Financial Strategy
Exam Bank
Course Introduction
Financial Strategy explores the principles and techniques used by organizations to make long-term financial decisions that achieve their overall objectives. The course examines topics such as capital structure, dividend policy, investment appraisal, corporate valuation, risk management, and the alignment of financial policy with business strategy. Students learn to analyze financial statements, evaluate strategic investment opportunities, and understand how financial markets and instruments impact executive decision-making. Emphasis is placed on integrating financial theory with practical scenarios to develop analytical skills necessary for formulating and implementing successful financial strategies in dynamic business environments.
Recommended Textbook Corporate Finance 1st European Edition by David Hillier
Available Study Resources on Quizplus
31 Chapters
1975 Verified Questions
1975 Flashcards
Source URL: https://quizplus.com/study-set/3073
Page 2
Chapter 1: Introduction to Corporate Finance
Available Study Resources on Quizplus for this Chatper
45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/60974
Sample Questions
Q1) Assume for a moment that the shareholders in a corporation have unlimited liability for corporate debts.If so,what impact would this have on the functioning of primary and secondary markets for ordinary equity?
Answer: With unlimited liability,you would be very careful which shares you invest in.In particular,you would not invest in companies you expected to be unable to satisfy their financial obligations.Both the primary and secondary markets for ordinary equity would be severely hampered if this rule existed.It would be very difficult for a young,untested business to acquire enough capital to grow.
Q2) Which one of the following business types is best suited to raising large amounts of capital?
A)sole proprietorship
B)limited liability company
C)corporation
D)general partnership
E)limited partnership
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Corporate Governance
Available Study Resources on Quizplus for this Chatper
18 Verified Questions
18 Flashcards
Source URL: https://quizplus.com/quiz/60973
Sample Questions
Q1) One thing lenders sometimes require when loaning money to a small corporation is an assignment of the ordinary equity as collateral on the loan.Then,if the business fails to repay its loan,the ownership of the stock certificates can be transferred directly to the lender.Why might a lender want such an assignment? What advantage of the corporate form of organization comes into play here?
Answer: In the event of a loan default,a lender may wish to liquidate the business.Often it is time consuming and difficult to take title of all of the business assets individually.By taking control of the equity,the lender is able to sell the business simply by reselling the equity in the business.This illustrates once again the ease of transfer of ownership of a corporation.
Q2) Which one of the following business types is best suited to raising large amounts of capital?
A)Sole proprietorship.
B)Limited liability company.
C)Corporation.
D)General partnership.
E)Limited partnership.
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Financial Statement Analysis and Long-Term Planning
Available Study Resources on Quizplus for this Chatper
89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/60972
Sample Questions
Q1) _____ refers to the changes in net capital assets.
A)Operating cash flow
B)Cash flow from investing
C)Net working capital
D)Cash flow from assets
E)Cash flow to creditors
Answer: B
Q2) What is the change in the net working capital from 2009 to 2010?
A)£1,235
B)£1,035
C)£1,335
D)£3,405
E)£4,740
Answer: C
Q3) Why is interest expense excluded from the operating cash flow calculation?
Answer: Operating cash flow is designed to represent the cash flow a firm generates from its day-to-day operating activities.Interest expense arises from a financing decision and thus should be considered as a cash flow to creditors.
Page 5
To view all questions and flashcards with answers, click on the resource link above.
Chapter 4: Discounted Cash Flow Valuation
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/60971
Sample Questions
Q1) What is the annual percentage rate of 14.9% compounded continuously?
A)15.96%
B)16.01%
C)16.05%
D)16.07%
E)16.17%
Q2) The stated rate of interest is 10%.Which form of compounding will give the highest effective rate of interest?
A)Annual compounding
B)Monthly compounding
C)Daily compounding
D)Continuous compounding
E)It is impossible to tell without knowing the term of the loan.
Q3) There are three factors that affect the future value of an annuity.Explain what these three factors are and discuss how an increase in each will impact the future value of the annuity.
Q4) Using the example of a savings account,explain the difference between the stated rate and the annual percentage rate.
To view all questions and flashcards with answers, click on the resource link above.
6
Chapter 5: How to Value Bonds and Shares
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/60970
Sample Questions
Q1) One basis point is equal to:
A).01%.
