Business Finance Exam Preparation Guide
Course Introduction
Business Finance examines the fundamental principles and practices of financial management within businesses. The course covers topics such as financial analysis, budgeting, capital structure, working capital management, risk assessment, and the time value of money. Students will learn how firms raise and allocate financial resources, assess investment opportunities, and make decisions that maximize value for shareholders. The course also introduces basic financial instruments, markets, and the broader economic context that influences corporate financial decision-making.
Recommended Textbook
Corporate Finance Core Principles and Applications
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21 Chapters
1630 Verified Questions
1630 Flashcards
Source URL: https://quizplus.com/study-set/2042
2
5th Edition by Stephen Ross
Chapter 1: Introduction to Corporate Finance
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57 Verified Questions
57 Flashcards
Source URL: https://quizplus.com/quiz/40644
Sample Questions
Q1) Dividends are a cash flow from
A)a firm to the financial markets.
B)a shareholder to a firm.
C)the government to a shareholder.
D)the financial markets to a firm.
E)a firm to the government.
Answer: A
Q2) In a limited partnership,
A)each limited partner's liability is limited to his net worth.
B)each limited partner's liability is limited to his annual salary.
C)each limited partner's liability is limited to the amount he/she invested.
D)there is no limitation on liability;only a limitation on what the partner can earn.
E)limitations are placed on both the salary and personal liability of each limited partner.
Answer: C
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Chapter 2: Financial Statements AMCQ Cash Flow
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85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/40643
Sample Questions
Q1) Pete's Boats has beginning long-term debt of $647 and ending long-term debt of $749.The beginning and ending total debt balances are $801 and $768,respectively.The interest paid is $54.What is the amount of the cash flow to the creditors?
A)-$10
B)-$48
C)$21
D)$156
E)$87
Answer: B
Q2) The Down Towner has annual costs of goods sold of $42,600,interest expense of $650,selling and administrative expenses of $7,800,dividends paid of $1,200,depreciation of $1,100,and a tax rate of 34 percent.What is the firm's taxable income if it added $2,500 to retained earnings during the year?
A)$2,181.30
B)$8,711.18
C)$3,700.00
D)$5,606.06
E)$10,882.35
Answer: D
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Page 4
Chapter 3: Financial Statements Analysis Amcq Financial
Models
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88 Verified Questions
88 Flashcards
Source URL: https://quizplus.com/quiz/40642
Sample Questions
Q1) If a firm decreases its operating costs,all else constant,then
A)the profit margin increases while the cash coverage ratio decreases.
B)the return on assets increases while the return on equity decreases.
C)both the return on assets and the return on equity increase.
D)both the profit margin and the equity multiplier increase.
E)the total asset turnover rate decreases while the profit margin increases.
Answer: C
Q2) The Golden Slipper has sales of $487,900,EBIT of $128,650,taxes of 35 percent,interest paid of $12,400,and a dividend payout ratio of 40 percent.What is the common-size ratio of the addition to retained earnings?
A)10.31%
B)9)29%
C)14.43%
D)11.74%
E)6)87%
Answer: B
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5
Chapter 4: Discounted Cash Flow Valuation
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101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/40641
Sample Questions
Q1) Alex estimates that he will have $47,500 in student loans by the time he graduates.The interest rate is 7.2 percent,compounded monthly.If he wants to have this debt paid in full within 5 years following graduation,how much must he pay each month?
A)$745.69
B)$873.65
C)$945.05
D)$741.67
E)$980.40
Q2) Today,the Corner Store borrowed $11,680 at 6.3 percent,compounded monthly.The loan payment is $195.23 a month.How many loan payments must the firm make before the loan is paid in full?
A)72 years
B)60 years
C)48 years
D)72 months
E)60 months
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Chapter 5: Interest Rates AMCQ Bomcq Valuation
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91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/40640
Sample Questions
Q1) A zero coupon bond has a yield to maturity of 7.48 percent,semiannual compounding,a $1,000 face value,and a market quote of 41.0932.How many years is it until this bond matures?
A)24.22 years
B)23.18 years
C)12.11 years
D)24.66 years
E)12.33 years
Q2) Protective covenants
A)are primarily designed to protect bondholders from future actions of the bond issuer. B)only apply to bonds that have a deferred call provision.
