Question 1

Describe the process for valuing a bond.

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Question 2

The final step in the capital budgeting process is

Question 2 options:

	implementation
	selection
	follow-up
	development

Question 3

On the balance sheet, total assets minus net fixed assets equals:

Question 3 options

	current assets
	current liabilities
	gross fixed assets
	total assets
	none of the above

Question 4

Which one of the following is not considered to be a generally recognized type of market efficiency?

Question 4 options:

	strong-form
	semi-strong form
	weak-form
	insider-information form

Question 5

The ________ is the discount rate that equates the present value of the cash inflows with the initial investment.

Question 5 options:

	payback period
	average rate of return
	cost of capital
	internal rate of return

Question 6

Unsystematic risk is also known as:

Question 6 options:

	market risk
	nondiversifiable risk
	firm-specific risk
	macroeconomic risk

Question 7

The goal of a business should be:

Question 7 options:

	maximization of the owners' wealth
	maximization of accounting profit
	maximization of sales
	maximization of assets

Question

If the _____________ of a stock is known, an investor can use the security market line to determine the expected return on that stock.

Question 8 options:

	standard deviation
	beta
	coefficient of variation
	unsystematic risk

Question 9

The correlation between the return on the risk-free asset with a constant return over time and the return on a risky asset is always:

Question 9 options:

	1
	0
	-1
	0.5

Question 10

Current liabilities would not include:

Question 10 options:

	accounts payable
	notes payable
	bonds
	accruals

Question 11

Cash flows from financing activities might include:

Question 11 options:

	increase in bonds payable
	increase in accounts payable
	depreciation
	all the above
	none of the above

Question 12

The cost of capital for retained earnings:

Question 12 options:

	cannot be determined
	may be determined by more than one method
	is greater than the cost of capital for common stock
	none of the above

Question 13

A decrease in the debt ratio will normally have no effect on:

Question 13 options:

	financial risk
	business risk
	total risk
	systematic risk

Question 14

The quick ratio of a firm with current assets of $300,000, current liabilities of $100,000 and inventory of $100,000 is:

Question 14 options:

	1:1
	2:1
	3:1
	4:1

Question 15

Of the components shown below, which is least likely to be of value in calculating the cost of preferred stock?

Question 15 options:

	flotation costs per share
	book value of a preferred share
	dividends per share
	market price per share

Question 16

The _______________ established the Public Company Accounting Oversight Board (PCAOB).

Question 16 options:

	Smoot-Hawley Act
	Sarbanes-Oxley Act
	Gram-Harkins Act
	McKean-Obama Act
	none of the above

Question 17

A business organization that receives the limited liability of a corporation but is taxed as a proprietorship or partnership is called a:

Question 17 options:

	limited proprietorship
	limited partnership
	limited corporation
	S corporation

Question 18

The strong-form efficient market implies that:

Question 18 options:

	no investor can consistently beat the market after adjusting for risk differences
	stock prices reflect all public and private knowledge
	even corporate officers and insiders cannot earn above-average, risk-adjusted profits
	all of the above

Question 19

The firm's target capital structure is consistent with which of the following?

Question 19 options:

	minimum risk
	maximum earnings per share
	minimum weighted average cost of capital
	minimum cost of equity

Question 20

The estimate of how quickly a firm may grow by maintaining a constant mix of debt and equity is called:

Question 20 options:

	the retention growth rate
	dividend growth rate
	sustainable growth rate
	the internal growth rate

Question 21

Which one of the following financial statements shows a relationship between assets and liabilities plus owners' equity?

Question 21 options:

	income statement
	statement of cash flows
	balance sheet
	statement of retained earnings

Question 22

A firm's stock is expected to pay a $2 annual dividend next year, and the current $50 stock price is expected to rise to $53 over the next year. What is the expected return?

Question 22 options:

	8%
	10%
	12%
	15%

Question 23

As defined in accordance with efficient markets notions, a weak-form efficient market would be a market in which asset prices reflect all:

Question 23 options:

	current information
	past information
	inside information
	public information

Question 24

The primary purpose of the liquidity ratios is to determine:

Question 24 options:

	the extent to which borrowed funds are used to finance assets
	the ability of the firm to meet short-term obligations to creditors
	the extent to which assets are used to support sales
	none of the above

Question 25

When the net present value is negative, the internal rate of return is __________ the cost of capital.

Question 25 options:

	greater than
	greater than or equal to
	less than
	equal to
	none of the above