B).10%.
C)1.0%.
D)10%.
E)100%.
Q2) High Noon Sun has a 5%,semiannual coupon bond with a current market price of 988.52.The bond has a par value of 1,000 and a yield to maturity of 5.29%.How many years is it until this bond matures?
A)4.0 years
B)4.5 years
C)6.5 years
D)8.0 years
E)9.0 years
Q3) A bond is listed as a 12 3/4s of July 2009.This bonds pays:
A) 127.50 in July and January.
B) 63.75 in July and January.
C) 127.50 in July.
D) 63.75 in July.
E)None of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Net Present Value and Other Investment Rules
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/60969
Sample Questions
Q1) The problem of multiple IRRs can occur when:
A)there is only one sign change in the cash flows.
B)the first cash flow is always positive.
C)the cash flows decline over the life of the project.
D)there is more than one sign change in the cash flows.
E)None of the above.
Q2) If a project is assigned a required rate of return equal to zero,then:
A)the timing of the project's cash flows has no bearing on the value of the project.
B)the project will always be accepted.
C)the project will always be rejected.
D)whether the project is accepted or rejected will depend on the timing of the cash flows.
E)the project can never add value for the shareholders.
Q3) List and briefly discuss the advantages and disadvantages of the internal rate of return (IRR)rule.
Q4) The IRR rule is said to be a special case of the NPV rule.Explain why this is so and why it has some limitations NPV does not?
Q5) Explain the differences and similarities between net present value (NPV)and the profitability index (PI).
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Making Capital Investment Decisions
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/60968
Sample Questions
Q1) The equivalent annual cost method is useful in determining:
A)the annual operating cost of a machine if the annual maintenance is performed versus when the maintenance is not performed as recommended.
B)the tax shield benefits of depreciation given the purchase of new assets for a project.
C)operating cash flows for cost-cutting projects of equal duration.
D)which one of two machines to acquire given equal machine lives but unequal machine costs.
E)which one of two machines to purchase when the machines are mutually exclusive,have different machine lives,and will be replaced once they are worn out.
Q2) The bottom-up approach to computing the operating cash flow applies only when:
A)both the depreciation expense and the interest expense are equal to zero.
B)the interest expense is equal to zero.
C)the project is a cost-cutting project.
D)no non-current assets are required for the project.
E)taxes are ignored and the interest expense is equal to zero.
Q3) When is it appropriate to use the equivalent annual cost (EAC)methodology,and how do you make a decision using it?
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Risk Analysis, Real Options, and Capital Budgeting
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/60967
Sample Questions
Q1) From the information below,calculate the accounting break-even point. Initial investment: 2,000
Fixed costs are 2,000 per year
Variable costs: 6 per unit
Depreciation: 250 per year
Price: 20 per unit
Discount rate: 10%
Project life: 4 years
Tax rate: 34%
A)88 units per year.
B)100 units per year..
C)143 units per year.
D)161 units per year.
E)None of the above.
Q2) Sensitivity analysis evaluates the NPV with respect to:
A)changes in the underlying assumptions.
B)one variable changing while holding the others constant.
C)different economic conditions.
D)All of the above.
E)None of the above.
Page 10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Risk and Return: Lessons From Market History
Available Study Resources on Quizplus for this Chatper
71 Verified Questions
71 Flashcards
Source URL: https://quizplus.com/quiz/60966
Sample Questions
Q1) You have a sample of returns observations for the Malta Stock Fund.The 4 returns are 7.25%,5.6%,12.5%,1.0%.What is the average return and variance of these returns?
A)6.50%; 16.9
B)6.60%; 22.5
C)6.60%; 4.75
D)26.35%; 67.6
E)None of the above.
Q2) Suppose you have £30,000 invested in the stock market and your banker comes to you and tries to get you to move that money into the bank's certificates of deposit (CDs).He explains that the CDs are 100% government insured and that you are taking unnecessary risks by being in the stock market.How would you respond?
Q3) Over the period of 1926 to 2005 in the US,small company shares had an average return of __ %.