C)are limited to stating actions that a firm must take.
D)are consistent for all bonds issued by a corporation within the United States. E)are designed to protect the issuer should it default.
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Chapter 6: Stock Valuation
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86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/40639
Sample Questions
Q1) Shares of ABBO stock are currently selling for $14.43 a share.The last annual dividend paid was $1.61 a share,and dividends increase at a constant rate.If the market rate of return is 14 percent,what is the dividend growth rate?
A)2)32%
B)2)56%
C)1)81%
D)2)05%
E)2)50%
Q2) Snider's Hardwoods has a dividend payout ratio of 45 percent,a return on assets of 9.4 percent,and a debt-equity ratio of 0.38.What is the firm's rate of growth?
A)6)78%
B)7)39%
C)7)13%
D)6)55%
E)4)10%
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8
Chapter 7: Net Present Value AMCQ Other Investment Rules
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80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/40638
Sample Questions
Q1) The value of a firm
A)increases when a new project with a negative net present value is accepted.
B)equals the sum of the individual values of the firm's projects and divisions.
C)is unaffected by the value of any one individual project.
D)increases anytime a project with a zero net present value is accepted.
E)is equal to the sum of all of the future cash flows derived from the firm's projects.
Q2) A project has an initial cost of $12,100 and cash flows of -$2,100,$5,800,$16,600,and -$800 for Years 1 to 4,respectively.How many IRRs will this project have?
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9
Chapter 8: Making Capital Investment Decisions
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81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/40637
Sample Questions
Q1) Computers used for business purposes are assigned to which MACRS property class?
A)3-year
B)7-year
C)10-year
D)5-year
E)15-year
Q2) Which one of the following is an example of an incremental cash flow for Project A?
A)Insurance on a building the company currently owns that will house the operations for Project A
B)Property taxes on a currently owned warehouse that has been sitting idle but is going to be utilized by Project A
C)Cost of the test marketing to ascertain whether or not Project A is feasible
D)Rental cost of some new machinery that will be acquired for Project A
E)Contractual annual salary of the company president
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Chapter 9: Risk Analysis, Real Options, AMCQ Capital Budgeting
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80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/40636
Sample Questions
Q1) Miller Tools is considering a new project that requires an initial investment of $81,300 for fixed assets,which will be depreciated straight-line to zero over the project's 3-year life.The project is expected to have fixed costs of $37,600 a year,and a contribution margin of $18.40.The tax rate is 34 percent and the discount rate is 15 percent.What is the financial breakeven point?
A)2,950 units
B)4,217 units
C)2,200 units
D)2,483 units
E)3,667 units
Q2) In scenario analysis,the expected case is
A)determined by a firm's current level of sales and costs.
B)a firm's most optimistic outlook that is likely to occur.
C)the situation where a project obtains its financial breakeven point.
D)a firm's best guess of a future outcome.
E)based on a firm's historical average sales and costs.
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11
Chapter 10: Risk Amcq Return: Lessons From Market History
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80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/40635
Sample Questions
Q1) Which one of the following types of securities has tended to produce the lowest real rate of return for the period 1926 to 2015?
A)Long-term corporate bonds
B)Long-term government bonds
C)Small-company stocks
D)Large-company stocks
E)U)S.Treasury bills
Q2) Kurt's Toy Co.has total annual returns for the past 5 years of -8.2 percent,11.7 percent,-6.4 percent,18.7 percent,and 6.8 percent.What is the 5-year holding period return?
A)9)00%
B)17.50%
C)22.60%
D)21.67%
E)20.33%
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12
Chapter 11: Return Amcq Risk: the Capital Asset Pricing
Model Capm
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89 Verified Questions
89 Flashcards
Source URL: https://quizplus.com/quiz/40634
Sample Questions
Q1) Which one of these measures the squared deviations of actual returns from expected returns?
A)Variance
B)Covariance
C)Beta
D)Correlation
E)Alpha
Q2) Which one of the following would tend to indicate that a portfolio is being effectively diversified?
A)A decrease in the portfolio standard deviation
B)An increase in the portfolio rate of return
C)An increase in the portfolio beta
D)An increase in the portfolio standard deviation
E)A constant portfolio beta
Q3) Which one of these measures the interrelationship between two securities?
