Business Finance
Exam Materials
Course Introduction
Business Finance provides students with a comprehensive understanding of the fundamental principles and practices of financial management within a business context. The course covers key topics such as financial statement analysis, time value of money, capital budgeting, risk and return, cost of capital, and working capital management. Emphasis is placed on the decision-making processes that financial managers use to maximize firm value, including investment, financing, and dividend decisions. Students will develop analytical skills to evaluate financial alternatives and learn to apply quantitative techniques to real-world business finance scenarios.
Recommended Textbook
Essentials of Corporate Finance 9th Edition by Stephen Ross
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18 Chapters
1640 Verified Questions
1640 Flashcards
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Page 2
Chapter 1: Introduction to Financial Management
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58 Verified Questions
58 Flashcards
Source URL: https://quizplus.com/quiz/60473
Sample Questions
Q1) An employee has a claim on the cash flows of Martin's Machines.This claim is defined as a claim by one of the firm's:
A)residual owners.
B)shareholders.
C)financiers.
D)provisional partners.
E)stakeholders.
Answer: E
Q2) Capital budgeting includes the evaluation of which of the following?
A)Size of future cash flows only
B)Size and timing of future cash flows only
C)Timing and risk of future cash flows only
D)Risk and size of future cash flows only
E)Size, timing, and risk of future cash flows
Answer: E
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Chapter 2: Financial Statements,Taxes,and Cash Flow
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Which one of the following will increase the cash flow from assets for a tax-paying firm,all else constant?
A)An increase in net capital spending
B)A decrease in the cash flow to creditors
C)An increase in depreciation
D)An increase in the change in net working capital
E)A decrease in dividends paid
Answer: C
Q2) Daniel's Market has sales of $43,800,costs of $40,400,depreciation expense of $2,500,and interest expense of $1,100.If the tax rate is 34 percent,what is the operating cash flow,OCF? Assume tax losses can be carried forward and utilized.
A)$3,332
B)$3,279
C)$3,511
D)$3,468
E)$3,013
Answer: D
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Chapter 3: Working With Financial Statements
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119 Verified Questions
119 Flashcards
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Sample Questions
Q1) A firm wishes to maintain an internal growth rate of 4.5 percent and a dividend payout ratio of 60 percent.The current profit margin is 7.5 percent and the firm uses no external financing sources.What must be the total asset turnover?
A).98
B)1.06
C)1.21
D)1.44
E)1.59
Answer: D
Q2) Mike's Place has total assets of $152,080,a debt-equity ratio of .62,and net income of $14,342 What is the return on equity?
A)13.48 percent
B)13.73 percent
C)15.74 percent
D)15.28 percent
E)14.61 percent
Answer: D
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Chapter 4: Introduction to Valuation: The Time Value of Money
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63 Verified Questions
63 Flashcards
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Sample Questions
Q1) You have $5,000 you want to invest for the next 45 years.You are offered an investment plan that will pay you 6 percent per year for the next 15 years and 10 percent per year for the last 30 years.How much will you have at the end of the 45 years?
A)$201,516.38
B)$209,092.540
C)$209,092.54
D)-$209,092.54
E)$221,408.97
Q2) Which one of the following is a correct statement,all else held constant?
A)The present value is inversely related to the future value.
B)The future value is inversely related to the period of time.
C)The period of time is directly related to the interest rate.
D)The present value is directly related to the interest rate.
E)The future value is directly related to the interest rate.
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Chapter 5: Discounted Cash Flow Valuation
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114 Verified Questions
114 Flashcards
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Sample Questions
Q1) Katie's Dinor spent $113,800 to refurbish its current facility.The firm borrowed 65 percent of the refurbishment cost at 6.82 percent interest for six years.What is the amount of each monthly payment?
A)$1,108.91
B)$1,282.16
C)$1,333.33
D)$1,254.73
E)$1,087.06
Q2) Bill just financed a used car through his credit union.His loan requires payments of $275 a month for five years.Assuming that all payments are paid on time,his last payment will pay off the loan in full.What type of loan does Bill have?
A)Amortized
B)Complex
C)Pure discount
D)Lump sum
E)Interest-only
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Chapter 6: Interest Rates and Bond Valuation
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) A corporate bond pays 6.65 percent interest.How much would a municipal bond have to pay to be equivalent to this on an after tax basis if you are in the 25 marginal percent tax bracket?