A)8.8
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 10: Return and Risk: The Capital Asset Pricing Model
Capm
Available Study Resources on Quizplus for this Chatper
117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/60965
Sample Questions
Q1) A portfolio has 50% of its funds invested in Security One and 50% of its funds invested in Security Two.Security One has a standard deviation of 6.Security Two has a standard deviation of 12.The securities have a coefficient of correlation of 0.5.Which of the following values is closest to portfolio variance?
A).0027
B).0063
C).0095
D).0104
E)One must have covariance to calculate expected value.
Q2) The market has an expected rate of return of 9.8%.The long-term government bond is expected to yield 4.5% and Treasury bills are expected to yield 3.4%.The inflation rate is 3.1%.What is the market risk premium?
A)2.2%
B)3.3%
C)5.3%
D)6.4%
E)6.7%
Q3) Why are some risks diversifiable and some nondiversifiable?
Give an example of each.
Page 12
To view all questions and flashcards with answers, click on the resource link above.
Chapter 11: Factor Models and the Arbitrage Pricing Theory
Available Study Resources on Quizplus for this Chatper
36 Verified Questions
36 Flashcards
Source URL: https://quizplus.com/quiz/60964
Sample Questions
Q1) Style portfolios are characterized by:
A)their equity attributes; P/Es less than the market P/E are value funds.
B)their systematic factors,higher systematic factors are benchmark portfolios.
C)their equity attributes; higher equity attribute factors are benchmark portfolios.
D)their systematic factors,P/Es greater than the market are value portfolios.
E)There is no difference between systematic factors and equity attributes.
Q2) In the one factor (APT)model,the characteristic line to estimate b<sub>i</sub> passes through the origin,unlike the estimate used in the CAPM because:
A)the relationship is between the actual return on a security and the market index.
B)the relationship measures the change in the security return over time versus the change in the market return.
C)the relationship measures the change in excess return on a security versus GNP.
D)the relationship measures the change in excess return on a security versus the return on the factor about its mean of zero.
E)Cannot be determined without actual data.
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: Risk, cost of Capital, and Capital Budgeting
Available Study Resources on Quizplus for this Chatper
46 Verified Questions
46 Flashcards
Source URL: https://quizplus.com/quiz/60963
Sample Questions
Q1) The cost of equity for Ryan Corporation is 8.4%.If the expected return on the market is 10% and the risk-free rate is 5%,then the equity beta is ___.
A)0.48
B)0.68
C)1.25
D)1.68
E)Impossible to calculate with information given.
Q2) Given the sample of returns of Top Black Tar plc and the FTSE 100 index,calculate Top Black's correlation.What can be said about the relationship of Top Black and the market return behavior?
Q3) For the levered firm the equity beta is __________ the asset beta. A)greater than B)less than C)equal to D)sometimes greater than and sometimes less than E)None of the above.
Q4) Given the sample of returns of Top Black Tar plc and the FTSE 100 index,calculate Top Black's covariance and beta.
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Corporate Financing Decisions and Efficient
Capital Markets
Available Study Resources on Quizplus for this Chatper
38 Verified Questions
38 Flashcards
Source URL: https://quizplus.com/quiz/60962
Sample Questions
Q1) Ritter's study of Initial Public Offerings (IPOs)showed that the post offering share performance was:
A)less than the control group by about 2% in the five years following the IPO.
B)incorrectly priced at issuance because over the next five years the abnormal returns were greater than zero on average.
C)immaterial to the pricing of the IPO because future market performance is unknown at issuance.
D)equal across IPOs,irrespective of risk or which year they were issued.
E)All of the above.
Q2) Individuals that continually monitor the financial markets seeking mispriced securities:
A)tend to make substantial profits on a daily basis.
B)tend to make the markets more efficient.
C)are never able to find a security that is temporarily mispriced.
D)are always quite successful using only well-known public information as their basis of evaluation.
E)are always quite successful using only historical price information as their basis of evaluation.
Q3) Define the three forms of market efficiency.
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: Long-Term Financing: An Introduction
Available Study Resources on Quizplus for this Chatper
35 Verified Questions
35 Flashcards
Source URL: https://quizplus.com/quiz/60961
Sample Questions
Q1) The dedicated capital of a corporation is determined by:
A)the sum of the capital in excess of par and the retained earnings.
B)the par value of preference shares.
