Business Finance
Mock Exam
Course Introduction
Business Finance is an essential course that introduces students to the fundamental principles 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. Through theoretical frameworks and practical case studies, students learn how financial decisions affect the value of the firm and develop skills necessary for making informed decisions about financing, investment, and asset management. The course balances analytical rigor with real-world application, preparing students for roles in corporate finance, banking, investment analysis, and financial consulting.
Recommended Textbook
NEW Corporate Finance Online 1st Edition by Stanley Eakins
Available Study Resources on Quizplus
16 Chapters
1371 Verified Questions
1371 Flashcards
Source URL: https://quizplus.com/study-set/3394 Page 2
Chapter 1: Overview of Finance
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/67351
Sample Questions
Q1) As the risk of a stock investment increases,
A) return will increase.
B) return will decrease.
C) required rate of return will decrease.
D) required rate of return will increase.
E) the beta approaches zero.
Answer: D
Q2) Which of the following are rights of stockholders?
A) To share in the firm's profits after all other creditors have been satisfied
B) To be guaranteed a dividend
C) To decide whether or not to pay taxes on capital gains
D) To vote for directors, but never on specific issues
E) To avoid losses when the firm's prospects decline
Answer: A
Q3) Finance is:
A) The study of investment management
B) The study of the stock exchange
C) The study of the capital market and its many players
D) The study of money management for personal use
Answer: C
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Financial Statements and Ratio Analysis
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/67343
Sample Questions
Q1) Ratio interaction refers to
A) using multiple ratios to make a decision.
B) the way ratios are affected by managerial decisions.
C) how ratios affect managerial decisions.
D) the effect one ratio has on another.
E) when a ratio raises a red flag for analysts.
Answer: D
Q2) What is the current ratio if cash is $10,000,accounts receivable are $25,000,inventories are $30,000,accounts payable are $40,000,and accrued payroll is $15,000?
A) 2.00
B) 1.18
C) 1.13
D) 0.64
E) 0.73
Answer: B
Q3) All else held constant,an increase in leverage should increase the ROE.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Time Value of Money - Introduction
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/67342
Sample Questions
Q1) In order to open up your new business you need to take out a loan.First Bank charges 6% compounded quarterly,and Second Bank charges 6.5% compounded semi-annually.From which bank would you prefer to obtain your loan?
A) First Bank
B) Second Bank
C) Indifferent
Answer: A
Q2) If you presently have $6,000 invested at a rate of 15%,how many years will it take for you investment to triple? (Round up to obtain a whole number of years if necessary.)
A) 2
B) 4
C) 6
D) 8
E) 10
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Time Value of Money - Streams and Valuations
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/67341
Sample Questions
Q1) A perpetuity pays $550 at the end of every month.The PV of the perpetuity is $36,000.What is the nominal annual rate (APR)on the perpetuity?
A) 18.33%
B) 9.17%
C) 19.96%
D) 13.42%
E) 15.15%
Q2) An annuity in which payments are made at the beginning of each period is a(n):
A) Ordinary annuity
B) Annuity due
C) Annuity in arrears
D) Perpetuity
Q3) What is the present value of an ordinary annuity that pays $1,000 per year over each of the next twenty years if the discount rate is 10%? Round to the nearest whole dollar.
A) $8,364
B) $385
C) $424
D) $8,514
E) $1,537
To view all questions and flashcards with answers, click on the resource link above.
Page 6
Chapter 5: Risk and Return - Introduction
Available Study Resources on Quizplus for this Chatper
46 Verified Questions
46 Flashcards
Source URL: https://quizplus.com/quiz/67340
Sample Questions
Q1) Frank's Franks went public and opened at $15.00 per share.One year later the stock was selling for $17.50 per share.What was the holding period return if during the year Frank sent out $1.25 per share in dividends?
A) 17%
B) 21%
C) 25%
D) 14%
E) 23%
Q2) To earn a ________ return,you must incur ________ risk.
A) lower; higher
B) higher; higher
C) decent; very high
D) higher; lower
E) None of the above.
Q3) Bond prices rise when interest rates fall.These two variables (bond prices and interest rates)are:
A) Not correlated
B) Positively correlated
C) Negatively correlated
D) Positively skewed
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Portfolio Theory
Available Study Resources on Quizplus for this Chatper
136 Verified Questions
136 Flashcards
Source URL: https://quizplus.com/quiz/67339
Sample Questions
Q1) Which of the following statements is false?
A) Adding additional securities to a portfolio only reduces market risk.
B) The risk-return relationship relates only to market risk.
C) Reducing market risk usually implies sacrificing expected return.
D) The appropriate measure of risk should only consider the incremental risk a security adds to a well-diversified portfolio.
E) Investors are usually not fully compensated for bearing the total risk associated with a security.