A)8.31percent
B)6.28 percent
C)4.99 percent
D)7.75 percent
E)8.87 percent
Q2) Blue Water bonds have a face value of $1,000,a coupon rate of 6.5 percent,semiannual interest payments,and mature in 11.5 years.What is the current price of these bonds if the yield to maturity is 6.36 percent?
A)$979.20
B)$984.56
C)$1,011.30
D)$1,018.27
E)$1,020.00
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8
Chapter 7: Equity Markets and Stock Valuation
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91 Verified Questions
91 Flashcards
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Sample Questions
Q1) Toy Mart recently announced that it will pay annual dividends at the end of the next two years of $1.60 and $1.10 per share, respectively. Then, in Year 5 it plans to pay a final dividend of $13.50 a share before closing its doors Permanently. At a required return of 13.5 percent, what should this stock sell for today?
A) $3.24
B) $16.20
C) $9.43
D) $13.33
E) $12.70
Q2) The specific location on the floor of an exchange where a particular security is traded is called a:
A) box office.
B) Figure 6.
C) post.
D) trading booth.
E) seat.
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Chapter 8: Net Present Value and Other Investment Criteria
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) Both Projects A and B are acceptable as independent projects.However,the selection of either one of these projects eliminates the option of selecting the other project.Which one of the following terms best describes the relationship between Project A and Project B?
A)Mutually exclusive
B)Conventional
C)Multiple choice
D)Dual return
E)Crosswise
Q2) The payback period is the length of time it takes an investment to generate sufficient cash flows to enable the project to:
A)produce a positive annual cash flow.
B)produce a positive cash flow from assets.
C)offset its fixed expenses.
D)offset its total expenses.
E)recoup its initial cost.
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10
Chapter 9: Making Capital Investment Decisions
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) The net working capital invested in a project is generally:
A)treated as an erosion cost.
B)treated as an opportunity cost.
C)recouped in the first year of the project.
D)recouped at the end of the project.
E)depreciated to a zero balance over the life of the project.
Q2) Northern Companies has three separate divisions.Each year,the company determines the amount it can afford to spend in total for capital expenditures and then allocates one-third of that amount to each division.This allocation process is called:
A)soft rationing.
B)hard rationing.
C)opportunity cost allocation.
D)divisional separation.
E)strategic planning.
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11
Chapter 10: Some Lessons From Capital Market History
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86 Flashcards
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Sample Questions
Q1) What is the probability associated with a return that lies in the upper tail when the mean plus two standard deviations is graphed?
A)05 percent
B)5 percent
C)1.0 percent
D)2.5 percent
E)5.0 percent
Q2) A security produced returns of 11 percent,7 percent,9 percent,13 percent,and -14 percent over the past five years,respectively.Based on these five years,what is the probability that this stock will earn more than 16.16 percent in any one given year?
A).5 percent
B)1.0 percent
C)2.5 percent
D)5.0 percent
E)16.0 percent
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Chapter 11: Risk and Return
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39 Verified Questions
39 Flashcards
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Sample Questions
Q1) Southern Wear stock has an expected return of 15.1 percent.The stock is expected to lose 8 percent in a recession and earn 18 percent in a boom.The probabilities of a recession,a normal economy,and a boom are 2 percent,87 percent,and 11 percent,respectively.What is the expected return on this stock if the economy is normal?
A)14.79 percent
B)17.04 percent
C)15.26 percent
D)16.43 percent
E)11.08 percent
Q2) A portfolio is:
A)a single risky security.
B)any security that is equally as risky as the overall market.
C)any new issue of stock.
D)a group of assets held by an investor.
E)an investment in a risk-free security.
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Chapter 12: Cost of Capital
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96 Flashcards
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Sample Questions
Q1) Given the following information for Electric Transport,find the WACC.Assume the company's tax rate is 35 percent. Debt:
8,100,6.9 percent coupon bonds outstanding.$1,000 par value,17 years to maturity,selling for 101 percent of par,the bonds make semiannual payments.
Common stock:
175,000 shares outstanding,selling for $77 per share,beta is 1.32.
Preferred stock:
9,000 shares of $7.50 preferred stock outstanding,currently selling for $73 per share. Market:
7)9 percent market risk premium and 3.6 percent risk-free rate.
A)10.4 percent
B)12.0 percent
C)12.4 percent
D)11.1 percent
E)9.8 percent
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Chapter 13: Leverage and Capital Structure
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89 Flashcards
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Sample Questions
Q1) Stevenson's Bakery is an all-equity company that has projected perpetual earnings before interest and taxes of $43,700 a year.The cost of equity is 15.2 percent and the tax rate is 34 percent.The company can borrow money at 7.15 percent.If the company borrows $50,000,what will be its levered value?