C)the sum of the treasury stock and the preference shares.
D)the number of shares issued multiplied by the par value of each share.
E)the market price of company's debt.
Q2) Financial deficits are created when:
A)profits and retained earnings are greater than the capital-spending requirement.
B)profits and retained earnings are less than the capital-spending requirement.
C)profits and retained earnings are equal to the capital-spending requirement.
D)All of the above.
E)None of the above.
Q3) Corporate financial officers prefer to use book values when measuring debt ratios because:
A)book values are more stable than market values.
B)debt covenant restriction are usually expressed in book value terms.
C)rating agencies measure debt ratios in book values terms.
D)All of the above.
E)None of the above.
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Capital Structure: Basic Concepts
Available Study Resources on Quizplus for this Chatper
81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/60960
Sample Questions
Q1) Uptown Interior Designs is an all equity firm that has 40,000 shares outstanding.The company has decided to borrow 1 million to buy out the shares of a deceased equityholder who holds 2,500 shares.What is the total value of this firm if you ignore taxes?
A) 15.5 million
B) 15.6 million
C) 16.0 million
D) 16.8 million
E) 17.2 million
Q2) A firm has a debt-to-equity ratio of 1.75.If it had no debt,its cost of equity would be 14%.Its cost of debt is 10%.What is its cost of equity if the corporate tax rate is 50%?
A)14.0%
B)16.0%
C)17.5%
D)21.0%
E)None of the above.
Q3) Explain homemade leverage and why it matters.
To view all questions and flashcards with answers, click on the resource link above.
17
Chapter 16: Capital Structure: Limits to the Use of Debt
Available Study Resources on Quizplus for this Chatper
53 Verified Questions
53 Flashcards
Source URL: https://quizplus.com/quiz/60959
Sample Questions
Q1) In a world with taxes and financial distress,when a firm is operating with the optimal capital structure:
I.the debt-equity ratio will also be optimal.
II.the weighted average cost of capital will be at its minimal point.
III.the required return on assets will be at its maximum point.
IV.the increased benefit from additional debt is equal to the increased bankruptcy costs of that debt.
A)I and IV only.
B)II and III only.
C)I and II only.
D)II,III,and IV only.
E)I,II,and IV only.
Q2) The basic lesson of MM theory is that the value of a firm is dependent upon the:
A)capital structure of the firm.
B)total cash flows of the firm.
C)percentage of a firm to which the bondholders have a claim.
D)tax claim placed on the firm by the government.
E)size of the shareholders claims on the firm.
Q3) What are the advantages of a prepackaged bankruptcy for a firm?
What are the disadvantages?
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Valuation and Capital Budgeting for the Levered Firm
Available Study Resources on Quizplus for this Chatper
42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/60958
Sample Questions
Q1) The appropriate cost of debt to the firm is:
A)the weighted cost of debt after tax.
B)the levered equity rate.
C)the market borrowing rate after tax.
D)the coupon rate pre-tax.
E)None of the above.
Q2) The term (B x r<sub>b)</sub> gives the:
A)cost of debt interest payments per year.
B)cost of equity dividend payments per year.
C)unit cost of debt.
D)unit cost of equity.
E)weighted average cost of capital.
Q3) Tip-Top Paving has a beta of 1.11,a cost of debt of 11% and a debt to value ratio of .6.The current risk free rate is 9% and the market rate of return is 16.18%.What is the company's cost of equity capital?
A)7.97%
B)8.96%
C)16.97%
D)17.96%
E)26.96%
Page 19
To view all questions and flashcards with answers, click on the resource link above.
Chapter 18: Dividend and Other Payouts
Available Study Resources on Quizplus for this Chatper
78 Verified Questions
78 Flashcards
Source URL: https://quizplus.com/quiz/60957
Sample Questions
Q1) The dividend-irrelevance proposition of Miller and Modigliani depends on the following relationship between investment policy and dividend policy.
A)The level of investment does not influence or matter to the dividend decision.
B)Once dividend policy is set the investment decision can be made as desired.
C)The investment policy is set before the dividend decision and not changed by dividend policy.
D)Since dividend policy is irrelevant there is no relationship between investment policy and dividend policy.
