,000 a year for 4 years.During the life of the project,inventory will be lowered by $9,000,accounts receivable will increase by $14,000,and accounts payable will increase by $11,000.The project requires $118,000 of new equipment that will be depreciated straight-line to a zero book value over 4 years.At the end of the project,net working capital will return to its normal level and the equipment will be sold for $21,000,aftertaxes.What is the net present value given a required return of 13 percent?
A)$14,322.49
B)$13,483.48
C)$18,117.05
D)$13,204.16
E)$12,804.42
Q2) Erosion can be best explained as the
A)loss of current sales due to a new project being implemented.
B)additional income generated from the sales of a newly added product.
C)loss of revenue due to customer theft.
D)loss of revenue due to employee theft.
E)loss of sales due to a product become obsolete.
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Chapter 9: Risk Analysis, Real Options, AMCQ Capital Budgeting
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Sample Questions
Q1) To set up a decision tree,you should
A)assign the most optimistic values to a success and the most pessimistic values to a failure.
B)determine the cash flows that are most apt to occur given a set of circumstances.
C)assign a constant discount rate to all decisions within the tree.
D)ignore a project's initial cost.
E)use equal probabilities for success and failure.
Q2) In a decision tree,the accept/reject decision is dependent upon
A)cash flows,probabilities,and future decisions.
B)only the cash flows from the successful path.
C)only the cash flows and probabilities of the successful path.
D)the path where the probabilities sum to one.
E)only the lower half of the tree.
Q3) All else constant,as the variable cost per unit increases,the A)net profit increases.
B)contribution margin decreases.
C)sensitivity to fixed costs decreases.
D)operating cash flow increases.
E)financial breakeven point decreases.
Page 11
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Chapter 10: Risk Amcq Return: Lessons From Market History
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Sample Questions
Q1) For our historical comparison purposes,how are large-company stocks defined?
A)Stocks of the lowest 20 percent of the firms listed on the NYSE based on market capitalization
B)Stocks with average annual returns that exceed the average annual return of the U.S.Treasury bill
C)Any firm that has been listed on the NYSE for 40 years or more
D)Stocks of firms included in the S&P 500 composite index
E)Stocks of firms that employ over 5,000 employees
Q2) One year ago,Ted purchased 300 shares of stock at $18.09 a share.Today,he received a total of $267 in dividends and sold his shares for a total of $5,250.What was his total rate of return?
A) 3.57%
B) 2.94%
C) 4.43%
D)2)47%
E)1)66%
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Chapter 11: Return Amcq Risk: the Capital Asset Pricing
Model Capm
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Sample Questions
Q1) The probabilities of an economic boom,normal economy,and a recession are 15 percent,83 percent,and 2 percent,respectively.For these economic states,Stock A has deviations from its expected returns of 0.03,0.01,and 0.02 for the three economic states respectively.Stock B has deviations from its expected returns of 0.15,0.06,and 0.09 for the three economic states,respectively.What is the covariance of the two stocks?
A)0)02049
B)0)02143
C)-0.00021
D)0)00116
E)-0.01054
Q2) Well-diversified portfolios have negligible
A)systematic risks.
B)unsystematic risks.
C)expected returns.
D)variances.
E)market risks.
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13
Chapter 12: Risk, cost of Capital, AMCQ Valuation
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Sample Questions
Q1) The use of debt is called
A)financial leverage.
B)production leverage.
C)operating leverage.
D)total asset turnover risk.
E)business risk.
Q2) Although a definitive value cannot be determined,which one of these values is considered to be the best estimate of the market's historical risk premium according to your textbook authors?
A)7 percent
B)5 percent
C)9 percent
D)11 percent
E)15 percent
Q3) The terminal value of a company is based on which one of these assumptions?
A)The growth rate of the future cash flows will exceed the company's WACC.
B)All future cash flows will be constant.
C)The cash flows after Time T will diminish on an annual basis.
D)The cash flows will increase in the future at a constant perpetual rate.
E)The company will be sold at Time T for the stated terminal value.
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Chapter 13: Efficient Capital Markets Amcq Behavioral Challenges
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Sample Questions
Q1) Which one of these terms is used to describe a principle where investors draw conclusions from insufficient data?
A)Representativeness
B)Synergy
C)Conservatism
D)Arbitrage
E)Independent deviations from rationality
Q2) Which one of these is an indicator that a market is efficient?
A)Positive serial correlation coefficients equal to or greater than 1
B)Lack of daily price movement
C)Lack of any adjustment for degree of risk
D)Repetitive price patterns
E)Normal rates of return
Q3) The research done by Ikenberry,Lakonishok,and Vermaelen supports the argument that mangers:
A)effectively time IPOs but not SEOs.
B)cannot effectively time IPOs.
C)cannot effectively time either stock sales or repurchases.
D)effectively time stock repurchases.
E)can effectively time stock sales but not repurchases.
Page 15
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Chapter 14: Capital Structure: Basic Concepts
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Sample Questions
Q1) Simpson's is an all-equity firm that has 400,000 shares of stock outstanding.The company is in the process of borrowing $1.5 million at 5 percent interest to repurchase 30,000 of the firm's outstanding shares.Ignore taxes.What will be the market value of equity after the repurchase?
A)$20.0 million
B)$19.2 million
C)$18.5 million
D)$19.8 million
E)$18.9 million
Q2) MM Proposition II,with taxes
A)reaches the final conclusion that the capital structure decision is irrelevant to the value of a firm.
