1. t/f the goal of the shareholders wealth maximization considers the risk of the various financial decisions 2. Profit maximizatiom does not adequately de
... [Show More] scribe the goal of the firm because 3. what is the sales revenue minus cost of goods sold and operating expenses known as for income state- ment purposes` true a. profit maximiza- tion does not re- quire the consider- ation of risk b. proft maximiza- tion ignores the the timing of a pro- ject's return EBIT 4. The debt ratio is a measure of a firms leverage 5. what is the formula for debt ratio total debt/ total as- sets 6. which of the following is always a non cash expense depreciation 7. bonds are traded In the money markets, while com- mon stock is traded in the capital markets. 8. what is a non cash expense expense reported on the income statement of the current accounting period but there was no related cash payment dur- ing the period 9. if current market interest rates rise what will happen to the value of outstanding bonds? 10. if current market interest rates fall what will happen to the value of outstanding bonds they will fall they will increaser 11. depreciation expense affect tax related cash flows by decreasing tax- able income thus reducing taxes 12. the most expensive source of captial new common stock 13. put these in order of most expensive to least expen- sive sources of capital (highest to lowest) 14. what are corporate bonds, common stocks, treasury bonds, financial leases classifies as money market or capital market 15. what is a negotiable certificate of deposit , commercial paper, treasury bills, classified as new common stock retained earnings preferred stock debt capital market money market in- strument 16. money market instruments are classified as short term debt in- sturments 17. what are some examples of money market instru- ments treasury bills, CDS commercial pa- per, bankers ac- ceptances 18. capital market insturments are classifies as long term financial securities 19. The market in which new issues of a security are sold to initial buyers. the only time the issuing firm ever gets any money for these securites 20. the additional shares by a company whose share are already publicly traded primary markets seasoned equity offering 21. secondary market the market in which previously issued securities are traded. the issuing corporation does not get any mon- ey for stocks traded on ? 22. capital market instruments include corporate equities 23. ultimate control in the a corporation is vested in the board of directors (T/F) False; stockhold- ers have control and appoint 24. a balance sheet reflects the current market value of a false; historical firms assets and liabilites 25. the lower the average collection period ratio, the more efficient is the firm in manging its investment in ac- counts receivables 26. what is the average number of days necessary to convert business recievables into cash 27. a security with a beta of zero has a required rate of return equal to the overall market rate of return 28. the better the bond rating the lower the rate of return demanded in the capital markets true; lower the more efficient average collection period ratio false; beta zero = risk free overall market re- turn = risk free rate true 29. how does bond rating affect yield? the greater the rat- ing the lower the yield 30. common stock represents a claim on residual income true 31. the required rate of return reflects the cost of funds needed to finance a project 32. the firm financed completely with equity capital has a cost of capita. equal to the required return on common stock true; reflects WAC true; 100% equity = required return of stock 33. the money market is usually thought of as dealing with long ter, debt instruments issued by firms with excellent credit ratings 34. test 1A 35. T/f when making financial decisions managers should ignore marginal or incremental cash flows 36. t/f unlike a propriertorship, a limited partnerships is an entity that legally functions separate and apart from its owners 37. a business owned by individual, owners maintains ti- tle to assets and profits, unlimited liability, termination occurs on owners death or by owners choise false; money mar- ket is short term false false proprietorship 38. two or more persons come together as co-owners partnership 39. two or more persons come together as co-owners; all partners are fully responsible for liabilities incurred by the partnership 40. one or more partners can have limited liability restrict- ed to the amount of capital invested in the partnership 41. legally functions separate and apart from its owners, can be sued purchase sell and own property,,share- holders dictate direction and polciies elected often times through board of directors 42. T/F a corporation that needs to raise cash may sell securities to investors in the secondary market 43. t/f if the debt ratio increase a firm is likely to face higher financial risk 44. t/f bonds are traded in the money markets, while com- mons stock is traded in the capital markets general partner- ship limited partnership corporation false; primary mar- ket true false 45. T/F if a firm increases its asset turnover, then it is likely TRUE that the return on equity will increase 46. t/f a balance sheet is a statement of the financial po- sition of the firm on a given date including, its assets holdings, liabilities, equity 47. t/f when the present financial ratios of a firm are com- pared with similar ratios for another firm in the same industry it is called trend analyis 48. t/f an increase in the average collection period will likely cause an decrease in liquidity true false true 49. gross profit is equal to sales - COGS 50. money market instruments include treasury bills 51. which of the following accounts does NOT belong on the balance sheet COGS Accounts payable preferred stock retained earnings COGS 52. what accounts included on balance sheet assets(cash, A/R, inventory, supplies property plant equipment, in- tangible assets goodwill, liabilities: notes payable, ac- counts payable un- earned rev, stock- holders equity: common stock, re- tained earnings, treasury sotck) 53. what accounts are included on the income statement? 