E)Miller and Modigliani were only concerned about capital structure.
Q2) Which of the following tend to keep dividends low?
I.state laws restricting dividends in excess of retained earnings.
II.terms contained in bond indenture agreements.
III.the desire to maintain constant dividends over time.
IV.flotation costs.
A)II and III only.
B)I and IV only.
C)II,III,and IV only.
D)I,II,and III only.
E)I,II,III,and IV.
To view all questions and flashcards with answers, click on the resource link above.
Page 20
Chapter 19: Equity Financing
Available Study Resources on Quizplus for this Chatper
54 Verified Questions
54 Flashcards
Source URL: https://quizplus.com/quiz/60956
Sample Questions
Q1) Discuss what a Dutch auction is and how it works.
Q2) In a best efforts offering the investment banker makes their money primarily by:
A)earning the spread between the buying and offering price.
B)earning a commission on each share sold.
C)earning the discount between the buying and offering price.
D)charging a flat fee for all services.
E)None of the above.
Q3) In terms of costs of issuing equity,Professor Clifford W.Smith finds that the ranking of methods,from cheapest to most expensive,is:
A)rights issue with standby underwriting,equity issue with underwriting,pure rights issue.
B)pure rights issue,rights issue with standby underwriting,equity issue with underwriting.
C)pure rights issue,preferred stock and debt issue with underwriting for an IPO,rights issue with standby underwriting.
D)equity issue with underwriting,rights issue with standby underwriting,pure rights issue.
E)equity issue with underwriting,pure rights issue,rights issue with standby underwriting.
To view all questions and flashcards with answers, click on the resource link above.
21
Chapter 20: Debt Financing
Available Study Resources on Quizplus for this Chatper
51 Verified Questions
51 Flashcards
Source URL: https://quizplus.com/quiz/60955
Sample Questions
Q1) A sinking fund is useful to a corporation because:
A)the corporation does not have to worry about paying the bondholders.
B)it provides the corporation with the option to buy the bonds back at the lower of face value or market price.
C)the payments to the sinking fund are not necessary when the firm is in financial difficulty.
D)they are simple and easy to monitor.
E)None of the above.
Q2) A bearer bond has the disadvantage(s)of:
A)being easily transferable if lost or stolen.
B)having to remit the coupon to a paying agent to collect.
C)no direct communication as it is held by an unidentified owner.
D)All of the above.
E)None of the above.
Q3) Zeros are bonds that have zero:
A)maturity.
B)call dates.
C)sinking funds.
D)coupon rates.
E)return.
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: Leasing and Off-Balance-Sheet Financing
Available Study Resources on Quizplus for this Chatper
35 Verified Questions
35 Flashcards
Source URL: https://quizplus.com/quiz/60954
Sample Questions
Q1) A lease with high payments early in its life which then decline to termination would:
A)provide greater cashflow to the lessee in the beginning years.
B)be evidence of tax avoidance and not acceptable to the tax authorities.
C)be qualified as a capital lease under IFRS.
D)provide a lower residual value and thus ensure a bargain-purchase price option.
E)All of the above.
Q2) Your firm is considering leasing a new computer.The lease lasts for 9 years.The lease calls for 10 payments of £1,000 per year with the first payment occurring immediately.The computer would cost £7,650 to buy and would be straight-line depreciated to a zero salvage over 9 years.The actual salvage value is negligible because of technological obsolescence.The firm can borrow at a rate of 8%.The corporate tax rate is 30%. What is the NPV of the lease relative to the purchase?
A)£-1,039.78
B)£ 339.78
C)£ 360.22
D)£6,610.22
E)None of the above.
To view all questions and flashcards with answers, click on the resource link above.
Page 23
Chapter 22: Options and Corporate Finance
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/60953
Sample Questions
Q1) Assume that the delta of a call option on a firm's assets is .792.This means that a 50,000 project will increase the value of equity by:
A) 27,902.
B) 39,600.
C) 43,820.
D) 63,131.
E) 89,600.
Q2) You purchased four WXO 30 call option contracts at a quoted price of .34.What is your net gain or loss on this investment if the price of WXO is 33.60 on the option expiration date?
