Financial Decision Making
Study Guide Questions
Course Introduction
Financial Decision Making explores the foundational principles and analytical tools required to make informed financial choices in both personal and organizational contexts. The course covers topics such as financial statement analysis, time value of money, risk and return, capital budgeting, and the evaluation of various financing options. Students will learn to apply quantitative and qualitative techniques to real-world scenarios, enhancing their ability to assess investment opportunities, manage financial risks, and devise effective strategies for wealth maximization. Through case studies, simulations, and problem-solving exercises, participants will develop practical skills essential for both career advancement and responsible financial management.
Recommended Textbook
Financial Management for Decision Makers 2nd Canadian Edition by Peter Atrill
Available Study Resources on Quizplus 14 Chapters
590 Verified Questions
590 Flashcards
Source URL: https://quizplus.com/study-set/1489
Page 2
Chapter 1: Introduction to Financial Management
Available Study Resources on Quizplus for this Chatper
42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/29560
Sample Questions
Q1) Bonuses paid to banking executives whose corporate share prices declined significantly during the Great Recession of 2008 were an example of
A) Greed by bankers
B) The agency problem
C) The failure of capitalism
D) Poor government oversight
E) Stock market risk
Answer: B
Q2) The Principals of a corporation are its
A) Managers
B) Shareholders
C) Lenders
D) Executives
E) Customers
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Accounting - the Language of Business
Available Study Resources on Quizplus for this Chatper
42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/29561
Sample Questions
Q1) A vacuum moulding machine, originally priced at $140,000 was purchased for $100,000 from industrial liquidators. It was subsequently sold five years later for $75,000. Straight-line accumulated amortization amounted to $50,000. The sale of the machine produced
A) A gain of $5,000
B) A gain of $15,000
C) A loss of $15,000
D) A gain of $25,000
E) A loss of $25,000
Answer: D
Q2) Which of the following represents the best description of accumulated depreciation?
A) Accumulated depreciation is a non-cash expenditure on the cash flow statement.
B) Accumulated depreciation is a contra asset on the balance sheet.
C) Accumulated depreciation is an expense on the income statement.
D) Accumulated depreciation is an allocation of costs over the life of the asset.
E) Accumulated depreciation is an expense that is not permitted under IFRS.
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Financial Planning and Pro Forma Financial Statements
Available Study Resources on Quizplus for this Chatper
44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/29562
Sample Questions
Q1) The Company receives 20% of its monthly sales immediately in cash, 70% in the following month and the balance in the month after that. If it had sales of $1.2 million in April, $1 million in May, $1.4 million in June and $1.3 million in July, how much cash is received from its customers in July?
A) $1.1 million
B) $1.24 million
C) $1.34 million
D) $960,000
E) $1.94 million
Answer: C
Q2) Timmy's Toys expects to make purchases of $181,775. It anticipates an opening inventory of $65,225 and closing inventory of $19,000. If its Sales Revenue is $365,030, what will the Company's cost of goods sold be?
A) $247,000
B) $346,030
C) $266,000
D) $228,000
E) $183,255
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Analyzing and Interpreting Financial Statements
Available Study Resources on Quizplus for this Chatper
45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/29563
Sample Questions
Q1) Which of the following pairs of ratios would reveal over trading best?
A) Revenue to capital employed and return on equity
B) Operating profit margin and average payment period for payables
C) Acid test and revenue to capital employed
D) Acid test and average payment period for payable
E) Operating profit margin and acid test
Q2) Halveston Aeronautics, with 130,000 common shares outstanding, declared a dividend of $148,200. Share price is $54. The dividend yield is
A) 45.7%
B) 25%
C) 19%
D) 2.1%
E) 1.1%
Q3) The ratio that is the best measure of a company's day-to-day operating performance is the
A) Gross Profit Margin
B) Return on Capital Employed (ROCE)
C) Return on Sales
D) Operating Profit Margin
E) Return on Equity
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: The Time Value of Money
Available Study Resources on Quizplus for this Chatper
44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/29564
Sample Questions
Q1) Tuscarora Transportation recently signed a seven-year loan of $350,000 with annual payments at the end of each year on four warehouses and the adjacent paved acreage at a 9% interest rate compounded annually. What is the total interest that will be paid by the end of the seven-year term?