A)Standard deviation
B)Variance
C)Beta
D)Covariance
E)Alpha
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Chapter 12: Risk, cost of Capital, AMCQ Valuation
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83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/40633
Sample Questions
Q1) Beta values are highly dependent on the A)direction of the market movement.
B)overall cycle of the market.
C)variance of the market and asset,but not their comovement.
D)covariance of a security with the market.
E)market risk premium.
Q2) A firm has net income of $21,350,depreciation of $2,780,interest of $640,and taxes of $10,990.The EBITDA multiple is 10.2.What is the value of the firm?
A)$378,820
B)$364,752
C)$341,008
D)$353,860
E)$341,214
Q3) The discount rate for a project should equal the A)cost of equity of the firm.
B)expected return on a financial asset of comparable risk.
C)discount rate used on the firm's last profitable project.
D)firm's weighted average cost of capital.
E)market rate of return.
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Page 14
Chapter 13: Efficient Capital Markets Amcq Behavioral Challenges
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52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/40632
Sample Questions
Q1) Choices between various accounting methods should not affect stock prices if A)and only if the financial markets are strong form efficient.
B)the financial market is weak form efficient and the investors are at least somewhat rational.
C)the markets have recently experienced the bursting of a market bubble.
D)companies consistently select the most conservative of the allowable methods.
E)markets are at least semistrong form efficient and firms provide sufficient information so investors can analyze those choices.
Q2) The efficient market hypothesis says that A)market prices reflect underlying asset values.
B)individual investors should not participate in the financial markets.
C)investors should expect to earn abnormal profits.
D)financial managers can accurately time stock and bond sales.
E)creative accounting can be used to inflate stock prices.
Q3) The efficient market hypothesis says that,on average,professional investors will A)tend to earn below average rates of returns.
B)earn a normal rate of return.
C)outperform investors with inside information.
D)tend to outperform most market participants.
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E)earn the same rate of return over time regardless of the risk assumed.
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Chapter 14: Capital Structure: Basic Concepts
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80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/40631
Sample Questions
Q1) Which one of these proposes that the value of a levered firm exceeds the value of an unlevered firm by the present value of the tax shield?
A)MM Proposition I,with and without taxes
B)MM Proposition I,with tax
C)MM Proposition II,with tax
D)MM Proposition I,without tax
E)MM Proposition II,without tax
Q2) Wilt's has a debt-equity ratio of 0.48,a pretax cost of debt of 7.3 percent,and an unlevered cost of capital of 14.1 percent.What is its levered cost of equity if there are no taxes or other imperfections?
A)19.65%
B)15.55%
C)18.20%
D)17.36%
E)16.45%
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Chapter 15: Capital Structure: Limits to the Use of Debt
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56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/40630
Sample Questions
Q1) The complete termination of a firm as a going business concern is called a A)merger.
B)repurchase program.
C)liquidation.
D)divestiture.
E)reorganization.
Q2) The Window Store will have a value of $139,000 if the economy does well this coming year and a value of $121,000 if the economy does poorly.The probability of a good economy is 68 percent.The firm owes its bondholders $63,000.The firm will only operate for one more year.What is the value of this firm to its shareholders?
A)$68,500
B)$70,240
C)$70,450
D)$73,550
E)$74,660
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Chapter 16: Dividemcqs AMCQ Other Payouts
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79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/40629
Sample Questions
Q1) KLT just paid an annual dividend of $1.62 a share.The firm has a target payout ratio of 0.55 and a speed of adjustment value of 0.4.What is the expected value of next year's annual dividend if the firm expects its earnings per share to be $3.98?
A)$2.50
B)$1.85
C)$1.74
D)$1.92
E)$1.71
Q2) The dividend amount divided by the earnings per share amount is referred to as the dividend
A)yield.
B)per share.
C)payment.
D)payout.
E)declaration.
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Chapter 17: Options Amcq Corporate Finance
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80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/40628
Sample Questions
Q1) Pure Aqua stock is selling for $37.28 a share.One $37.50 call is valued at $1.02 and one $35 put is valued at $.13.What is the value of four call option contracts?