54. what information does a firms statement of cash flows provide to the viewing public? 55. all of the following statements about balance sheets are true except a. assets-liabilities= shareholders equity b. are reported at historical cost c.balance sheets show average asset balance over a one year period. d. a blaanc ehseet reports a companys financial posi- tion at a specific point in tome 56. the two principal external sources of financiaing for corporations are 57. the primary goal of a financial manager of a corpora- tion is to Sales- COGS, gross profit op- erating expenses admin expenses, operating income, net income a report docu- menting a firms cash inflows and cash outflows from operating, financ- ing, and invest- ing activities for a defined period of time assets are report- ed at historical cost debt and equity maximize share- holders wealth 58. the principle of risk return trade off means that a rational invest- pr will only take a higher risk if he ex- pects a higher re- turn 59. current ratio which of the following ratios would be affected the most if our suppliers give us less credit causing sig- nificant decrease in accounts payable 60. the financial manager most directly responsible for producing the companys financial statements and di- recting its cost accounting functions is the 61. all of business organizations provide limited liability to their owners except (general partnership , s-type corporation, corporation, limited liability corporation 62. which of the following is an advantage of the sole propritorshop ? 63. this company type has the greatest ability to attract new captial 64. this company type has the least ability to attract a new captial controller general partner- ship no significant le- gal requriements for starting a busi- ness corporation sole prop 65. a current ratio of a firm would be increased by which a building owned by the firm is sole for cash 66. test 2 67. t/f the present value of a future amount increase as the discount rate increase 68. t/f accounting profits is the most relevant variable the financial manager uses to measure returns 69. t/f the beta coeficent measures a company specific risk 70. t/f diversification allows investors to eliminate sys- tematic risk true false false false 71. subordinated debentrues are more risky than unsub- ordinated debentures because the claims of subour- dinated debenture holders are less likely to be honore din the event of liquidation 72. the price of a short term bonds is more sensitive to changes in the market interest rates than the price of long term bonds 73. if the market price of a coupond bonds is less than its par value, then the coupon rat eof that bond is likely to be less than the market intrest rate for similar bonds 74. of the following different types of securities which is typically considered the riskiest 75. a stocks beta measure of risk that be diversi- fied away 76. as we add diverse securities of other companies to our portfolio, which type of risk declines 77. if we were able to fully diversify, what is the appropri- ate measure of risk to use true true true treasury bills systematic ; can- nont unsystematic risk beta 78. which of the following is a false concerning bonds debentures are se- cured by specific assets other than real estate 79. if the market price of a bond increses then ; the yield to maturi- ty decrases 80. test 3a 81. the cost of new issues preferred stock is equal to preferred stock dividend divdied by the net selling price of preferred 82. we compute the proftiabitly index of a capital budget- ing proposal by 83. the cost of retained earnings is less than the cost of new common stock because 84. using the constant growth dividend valuation model and assuming dividends will growth a constant rate forever the increase in the value of stock each year should be equal tp the 85. in general which of the following rankings form high- est to lowest cost is more accurate 86. in capital budgeting analysis, when computing the weighted average a cost of capital, the CAPM ap- proach is typically used to find which of the following 87. preferred stock valuation usually treats the preferred stock as 88. what is the one advantage of the MIRR over the IRR method 89. t/f preferred stock is referred to as hybrid security because it has many charactersitcs of both common stock and bonds and bodns dividing the pre- sent value of the annual after tax cash flows by the initial outlay flotation costs are incureed when new stock is is- sued growth rate in divi- dends cost of new com- mon stock, cost of retained earnings, cost of preferred stock, cost of debt cost of internal eq- uity perpetuity MIRR assumes cash flow are rein- vested at the re- quired return and IRR Does not true 90. true the fact that interst expense is tax deductible while didvidends are not makes the cost of debt usually lower than the cost of equity 91. if a firm does not have enough money to pay any common stock dividends, is it at risk of being taken into bankruptcy by the common shareholders 92. the firm financed mainly with debt has a cost of capital higher tha the required return on common stock 93. t/f the pre tax cost of debt is always higher than the after tax cost of debt 94. a projects equivalent annual annuity is the annuity cash flows that yields the same present value as the projects NPV 95. t/f the modified IRR method assumes that projects cash flows are reinvested at the IRR 96. t/f the weighted average cost of capital is the cost of funding investment projects if the firm continues to use the same capital strucutre 97. t/f the payback period method uses all the cash flows related to the project false false true true false true false [Show Less]