Applied Finance
Final Exam Questions
Course Introduction
Applied Finance focuses on the practical application of financial theories, tools, and models used in real-world decision-making within businesses and financial markets. The course covers topics such as financial statement analysis, valuation, capital budgeting, risk management, portfolio theory, and the functioning of capital markets. Emphasis is placed on using quantitative methods and financial data to solve problems faced by corporate managers, investors, and financial institutions, preparing students to analyze investment opportunities, assess financial performance, and make evidence-based financial decisions.
Recommended Textbook
Introduction to Finance Markets Investments and Financial Management 14th Edition by Ronald
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2711 Verified Questions
2711 Flashcards
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Chapter 6: International Finance and Trade
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149 Verified Questions
149 Flashcards
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Sample Questions
Q1) A trust receipt as used in financing international transactions:
A)is issued by bonded warehouses for merchandise stored therein
B)allows the release of merchandise on a consignment basis by the bank that issued the letter of credit
C)is evidence of ownership of funds held in escrow by the importer's bank
D)is a negotiable instrument that trades freely in the money market
Q2) The United Nations operates a world central bank that provides a world monetary unit to accommodate commerce across national boundaries.
A)True
B)False
Q3) A draft requiring immediate payment is called a (n)
A)bill of exchange
B)sight draft
C)time draft
D)documentary draft
Q4) Economic risk is the risk associated with possible slow or negative economic growth,as well as with the likelihood of variability.
A)True
B)False
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Chapter 7: Savings and Investment Process
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150 Flashcards
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Sample Questions
Q1) During the early years of the life stage of a typical corporation,the:
A)volume of physical assets increases slowly
B)firm is unable to establish a strong position with respect to its financial assets
C)corporation is a heavy provider of financial assets
D)need for borrowed capital is small
Q2) In recent years,the United States has been running large trade surpluses with both Japan and China.
A)True
B)False
Q3) Which one of the following instruments is the least important in terms of funds raised in the credit markets?
A)U.S.government securities
B)tax-exempt obligations
C)corporate bonds
D)mortgages
Q4) The corporate retention rate is simply another term for the corporate savings rate.
A)True
B)False
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Chapter 8: Interest Rates
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160 Verified Questions
160 Flashcards
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Sample Questions
Q1) As the economy begins moving out of a recessionary period,the yield curve is generally:
A)upward sloping
B)flattened out
C)downward sloping
D)discontinuous
Q2) The nominal interest rate can be expressed as:
A)r = MR + IP + DRP + MRP + LP
B)r = RR + IP + GRP + MRP + LP
C)r = RR + IP + DRP + TRP + LP
D)r = RR + IP + DRP + MRP + LP
E)none of the above
Q3) The liquidity preference theory holds that securities of different maturities are not perfect substitutes for each other.
A)True
B)False
Q4) Interest rates in the United States are only influenced by domestic factors.
A)True
B)False
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Chapter 11: Securities Markets
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Sample Questions
Q1) Churning happens when a broker constantly buys and sells securities from a client's portfolio in an effort to generate commissions.
A)True
B)False
Q2) A trade in the multiple of 100 shares is called a (n):
A)round lot
B)odd lot
C)block trade
D)none of the above
Q3) ___________________________________ has the goal of a creating a single market for investment services across the European Union as well as creating a single set of regulations for financial services firms.
A)European Securities Services (ESS)
B)Markets in Financial Instruments Directive (MiFID)
C)Continental Brokerage Services (CBS)
D)Money Market Clearing House (MMCH)
E)none of the above.
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Chapter 12: Financial Return and Risk Concepts
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Sample Questions
Q1) Which one of the following is not considered to be a generally recognized type of market efficiency?
A)strong-form
B)semi-strong form
C)weak-form
D)insider-information form
Q2) If someone were able to earn greater than the average returns for the market on a consistent basis,which form of market efficiency is violated?
A)weak
B)semi-strong
C)strong
D)both a and b
Q3) During the past 75 years,small company stocks have provided investors with higher average annual returns than large company stocks.
