1. (In this question, a word or phrase may be used more than once) Complete the following sentences with the most appropriate term or phrase:

a) Already outstanding securities are traded in the ______________markets.

b) An IPO is a ____________________ market transaction.

c) Firms raise capital by selling newly issued securities in the ___________markets.

d) New York Stock exchange is an example of a ____________________ market.

e) The ___________ of the securities traded differentiates the money market from the capital market.

f) The primary goal of a financial manager should be ___________________

g) Markets for short-term debt securities are called ___________ markets.

h) ______________ ________________ bring together people and organizations wanting to borrow money with those having surplus funds.

i) Markets for long-term debt and equity are called __________ markets j) In a dealer market, the buyer and seller are not brought together directly but instead have their orders executed on the _________________.

k) The financial controller of a company is typically responsible for ___________________

l) The primary disadvantage of the corporate form of organization is _________________ ______________.

2. Select all that is/are true about the financial markets.

a. Financial markets bring the buyers and sellers of debt and equity together.

b. Stocks trading on an organized exchange such as the NYSE are also referred to as listed securities

c. Securities traded between two shareholders happen in the primary market.

d. When a firm first sells shares to the public this is a primary market transaction.

e. The OTC market has a central location and is also an auction market.

f. On a typical day in the US the largest volume of trading in auction markets occurs in the OTC market

3. Select all that is/are true about the role of financial managers and the types of financial decisions they make.

a. The duties of the financial manager includes determining the capital structure and which projects the firm should undertake.

b. The optimal financial management strategy of a financial manager is to reduce the overall risk level of the firm.

c. Capital Budgeting function involves planning and determining the firms short term investments.

d. Size and timing of cash flows is important in a capital budgeting decision.

e. Capital structure describes the mix of short-term liabilities a firm uses to finance its short-term assets.

f. Determining the appropriate level of inventory is a working capital management function.

4. Financial Analysis is not just a tool for financial mangers within the firm. Identify the groups of users to the most appropriate way in which they may use financial ratio analysis.

a) ___________________ to compare investment among companies.

b) ____________to compare performance over time.

c) _________ may want to evaluate the chances of being repaid money they may have lent to the organization.

d) ____________________ to assess organizational or industry financial health and performance.

e) _________________may want to determine credit worthiness.

f) _____________ to decide whether or not to grant credit to a company.

5. Given the following information, what is the amount of the Operating Cash Flow?

Sales	$16,500
Operating expenses	$3,118
COGS	$10,350
Depreciation	$1, 120
Interest Expense	$900
Tax Rate	34%

6. Simple Company Ltd. has EBIT of $6.5 million and a 17% tax rate. It had $850,000 in depreciation expenses with a $680,000 increase in working capital. It had another $150,000 in capital expenditures. What is the company's free cash flow?

7. You are given the following information for McGee Corporation. Prepare (in good form) a balance sheet for 2018 for the company.

	2018
Accounts Receivable	$2,480
Property, Plant and Equipment	16,400
Cash	13,300
Accumulated Depreciation	6,020
Inventory	5,800
Accounts Payable	11,800
Common stock	9,990
Long-Term Debt	7,800
Retained Earnings	2,370

8. Identify whether each of the following items increase or decrease cash flow.

a) Increase in investments

b) Increase in inventory

c) Increase in notes payable d) Depreciation expense

e) Increase in accounts receivable

f) Decrease in accounts payable

g) Decrease in prepaid expenses

h) Dividend payment

i) Increase in accrued expenses

9. You are analysing the leverage of two firms and you noted the following (all values in millions of dollars)

	Debt	Book Equity	Market Equity	Operating Income	Interest Expense
Firm A	65	75	80	45	12
Firm B	60	40	50	22	10

a) What is the market debt-to-equity ratio of each firm? (Answer to 2 decimal places)

b) What is the book debt-to-equity ratio of each firm? (Answer to 2 decimal places)

c) What is the interest cover ratio of each firm? (Answer to 2 decimal places)

d) Based on your calculations above, which of the following statement is most correct about firms A and B?

i. Firm A is most likely to default on its debt

ii. Firm B is most likely to default on its debt

iii. Lenders are more likely to favour Firm B

iv. Lenders are more likely to favour Firm

10. Select all that is/are true about the cash flows of a firm

a. In measuring free cash flows we are more interested in considering cash flows from an accounting perspective rather than the perspective of the firms shareholders and investors.

b. Net cash flow does not include after-tax interest expense.

c. While an income statement measures a companys profits, profits are not the same as cash flows; profits are calculated on a cash basis rather than an accrual basis.

d. A firm which invested more cash in assets and working capital than operations, will have a positive operating cash flow and a negative cash flow from assets.

e. Free cash flow from an operating perspective must equal free cash flow from a financing perspective

f. If dividends paid is greater than net equity sold for the year, then the cash flow to stockholders is negative.

g. FCF may be defined as net operating profit after taxes (NOPAT) minus the amount of net investment in operating working capital and fixed assets necessary to sustain the business.