B)reveals how the interest tax shield relates to the value of a firm.
C)supports the argument that business risk is determined by the capital structure employed by a firm.
D)has the same general implications as MM Proposition II,without taxes.
E)supports the argument that the cost of equity decreases as the debt-equity ratio increases.
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Chapter 15: Capital Structure: Limits to the Use of Debt
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Sample Questions
Q1) Issuing debt instead of new equity in a closely held firm more likely causes owner-managers to
A)work harder than they would if equity had been issued.
B)consume more perquisites because the cost is passed on to the debtholders.
C)enjoy more leisure time than they would with an equity issue.
D)accept more unprofitable projects.
E)shirk their duties as they have less capital at risk.
Q2) Which one of these statements is a correct implication of the pecking order theory?
A)External financing should be limited to debt issues.
B)The target debt level occurs when the marginal benefit of debt equals the marginal cost of debt.
C)Companies like financial slack so they can reduce their external capital needs.
D)Internally funded projects lower the market value of equity.
E)Profitable firms use more debt.
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Chapter 16: Dividemcqs AMCQ Other Payouts
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Sample Questions
Q1) The highest and lowest prices at which a stock has traded over a period of time is called its
A)bid-ask spread.
B)average price.
C)closing price.
D)opening price.
E)trading range.
Q2) Which one of these statements is correct regarding large U.S.firms for the period 2004 to 2014?
A)Common dividends outpaced share repurchases for the majority of the years during the period.
B)Share repurchases tend to be steadier from year to year than are common dividends.
C)Both common dividends and share repurchases were lower in 2014 than they were in 2004.
D)Corporate earnings tend to be more volatile than either stock dividends or repurchases.
E)Common dividends decreased more than share repurchases during the period 2008 to 2009.
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Chapter 17: Options Amcq Corporate Finance
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Sample Questions
Q1) Bruno's stock is currently selling for $31.74 a share but is expected to increase to either $32 or $37 a share over the next year.The risk-free rate is 3 percent.What is the current value of a 1-year call option with an exercise price of $35?
A)$)27
B)$)33
C)$)64
D)$)89
E)$)52
Q2) In the Black-Scholes option pricing formula,N(d)is the probability that a standardized,normally distributed random variable is:
A)greater than or equal to d.
B)less than one.
C)equal to one.
D)equal to d.
E)less than or equal to d.
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Chapter 18: Short-Term Finance Amcq Planning
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Sample Questions
Q1) The most common means of financing a temporary cash deficit is a
A)short-term issue of corporate bonds.
B)short-term secured bank loan.
C)short-term unsecured bank loan.
D)long-term unsecured bank loan.
E)long-term secured bank loan.
Q2) Smithfield's has a line of credit with a local bank of $75,000.The loan agreement calls for interest of 6 percent with a compensating balance requirement of 3 percent that is based on the total amount borrowed.What is the effective interest rate if the firm needs
$58,000 for 1 year to finance a fixed asset purchase?
A)8)55%
B)6)34%
C)7)13%
D)7)38%
E)6)19%
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20
Chapter 19: Raising Capital
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Sample Questions
Q1) In the United States,the period from 1960 to 2015 illustrates that
A)both the number of IPO offerings and the amount of underpricing vary significantly over time.
B)the number of IPO offerings is relatively constant over time but the amount of underpricing varies considerably.
C)both the number of IPO offerings and the amount of underpricing follow a set pattern.
D)IPO underpricing is relatively constant over time but the number of offerings varies quite dramatically.
E)the level of underpricing steadily increased over the period while the number of offerings consistently decreased.
Q2) Kite Flyers recently offered 6,000 shares of stock for sale but only received payment from its underwriters for the 4,500 shares they sold.This must have been a ________ underwriting.
A)standby
B)best efforts
C)firm commitment
D)Dutch auction
E)private placement
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Chapter 20: International Corporate Finance
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Sample Questions
Q1) Which one of these is a U.S.company-sponsored security that trades on an exchange and has an underlying value based on foreign securities?
A)Yankee bond
B)Foreign bond
C)American Depository Receipt
D)Gilt
E)Eurobond
Q2) How many euros can you get for $864 if the direct quote is 1.2452?
A) 728.72
B) 693.86
C) 847.06
D) 1,092.96
E) 1,075.85
Q3) Which two countries use the krone as their home currency?
A)Singapore and India
B)Switzerland and Sweden
C)Denmark and Norway
D)South Africa and Saudi Arabia
E)Kuwait and Iran
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Page 22
Chapter 21: Mergers Amcq Acquisitions Web Only
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Sample Questions
Q1) New Tech has a market value of $452,000.Emerson Electrics has 37,000 shares of stock outstanding at a price per share of $21.Emerson Electrics is acquiring New Tech in exchange for 21,500 shares of Emerson Electrics stock.The merger is expected to create $3,000 of synergy.What is the acquisition net present value?
A) $790
B)$3,511
C)$2,503
D)$2,214
E)$3,000
Q2) The Glass Works has a market value of $336,000.Creative Pottery has 23,800 shares of stock outstanding at a price per share of $37.Creative Pottery is acquiring The Glass Works in exchange for 9,200 shares of Creative Pottery stock.The merger is expected to create $24,000 of synergy.What is the NPV of the acquisition?
A) $11,407
B)$24,608
C)$14,136
D)$19,600
E)$5,701
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