A)True
B)False
Q4) In an efficient market,investors cannot consistently earn above average profits.
A)True
B)False
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Chapter 13: Business Organization and Financial Data
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Sample Questions
Q1) The rule-setting body,which authorizes generally accepted accounting principles is:
A)GAAP
B)FASB
C)SEC
D)Federal Reserve System
E)none of the above
Q2) On the income statement,net profit after tax is defined as:
A)operating profit minus operating expenses
B)operating profit minus cost of goods sold
C)operating profit minus interest
D)operating profit minus interest minus taxes
E)none of the above
Q3) In the statement of cash flows,retained earnings are reported as two separate line items,which are __________ and ___________.
A)revenues and expenses
B)assets and liabilities
C)depreciation and amortization
D)net profits and dividends
E)none of the above
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Page 15
Chapter 14: Financial Analysis and Long-Term Financial Planning
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Sample Questions
Q1) Break-even analysis is used to estimate how many units of products must be sold in order for the firm to have a reasonable profit.
A)True
B)False
Q2) The degree of operating leverage (DOL)can be measured by the percent change in operating income (EBIT)divided by percent change in:
A)fixed costs
B)total costs
C)variable costs
D)unit sales
Q3) Financial analysis using ratios can assist managers in the firm's financial planning process.
A)True
B)False
Q4) The price-to-book ratio measures the market's value of the firm relative to balance sheet equity.
A)True
B)False
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Chapter 15: Managing Working Capital
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152 Flashcards
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Sample Questions
Q1) The ________ of a firm is the amount of time that elapses from the point when the firm makes an outlay to purchase raw materials to the point when cash is collected from bad debt.
A)cash conversion cycle
B)operating cycle
C)average age of inventory
D)average collection period
E)none of the above
Q2) Working capital is essentially a firm's current assets and consists of cash,accounts receivable,inventories,plant and equipment.
A)True
B)False
Q3) Speculative motives for holding cash include holding funds to meet unexpected demands.
A)True
B)False
Q4) The inventory period may be calculated as sales divided by inventories.
A)True
B)False
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Chapter 16: Short-Term Business Financing
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Sample Questions
Q1) Service industries tend to have larger proportions of fixed assets to current assets.
A)True
B)False
Q2) Which of the following might be a characteristic of a field warehouse?
A)it serves a single customer
B)it exists only until the loan is repaid
C)a lease on that portion of the property which is to be used for warehousing purposes must be obtained
D)all the above
E)none of the above
Q3) Maturity factoring is where the firm selling its accounts receivable is paid on the normal collection date or net due date of the account.
A)True
B)False
Q4) To compute the effective cost of a revolving agreement,the joint effect of interest on borrowed funds and commitment fees must be considered.
A)True
B)False
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Chapter 17: Capital Budgeting Analysis
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Sample Questions
Q1) All of the following are considered stages in the capital budgeting process EXCEPT:
A)development
B)identification
C)implementation
D)selection
E)all are included
Q2) The stand-alone principle means that:
A)projects should not be evaluated against one another
B)projects must operate independently of the firm's other projects
C)analysts should focus on the project's cash flows,uncontaminated by cash flows from the firm's other activities
D)none of the above
Q3) The final step in the capital budgeting process is
A)implementation
B)selection
C)follow-up
D)development
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Page 19
Chapter 18: Capital Structure and the Cost of Capital
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Sample Questions
Q1) A firm's business risk is measured by the variability in which one of the following over time:
A)net sales
B)total assets
C)operating income (EBIT)
D)net income
Q2) What is Ningbo Shipping's WACC if it's after tax cost of debt is 3.5%,it's cost of retained earnings is 14%,and the firm's market value of debt is $40 million while the market value of its equity is $60 million?
A)9.8%.
B)3.5%.
C)11.8%.
D)14.7%.
E)none of the above.
Q3) As a general rule,the capital structure that maximizes stock price also:
A)minimizes the weighted average cost of capital
B)maximizes the weighted average cost of capital
C)minimizes the required rate of return on equity
D)maximizes the cost of debt
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Page 20