A)$187,613
B)$189,919
C)$206,750
D)$229,507
E)$203,682
Q2) A firm is considering two different capital structures.The first option is an all-equity firm with 40,000 shares of stock.The second option is 28,000 shares of stock plus some debt.Ignoring taxes,the break-even level of earnings before interest and taxes between these two options is $52,000.How much money is the firm considering borrowing if the interest rate is 9 percent?
A)$175,000
B)$173,333
C)$208,333
D)$216,667
E)$225,000
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Page 15
Chapter 14: Dividends and Dividend Policy
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87 Flashcards
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Sample Questions
Q1) Modern Homes just declared a 4-for-3 stock split.Which of the following occurred as a result of this split?
I.Number of shares outstanding increased by one-third
II.Number of shares outstanding decreased by one-fourth
III.Price per share increased by one-third
IV.Price per share decreased by one-fourth
A)I only
B)I and III only
C)I and IV only
D)II and III only
E)II and IV only
Q2) Which one of the following is a payment by a firm to its shareholders from any source other than current or accumulated retained earnings?
A)Interest
B)Distribution
C)Retained earnings
D)Dividend
E)Stock repurchase
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Chapter 15: Raising Capital
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69 Flashcards
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Sample Questions
Q1) A lockup agreement ensures:
A)the lead underwriter maintains an economic interest in the IPO it is managing.
B)the issuer of new securities receives a minimally agreed upon amount from the issue.
C)no research reports are issued during the waiting period.
D)company insiders maintain an economic interest in the issuer of an IPO for a minimum period of time.
E)an IPO is not underpriced by more than five percent.
Q2) Which one of the following statements is correct?
A)Oral offers can be made for new securities during the waiting period.
B)A Green Shoe letter must be provided to all investors who purchase shares of a new equity offering.
C)Corporate directors have the authority to authorize additional shares of stock for a new issue.
D)The underwriters must approve any increase in the authorized number of shares for a firm.
E)When issuing new securities, the first step is the distribution of the prospectus.
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Chapter 16: Short-Term Financial Planning
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) Which statement related to a cash budget is correct?
A)Capital expenditures are treated as a cash inflow on a cash budget.
B)The cumulative surplus is computed prior to adjusting for the minimum cash balance.
C)A positive net cash inflow for a period indicates the cash disbursements exceed the cash collections for the period.
D)Financially healthy firms can have a negative quarterly net cash inflow.
E)Firms generally set the minimum cash balance at zero for planning purposes.
Q2) Which one of the following will increase the operating cycle?
A)Decreasing the accounts payable period
B)Increasing the accounts payable turnover rate
C)Increasing the cash cycle
D)Decreasing the accounts receivable turnover rate
E)Decreasing the inventory period
Q3) Which one of the following is a use of cash?
A)Selling inventory at cost
B)Paying a supplier for inventory you purchased last month
C)Borrowing money from a local bank
D)Collecting payment from a customer
E)Selling a fixed asset such as a piece of machinery
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Page 18
Chapter 17: Working Capital Management
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Sample Questions
Q1) Laurie's Ice Rink keeps an extra $1,000 in its checking account simply in case an emergency arises.Which type of motive for holding cash does this represent?
A)Speculative
B)Float requirement
C)Transaction
D)Precautionary
E)Availability
Q2) A firm offers credit terms of 1/5,net 25.How long is the net credit period?
A)1 day
B)5 days
C)20 days
D)25 days
E)30 days
Q3) A bill given to a customer for goods he or she purchased is called a(n):
A)account reconciliation.
B)invoice.
C)docket.
D)remittance advice.
E)shipping receipt
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Page 19
Chapter 18: International Aspects of Financial Management
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85 Flashcards
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Sample Questions
Q1) Which of the following parties are participants in the foreign exchange market?
I.U.S.importers
II.U.S.exporters
III.U.S.travelers to Europe
IV.Foreign portfolio managers who purchase American securities
A)I and III only
B)II and IV only
C)I, III, and IV only
D)II, III, and IV only
E)I, II, III, and IV
Q2) Which one of the following is the suggested method of handling exchange rate risk for a large,multinational firm headquartered in the U.S.? Assume the operations in each country represent a different division of the firm.
A)At the division level
B)At a level that combines all divisions representing a separate geographic continent
C)At a level that combines divisions based on the currency used by each division
D)By segregating U.S.operations and foreign operations
E)On a centralized basis for all divisions
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