Amongst corporations, sole proprietorships and partnerships, approximately what percentage of revenues are generated by corporations?
50%
42%
33%
82%
Question 2
What should be the financial goal of any firm?
attracting and acquiring capital and investing it
maximization of the owners’ wealth
offering quality products at fair prices
quality customer service
Question 3
4 pts
Which of the following statement(s) is \ are true regarding the corporate management team?
In a corporation, ownership and direct control are typically separate.
Board of Directors is elected by shareholders and has ultimate decision-making authority
The Chief Executive Officer (CEO) – the Board typically delegates day-to-day decision making to the CEO.
All of the above
Question 4
4 pts
When calculating the present value of either a future single sum or a future annuity, it involves a process called discounting. The applicable interest rate to perform the discounting function is usually called the
yield to maturity
compound interest rate
discount rate
none of the above
Question 5
4 pts
_________________ are used to present additional information about items included in the financial statements and to present additional financial information.
stock certificates
Notes to financial statements
Preferred stocks
Convertible securities
Question 6
4 pts
What should be the financial goal of any firm?
maximization of the owners’ wealth
attracting and acquiring capital and investing it
offering quality products at fair prices
quality customer service
Question 7
4 pts
A competitive market is one in which a _____ numbers of producers compete with each other to satisfy the wants and needs of a _____ number of consumers.
Large, small
Small, small
Large, large
Small, large
Question 8
4 pts
The Valuation Principle is an analysis between the value of the ______ of a financial alternative and the value of its ______.
revenues, income
benefits, costs
expenses, costs
Question 9
4 pts
The Net Present Value rule implies that we should compare a project’s net present value (NPV) to___________. (zero \ future value \ the past).
Zero
Future Value
The Past
An Estimate
Question 10
4 pts
The internal rate of return (IRR) rule will _______ agree with the Net Present Value rule on a given investment project.
always
never
sometimes
none of the above
Question 11
5 pts
The law of one price exists due to arbitrage opportunities. If the price of a security, commodity or asset is different in two different markets, then an arbitrageur will ______ the asset in the more expensive market and ________ it where prices are lower.
sell, purchase
purchase, sell
purchase, purchase
sell, sell
Question 12
5 pts
Approaching every problem using a timeline is a(n) ________ idea because timelines identify events in a transaction or investment which might otherwise be easily overlooked.
good
bad
indifferent
unrealistic
Question 13
5 pts
The present value (PV) of a stream of cash flows is the _______ the present values of each individual cash flow
difference between
product of
sum of
same as
Question 14
5 pts
As the number of periods increases, present value (increases\decreases\stays the same).
increases
decreases
stays the same
is unrelated
Question 15
5 pts
When a constant cash flow will occur at regular intervals for a finite number of periods of time, it is called a(n) __________.
annuity
perpetuity
interest payment
principle payment
Question 16
5 pts
When a constant cash flow will occur at regular intervals forever, it is called a(n) ___________.
annuity
perpetuity
interest payment
principle payment
Question 17
5 pts
The NPV measures the ______ change in shareholder wealth that arises from undertaking a project.
consistent
dollar
annual
semi-annual
Question 18
5 pts
When calculating the present value of either a future single sum or a future annuity, the applicable interest rate is usually called the _______ rate
compounding
inverted
market
discount
Question 19
5 pts
To endow a perpetuity is the same as calculating the present value (PV) of a perpetuity. Say you want to endow an annual graduation party at your alma mater. You want the event to be a memorable one, so you budget $30,000 per year forever for the party. If the university earns 8% per year on its investments, and if the first party is in one year’s time, how much will you need to donate to endow the party?
The formula for PV of a perpetuity = C\r; = $30,000 \ 0.08; =
$3,750
$37,500
$375,000
$3,750,000
Question 20
5 pts
With an Ordinary Annuity, payments are required at the ________ of each period. An example of this is bonds which usually pay coupon payments at the end of every six months until the bond's maturity date.
beginning
middle
end
payments are not required
Question 21
5 pts
Sales of securities that the seller does not own is called a:
stop-loss order
short sale
limit order
maintenance margin
Question 22
5 pts
What is the name of the market where money market securities, bonds, and mortgages are originated and traded?
debt securities market
foreign exchange market
derivative securities market
equity securities market
Question 23
5 pts
If an investor feels the price of a stock will decline in the future, which trade should the investor undertake?
market order
buy on margin
limit order
short sale
Question 24
5 pts
For risk averse investors, how much return is expected for taking on more risk?
lower
equal
zero
higher
Question 25
5 pts
A ___________________ is a highly regulated document which details the issuers operations and finances and must be provided to each buyer of a newly issued security.
Prospectus
An underwriting agreement
A best efforts agreement
none of the above
Question 26
5 pts
Which of the following statements about liquidity ratios is true?
The lower the quick ratio relative to the current ratio, the safer a firm is in terms of liquidity.
The higher the current ratio, the more likely a firm is able to pay its short-term obligations.
The quick ratio is always between 0 and 1.
All the above statements are true.
Question 27
5 pts
The ability of a firm to meet its short-term debt obligations as they come due is indicated by which of the following ratios:
liquidity ratios
asset utilization ratios
financial leverage ratios
profitability ratios
Question 28
5 pts
Which one of the following financial statements reports a firm’s assets and the claims on assets?
balance sheet
income statement
statement of changes in financial position
cash flow statement
Question 29
5 pts
The extent to which assets are used to support sales is indicated by which of the following ratios:
liquidity ratios
asset utilization ratios
financial leverage ratios
profitability ratios
Question 30
5 pts
The extent to which assets are financed by borrowed funds and other liabilities is indicated by:
liquidity ratios
asset utilization ratios
financial leverage ratios
profitability ratios
Question 31
5 pts
The basic price that equates the demand for and supply of loanable funds in the financial markets is the __________:
interest rate
yield curve
term structure
cash price
none of the above
Question 32
5 pts
Federal obligations usually issued for maturities of two to ten years are called:
Treasury bonds
Treasury notes
Treasury bills
Agency issues
Question 33
5 pts
An increase in the demand for loan-able funds, holding supply constant, will cause interest rates to:
increase
decrease
stay the same
none of the above
Question 34
5 pts
As interest rates rise, the prices of existing bonds will:
rise
stay the same
fall
either a or b
Question 35
5 pts
In an inflationary period, interest rates have a tendency to:
rise
fall
stay the same
act erratically
