HOW WAS THE RETIREMENT OF DEBT ACCOMPLISHED?

21 May HOW WAS THE RETIREMENT OF DEBT ACCOMPLISHED?

A Cash Flow Statement can be used to answer a
variety of questions. Which of the following would this statement not be likely
to answer?

A)
Why was money borrowed?

B)
Where did profits go?

C)
How was the retirement of debt accomplished?

D)
What is the current level of inventory?

25)
Which of the following ratios would be the best way to determine how customers
are paying for their purchases?

A)
total asset turnover

B)
average collection period

C)
current ratio

D)
inventory turnover

26)
You are an investor and you want to achieve the highest possible return on your
money. Which would be best for you to do, everything else equal?

A)
Set aside funds on a semi-annual basis to make investments.

B)
Set aside funds on a monthly basis to make investments.

C)
Set aside funds on a quarterly basis to make investments.

D)
Set aside funds on an annual basis to make investments.

E)
All of the above will result in the same return.

27)
The time value of money is created by

A) the fact that the value of saving
money for tomorrow could be more or less than spending it today.

B) the existence of profitable
investment alternatives and positive interest rates.

C)
the elimination of the opportunity cost as a consideration.

D)
the fact that the passing of time increases the value of money.

28) Which of the following has a beta of one?

A)
a risk-free asset

B)
All assets have a beta greater than one.

C)
the market

D)
All assets have a beta less than one.

29) Which of the following has a beta of zero?

A)
a risk-free asset

B)
All assets have a beta greater than zero.

C)
the market

D)
none of the above

30)
The appropriate measure for risk according to the capital asset pricing model
is

A)
the coefficient of variation of a firm’s cash flows.

B)
the standard deviation of a firm’s cash flows.

C)
alpha.

D)
none of the above

31) What is diversifying among different kinds of
assets known as?

A)
capital asset classification

B)
portfolio funding

C)
multi-diversification

D)
asset allocation

32) Which of the following statements is true?

A)
All bonds have equal interest rate risk.

B) Short-term bonds have greater
interest rate risk than do long-tenn bonds.

C) Long-term bonds have greater
interest rate risk than do short-tenn bonds.

D)
none of the above

33)
As interest rates, and consequently investors’ required rates of return, change
over time, the _______________ of outstanding bonds will change as a result.

A)
coupon interest payment

B)
maturity date

C)
price

D)
par value

34) If market interest rates decline

A)
short-term bonds will decline in value more than long-term bonds.

B) long-term bonds will rise in
value more than short-term bonds.

C)
short-term bonds will rise in value more than long-term bonds.

D)
long-term bonds will decline in value more than short-term bonds.

35) A bond will sell at a discount (below par value)
if

A) current market interest rates are
moving in the same direction as bond values.

B) the market value of the bond is
less than the present value of the discount rate of the bond.

C) investors’ required rate of
return is above the coupon rate of the bond.

D)
the economy is booming.

36)
If a corporation were to choose between issuing a debenture, a mortgage bond,
or a subordinated debenture, which would have the highest yield to maturity,
everything else equal?

A)
the mortgage bond

B) the subordinated debenture

C)
the debenture

D)
All of the above types of bonds would have the same coupon rate.

37) All of the following affect the value of a share
of common stock except

A)
the par value of stock.

B)
the future dividends.

C)
the future growth in dividends.

D)
investors’ required rate of return.

38)
Many preferred stocks have a provision that entitles a company to repurchase
its preferred stock from their holders at stated prices over a given time
period. What is the name of this provision?

A)
Callable

B)
Cumulative

C)
Portable

D)
Convertible

39)
What provision entitles the common shareholder to maintain a proportionate
share of ownership in a firm?

A)
the cumulative feature

B)
the preemptive right

C)
the proxy

D)
the convertible feature

40)
How is preferred stock affected by a decrease in the required rate of return?

A)
the dividend increases

B)
the value of a share of preferred stock decreases

C)
the dividend decreases

D) none of the above

41) Preferred stock is similar to a bond in the
following way

A)
preferred stock always contains a maturity date.

B)
both provide interest payments.

C)
both contain a growth factor similar to common stock.

D)
both investments provide a stated income stream.

42) A significant advantage of the payback period is
that it

A) tends to reduce firm risk because
it favors projects that generate early, less uncertain returns.

B)
gives proper weighting to all cash flows.

C)
places emphasis on time value of money.

D)
allows for the proper ranking of projects.

43) Incremental cash flows refer to

A)
the cash flows of a project, minus financing costs.

B)
the new cash flows that will be generated if a project is undertaken.

C) the cash flows that are foregone
if a firm does not undertake a project.

D) the difference between after-tax
cash flows and before-tax accounting profits.

44) What method is used for calculation of the
accounting beta?

A)
sensitivity analysis

B) regression analysis

C)
simulation

D)
both A and C

45) Market Value Added is

A) the additional value received for
a firm’s common stock once the firm is listed on the NYSE.

B) stockholder’s required rate of
return that is based upon the market value of a firm’s common stock relative to
the book value of a firm’s common stock.

C) the difference in the current
market value of a firm and the sum of all the funds that have been invested in
the firm over its entire operating life.

D) market value of a firm’s common
stock, plus the book value of its common stock.

46)
Which of the following would be considered a variable cost in a manufacturing
setting?

A)
direct labor

B)
administrative salaries

C)
insurance

D)
rent

E)
all of the above

47) A
high degree of variability in a firm’s earnings before interest and taxes
refers to

A)
financial risk.

B)
financial leverage.

C)
operating leverage.

D) business risk.

48) The true owners of the corporation are the

A)
board of directors of the firm.

B)
preferred stockholders.

C) common stockholders.

D)
holders of debt issues of the firm.

49) A firm’s “sustainable rate of growth”
is positively affected by