A) $136,792
B) $668,450
C) $754,950
D) $1,761,550
E) $2,450,000
Q2) Five years ago John Henry set aside $5,000 in a separate bank account to be used for his favourite hobby - betting on horses at the race track. This account now has a $10,000 balance. What is the approximate compound interest rate John Henry's hobby is earning?
A) 2.9%
B) 6.9%
C) 10.0%
D) 14.4%
E) 100.0%
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Making Capital Investment Decisions
Available Study Resources on Quizplus for this Chatper
44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/29565
Sample Questions
Q1) A specialty original equipment manufacturer (OEM) to the automobile industry, has maintained an ROCE above 12% over the past four years by insisting on an ARR of over 12%. However, in the past four periods, consumer spending has begun to decline. Interest rates are falling. The company should
A) Expect ROCE to drop significantly given fewer high yield investment opportunities available during economic slow-down
B) Focus R&D efforts to develop recession proof or counter cyclical investment opportunities
C) Shift resources immediately from producing vulnerable products to more recession proof market offerings
D) Review current process and financing contracts to institute cost cutting procedures
E) Take advantage of a well diversified product portfolio to limit exposure
Q2) Net Present Value is the only method of investment appraisal that
A) Considers the time value of money
B) Uses all the relevant cash flows in the analysis
C) Deals with cash outflows exceeding inflows after the start of the project
D) Uses the company's cost of capital to establish a discount rate
E) Considers the investment's direct impact on shareholder's wealth
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Making Capital Investment Decisions: Further Issues
Available Study Resources on Quizplus for this Chatper
42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/29566
Sample Questions
Q1) Granular Sugar Company is considering buying a new fork lift truck that will improve warehousing efficiency. the cost is $100,000 and it will last two years producing additional cash inflows of $61,500 each year. Granular's cost of capital is 10%. What is the net present value, internal rate of return, percentage margin of safety on the cost and margin of safety on the additional cash inflow?
A) $6,736, 15%, 6.7%, $3,881
B) $6,736, 14%, 7.6%, $6,358
C) $17,409, 59.7%, 45.2%, $10,031
D) $17,409, 19.7%, 9.2%, 45,329
E) $23,000, 10%, 23%, $13,253
Q2) Approximately 20,000 businesses use 350,000 cases of a particular kind of metal fastener. An average case sells for $15. If Flex Bolt Ltd. sells 200,000 cases to 8,000 businesses, what is Flex Bolt's market share?
A) 10 turns
B) 57%
C) 40%
D) 25 turns
E) $3,000,000
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Financing a Business 1: Sources of Funds
Available Study Resources on Quizplus for this Chatper
43 Verified Questions
43 Flashcards
Source URL: https://quizplus.com/quiz/29567
Sample Questions
Q1) Comfort Ltd. offers customers payment terms on invoices of 2/10, n30. A customer is unable to pay the invoice when received but will have the funds by month end. The customer has the option of borrowing on its 12% line of credit and paying off the invoice or waiting until the end of the 30 days. What should the customer do?
A) Borrow the funds on the tenth day and pay the invoice.
B) Borrow the funds upon receipt of the invoice and pay immediately.
C) Borrow the funds upon receipt and pay in 30 days.
D) Wait until the end of the month and pay from the customer's own cash.
E) Wait until month end to borrow the funds and pay the invoice.
Q2) Which of the following best describes the pecking order theory?
A) Dividend are preferable to capital gains.
B) Capital gains are preferable to dividends.
C) Retained earnings are preferable for long term financing.
D) Debt is preferable for long term financing.
E) Common shares are preferable for long term financing.
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Financing a Business 2: Raising Long-Term Funds
Available Study Resources on Quizplus for this Chatper
42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/29568
Sample Questions
Q1) Which of the following best describes an efficient capital market?
A) All information is freely available and accessible. There is no assumption that it is accurately reflected in share price.
B) Not all information is freely accessible. However, that which is available, is quickly and accurately reflected in share prices.
C) All information is freely available and accessible. It is also assumed that the short term profit taking perspective of most investors may lead to inaccurate share prices.
D) All information is freely available, accessible and accurately reflected in share price.
E) Available information is assumed not always to be accessible and what is accessible is not always reflected accurately in share price.
Q2) What is the main role of a stock exchange?
A) To act as a primary and secondary capital market for businesses.