A)- 1,576
B)- 136
C) 1,304
D) 1,440
E) 1,576
Q3) Explain the rationale behind the statement that equity is a call option on the firm's assets.When would a shareholder allow the call to expire?
Q4) What are the upper and lower bounds for an American call option? Explain what would happen in each case if the bound was violated.
To view all questions and flashcards with answers, click on the resource link above. Page 24
Chapter 23: Options and Corporate Finance: Extensions and Applications
Available Study Resources on Quizplus for this Chatper
32 Verified Questions
32 Flashcards
Source URL: https://quizplus.com/quiz/60952
Sample Questions
Q1) Which of the following is not part of the Black Scholes option pricing model?
A)Standard deviation
B)Time to maturity
C)Exercise price
D)Par value of the company's equity
E)Interest rate
Q2) The volatility of interest rates affect the value of the project by:
A)increasing the value as volatility increase.
B)increasing the value as volatility decrease.
C)decreasing the value as volatility increase.
D)interest rate volatility does not affect value.
E)None of the above.
Q3) An example of a special option is:
A)an executive share options.
B)the embedded option in a start-up company.
C)the option in simple business contracts.
D)the option to shut down and reopen a project.
E)All of the above.
Q4) Why would the company pay the executive in options as opposed to salary?
25
To view all questions and flashcards with answers, click on the resource link above.
Chapter 24: Warrants and Convertibles
Available Study Resources on Quizplus for this Chatper
44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/60951
Sample Questions
Q1) Diamond Drill Inc.has 150,000 shares and 15,000 warrants outstanding.A warrant holder can purchase a new share of equity for five warrants and 5.00 per warrant.The equity is currently selling for 27 per share.If the warrants are all exercised immediately,what would be the market price of the equity?
A) 22.78
B) 25.13
C) 26.96
D) 28.00
E) 29.00
Q2) Diamond Drill Inc.has 150,000 shares and 15,000 warrants outstanding.A warrant holder can purchase a new share of equity for five warrants and 5.00 per warrant.The equity is currently selling for 27 per share.The holder of a 1,000 face value bond can exchange the bond any time for 25 shares of equity.The conversion ratio is: A)25.
B)40.
C)100.
D)Depends on the current market price of the bond.
E)None of the above.
To view all questions and flashcards with answers, click on the resource link above.
26
Chapter 25: Financial Risk Management With Derivatives
Available Study Resources on Quizplus for this Chatper
49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/60950
Sample Questions
Q1) A futures contract on gold states that buyers and sellers agree to make or take delivery of an ounce of gold for £800 per ounce.The contract expires in 3 months.The current price of gold is £700 per ounce.If the price of gold rises and continues to rise every day over the 3 month period,then when the contract is settled,the buyer will_____and the seller will _____.
A)lose; gain
B)gain; lose
C)gain; break even
D)gain; gain
E)lose; lose
Q2) In percentage terms,higher coupon bonds experience a _______ price change compared with lower coupon bonds of the same maturity given a change in yield to maturity.
A)greater
B)smaller
C)similar
D)smaller or greater
E)None of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 27
Chapter 26: Short-Term Finance and Planning
Available Study Resources on Quizplus for this Chatper
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/60949
Sample Questions
Q1) Restrictive short-term financial policies regarding current asset management include three basic actions.List and briefly describe each action.
Q2) Weson has sales of £462,000,costs of goods sold of £308,000 and average trade receivables of £48,900.How long does it take its credit customers to pay for their purchases?
A)36.09 days.
B)38.63 days.
C)41.23 days.
D)44.20 days.
E)57.95 days.
Q3) Which of the following is not included in current liabilities?
A)Trade payables.
B)Prepaid insurance.
C)Accrued expenses payable.
D)Taxes payable.
E)Notes payable.
Q4) List and describe the three basic types of secured inventory loans.What are the advantages and disadvantages of each type of loan?
To view all questions and flashcards with answers, click on the resource link above.
28
Chapter 27: Cash Management
Available Study Resources on Quizplus for this Chatper
58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/60948
Sample Questions
Q1) On an average day,a company writes cheques totaling 1,500.These cheques take 7 days to clear.The company receives cheques totaling 1,800.These cheques take 4 days to clear.The cost of debt is 9%. What is the firm's net float?