A)$4.08
B)$2.96
C)$296.00
D)$408.00
E)$0
Q2) Robotic stock is selling for $68.90 a share.One $50 call contract is valued at $19.05,and one $65 put contract is valued at $0.72.What is the per share intrinsic value of the put?
A)$0
B)$)72
C)$3.90
D)$3.18
E)$72.00
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19
Chapter 18: Short-Term Finance Amcq Planning
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79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/40627
Sample Questions
Q1) Which one of these statements is correct?
A)A firm might be able to charge higher prices if it switches from a flexible to a restrictive short-term financial policy.
B)If a firm adopts a restrictive short-term financial policy,its current assets will be greater than if it adopts a flexible policy.
C)If a firm switches from a flexible short-term financial policy to a restrictive policy,it is likely to see an increase in its uncollectible accounts receivable.
D)If a firm switches from a restrictive short-term financial policy to a flexible policy,its operating cycle will most likely decrease.
E)Future cash flows are expected to be higher if a firm adopts a flexible,rather than a restrictive,short-term financial policy.
Q2) Which of the following could be the cause of a lengthening cash cycle?
A)Increasing the inventory turnover
B)Issuing credit to less credit-worthy customers than in previous periods
C)Increasing the accounts payable period
D)Extending the time period before paying a supplier for a credit purchase
E)Offering customers cash discounts for prompt payment
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Page 20
Chapter 19: Raising Capital
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75 Verified Questions
75 Flashcards
Source URL: https://quizplus.com/quiz/40626
Sample Questions
Q1) Iver Mfg.wants to raise $11.6 million to purchase equipment by issuing new securities.Management estimates the issue will cost the firm $284,000 for accounting,legal,and other costs.The underwriting spread is 6.5 percent and the issue price is $24 per share.How many shares of stock must be sold if the firm is to receive sufficient funds to purchase all its desired equipment?
A)544,799 shares
B)502,108 shares
C)529,590 shares
D)640,759 shares
E)633,333 shares
Q2) Which one of these conditions must exist if a rights offering is to be successful?
A)The rights cannot be resold.
B)The book value per share must be less than the subscription price.
C)Shareholders must be able to obtain one new share for every right they receive.
D)The issuer must guarantee to repurchase the rights at the offer price if the market price declines.
E)The subscription price must be less than the market price.
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Page 21
Chapter 20: International Corporate Finance
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79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/40625
Sample Questions
Q1) For accounting purposes,the translation gains and losses that affect a firm's balance sheet are
A)recorded as an intangible asset.
B)treated as either current income or a current expense as they are incurred.
C)treated as an unsecured debt of the firm.
D)recorded as stockholders' equity.
E)recorded as a deferred liability.
Q2) Assume that ¥118.62 equal $1.Also assume that 7.4518Skr equal $1.How many Japanese yen can you acquire in exchange for 2,500 Swedish krona?
A)¥157.05
B)¥39,795.75
C)¥618,309.90
D)¥1,054,901.88
E)¥2,209,831.29
Q3) Which two countries use the krone as their home currency?
A)Singapore and India
B)Switzerland and Sweden
C)Denmark and Norway
D)South Africa and Saudi Arabia
E)Kuwait and Iran
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Chapter 21: Mergers Amcq Acquisitions Web Only
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49 Verified Questions
49 Flashcards
Source URL: https://quizplus.com/quiz/40624
Sample Questions
Q1) Western Farms just paid $185,000 cash to acquire Northern Foods.Prior to the acquisition Western Farms had 12,000 shares of stock outstanding at a price per share of $17.Northern Foods had 7,500 shares outstanding at a price per share of $23.The acquisition created $4,500 of synergy.What is the value of Northern Foods to Western Farms?
A)$185,000
B)$181,500
C)$229,500
D)$220,500
E)$177,000
Q2) Dog Treats has 7,500 shares of stock outstanding at a market price per share of $13.FIDO has 22,000 shares outstanding that sell for $26 a share.By merging,$12,600 of synergy can be created.What would be the postmerger value of the combined firm if FIDO pays $100,000 to acquire Dog Treats?
A)$569,500
B)$582,100
C)$556,100
D)$669,500
E)$682,100
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Page 23