B) To act as a primary capital market for businesses.
C) To act as a secondary capital market for businesses.
D) To act as a primary capital market for businesses and government.
E) To act as a secondary capital market for businesses and government.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: The Cost of Capital and the Capital Structure
Decision
Available Study Resources on Quizplus for this Chatper
42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/29569
Sample Questions
Q1) Omaro Ltd. has $34 million worth of bonds outstanding with an interest rate of 8% and redemption in 4 years. The issue price of the bond is $90 per $100 of nominal value. The company's tax rate is 24%. Using trial values of 8% and 12%, what is the company's after tax cost of capital for the bonds?
A) 7.8%
B) 8.6%
C) 9.3%
D) 11.3%
E) 12.0%
Q2) Which of the following is an assumption of the Capital Asset Pricing Model?
A) Very few investors hold fully diversified portfolios.
B) The relationship between beta and expected returns are seldom linear.
C) Returns on specific shares are affected by general market changes only.
D) Beta values tend to be unstable over the long term.
E) Historical data can be used to predict the future.
To view all questions and flashcards with answers, click on the resource link above.
12
Chapter 11: Developing a Dividend Policy
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/29570
Sample Questions
Q1) Merrick Manufacturing has been in a court battle over alleged patent infringement for several years. If Merrick has had generally paid out a consistent level of dividends and increases its dividend payout by 50%, how investors may interpret this move by Merrick?
A) As reorganizing its dividend policies based on company investment and tax requirements and correctly ignore the on-going case.
B) As distributing cash it no longer needs for investment as it anticipates losing the court case and its patent rights.
C) As attempting to placate investors who will sell off their shares once information about the loss of the court case is announced.
D) As winning the court case and being restricted by the settlement from officially announcing the company's good fortune.
E) As anticipating a settlement in its favour and distributing expected future earnings.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 12: Managing Working Capital
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/29571
Sample Questions
Q1) What is the Pattern of Credit Sale Cash Receipts compared to in order to monitor cash collections?
A) The sales forecast.
B) The Pro Forma Balance Sheet.
C) The Pro Forma Cash Flow Statement.
D) The Cash Flow budget.
E) The aging schedule of receivables.
Q2) If Jonas Movers Ltd. chooses to forego the 3% discount offered by its corrugated box supplier if the invoice is paid with 15 days in favour of paying in 50 days, using the approximation formula, what will the oversight cost Jonas in terms of an annualized rate?
A) 18.3%
B) 21.9%
C) 31.3%
D) 36.5%
E) 73.0%
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 13: Measuring and Managing for Shareholder Value
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/29572
Sample Questions
Q1) Jericho Paper Distributors has a stable share of a saturated regional market. If the company's EVA is expected to continue at $7.2 million indefinitely, its capital invested is $3.1 million, and its cost of capital is 8%, what is the total business value?
A) $144.2 million
B) $93.1 million
C) $41.5 million
D) $10.3 million
E) $9.8 million
Q2) What is the best way to measure changes in shareholder value?
A) Consider the changes in the company's balance sheet measured at fair value.
B) Consider the changes in the company's share price, dividend policy, and fair value of its bonds.
C) Consider long term cash flows taking into account risk and the cost of sharehoders' equity.
D) Consider the problem that accounting policies may vary from company to company.
E) Consider the problem that ratios based on profit do not take in to account all the costs of capital invested by the business.
To view all questions and flashcards with answers, click on the resource link above.
Page 15
Chapter 14: Mergers, Acquisitions, and the Valuation of Shares
Available Study Resources on Quizplus for this Chatper
40 Verified Questions
40 Flashcards
Source URL: https://quizplus.com/quiz/29573
Sample Questions
Q1) Why is the dividend valuation method based on the concept that the present value of the future stream of dividends is an appropriate measure of a business's value?
A) The amount of dividends paid to shareholders is not discretionary and, therefore, is an objective measure of the value of the company to the shareholder.
B) Shareholders purchase shares only for the returns represented by future dividends.
C) Ultimately all value inherent in the company will be distributed as dividends.
D) Companies usually offer a predictable payout of dividends and therefore dividends are the most reliable measure of wealth gained by the shareholder.
E) The only cash returns from holding a business's shares take the form of dividends.
To view all questions and flashcards with answers, click on the resource link above. Page 16