A) -3,300
B) -300
C) 300
D) 3,300
E)None of the above.
Q2) The Timberline firm expects a total need of 12,500 over the next 3 months.They have a beginning cash balance of 1,500,and cash is replenished when it hits zero.The fixed cost of selling securities to replenish cash balances is 3.50.The interest rate on marketable securities is 8% per annum.There is a constant rate of cash disbursement and no cash receipts during the month. Using the Baumol model,what is the optimum cash holding?
A) 362.28
B) 1,045.83
C) 1,251.86
D) 3,613.82
E)None of the above.
To view all questions and flashcards with answers, click on the resource link above.
Page 29
Chapter 28: Credit Management
Available Study Resources on Quizplus for this Chatper
42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/60947
Sample Questions
Q1) Aging schedules are flawed because they:
A)do not identify specific customers.
B)show the percent of accounts that are be past due.
C)only give the yearly or periodic average of account age.
D)All of the above.
E)None of the above.
Q2) When a firm sells its trade receivables to a financial institution,it is called:
A)captive financing.
B)collateralization.
C)securitization.
D)legalization.
E)None of the above.
Q3) Ali Storage Company projects 800 customers next year.Of these,600 have been profitable and have never defaulted on past obligations,while 200 have not been profitable.All of the unprofitable accounts are expected to default if given credit.Ali can pay £0.40 to an agency that will tell them whether a customer has been profitable.If Ali's price per unit is £10,and its cost per unit is £6,should they allow the credit check to be performed?
Assume a discount rate of 1%.
To view all questions and flashcards with answers, click on the resource link above.
Page 30
Chapter 29: Mergers and Acquisitions
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/60946
Sample Questions
Q1) The distribution of shares in a subsidiary to existing parent company equityholders is called a(n):
A)lockup transaction.
B)bear hug.
C)equity carve-out.
D)spin-off.
E)split-up.
Q2) A business deal in which all publicly owned equity in a firm is replaced with complete equity ownership by a private group is called a:
A)tender offer.
B)proxy contest.
C)going-private transaction.
D)leveraged buyout.
E)consolidation.
Q3) When evaluating an acquisition,you should:
A)concentrate on book values and ignore market values.
B)focus on the total cash flows of the merged firm.
C)apply the rate of return that is relevant to the incremental cash flows.
D)ignore any one-time acquisition fees or transaction costs.
E)ignore any potential changes in management.
To view all questions and flashcards with answers, click on the resource link above. Page 31
Chapter 30: Financial Distress
Available Study Resources on Quizplus for this Chatper
19 Verified Questions
19 Flashcards
Source URL: https://quizplus.com/quiz/60945
Sample Questions
Q1) Firms deal with financial distress by:
A)selling major assets
B)merging with another firm
C)issuing new securities
D)exchanging debt for equity
E)All of the above.
Q2) A firm in financial distress that reorganizes:
A)continues to run the business as a going concern.
B)must have acceptance of the plan by the creditors.
C)may distribute new securities to creditors and shareholders.
D)All of the above.
E)None of the above.
Q3) Prepackaged bankruptcies are:
A)described as a combination of a private workout and a liquidation.
B)the easiest way to transfer wealth to the shareholders.
C)described as a combination of a completed private workout and the formal bankruptcy filing.
D)All of the above.
E)None of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 32
Chapter 31: International Corporate Finance
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/60944
Sample Questions
Q1) The acronym LIBOR stands for:
A)London Interbank Offer Rate.
B)Lending Institution Bank Receipt.
C)Leading Indicator Borrowing Rate.
D)Loan Interest Bank Order Receipt.
E)London International Opportunity Rate.
Q2) Currently,£1 will buy C$1.36 while £1.10 will buy 1.What is the exchange rate between the Canadian dollar and the euro?
A)C$1 = 1.10
B)C$1 = .9091
C)C$1 = 1.2364
D)C$1.36 = 1.10
E)C$1.36 = .9091
Q3) The implicit exchange rate between two currencies when both are quoted in some third currency is called a(n):
A)open exchange rate.
B)cross-rate.
C)backward rate.
D)forward rate.
E)interest rate.
To view all questions and flashcards with answers, click on the resource link above. Page 33