Q2) CISCO System's stock has a correlation with the market of 0.65.CISCO's standard deviation of returns is 45% and standard deviation of the market is 20%.What is CISCO System's beta?
A) 0.29
B) 0.85
C) 1.19
D) 1.46
E) 1.76
Q3) Can the return on a portfolio ever be less than the smallest return on an individual security in the portfolio?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 7: Interest Rates and Bond Valuation
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/67338
Sample Questions
Q1) What is the value of a 25-year bond with a $1,000 face value and an 8% coupon rate that yields 4%?
A) $ 716.84
B) $1,124.67
C) $1,624.88
D) $ 996.53
E) $1,087.22
Q2) A US Government bond has 15 years remaining to maturity,pays annual coupons (yesterday)of $90,and has a face value of $1,000.The current price of the bond is $923.94 to yield 10%.Calculate your return if you buy the bond today,hold it for one year and sell it after the next coupon.What percentage of your return will be attributable to coupon interest (as opposed to capital gain)? (Assume that yields are expected to remain constant at the current level over the bond's life.)
A) 67%
B) 77%
C) 87%
D) 91%
E) 97%
To view all questions and flashcards with answers, click on the resource link above.
9
Chapter 8: Stock Valuation and Market Efficiency
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/67337
Sample Questions
Q1) The Textbook Production Company has been hit hard due to increased competition.The company's analysts predict that earnings (and dividends)will decline at a rate of 5% annually forever.Assume that Ks = 11% and Do = $2.00.What will the price of the company's stock be three years from now?
A) $27.17
B) $6.23
C) $28.50
D) $10.18
E) $20.63
Q2) Which of the following is not a characteristic of an efficient market?
A) Information is rapidly reflected in market prices.
B) The market has a large number of buyers and sellers.
C) Prices vary for a single asset or commodity as a result of differences in people's willingness to pay.
D) Prices reflect the intrinsic value of an asset.
E) Markets that function with a minimum of waste or excessive trading costs.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Capital Budgeting Techniques
Available Study Resources on Quizplus for this Chatper
86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/67336
Sample Questions
Q1) Analysts at Tabby Fur Storage predict that the net present value of a proposed new $10 million warehouse is $1 million.How should these findings be interpreted?
A) Although NPV is positive, its value is too low for such a large expenditure and as a result, the project should be rejected.
B) The project should be rejected because the NPV is less than the cost of the warehouse.
C) The project should be accepted because it will add value to the firm.
D) More information such as the payback period should be evaluated since the reliance on only one capital budgeting technique should be discouraged.
E) The project does not meet the acceptance criteria of the NPV method and should be rejected.
Q2) All of the following are steps in the capital budgeting process EXCEPT:
A) identifying opportunities.
B) the pre-audit.
C) evaluating opportunities.
D) the post audit.
E) implementing the project.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Capital Budgeting - Cash Flows
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/67350
Sample Questions
Q1) Tom Morrison Inc.,a leading manufacturer of golf equipment,is currently evaluating a new golf ball called the 'Feathery'.The secret to the Feathery is that its core is made from goose down.The advantage of down is that the ball flies higher and longer.You have completed an analysis of the Feathery project and estimated the NPV to be $148,643. After completing your analysis,your boss tells you that the Feathery project will occupy an unused portion of the Morrison plant and that Morrison could have leased the space to another user for $15,000 per annum for two years.Assume a tax rate of 30% and a cost of capital of 10%.What is the NPV of the project with this fact included? (Round to the nearest dollar)
A) $118,643
B) $127,643
C) $128,229
D) $130,420
E) Doesn't affect NPV of this project
Q2) An outlay for installation costs is not considered part of the depreciable basis of the asset to be purchased.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Cost of Capital
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/67349
Sample Questions
Q1) Jensen's Travel Agency has a 7 percent preferred stock outstanding that is currently selling for $48 a share.The preferred stock has a $100 par value.The market rate of return is 10 percent and the firm's tax rate is 34 percent.What is the Jensen's cost of preferred stock?
A) 8.75 percent
B) 9.62 percent
C) 11.98 percent
D) 13.25 percent
E) 14.58 percent
Q2) A firm can raise its value without earning at least the WACC.
A)True
B)False
Q3) Preferred stock constitutes what percentage of the average firm's capital structure?
A) 50%
B) 25%
C) 5%
D) 10%
E) 75%
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: Capital Structure
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/67348
Sample Questions
Q1) Cyberdyne Systems is a military/defense products company.Cyberdyne Systems is all equity financed.Cyberdyne has 200 million shares outstanding which trade for $20 per share.Cyberdyne's shareholders require a return of 10%.
Omni Defense Products Inc.is also a military/defense products company.It's shares are trading for $35 per share.Omni has 100 million shares outstanding.Omni has debt worth $3 billion.Omni's debt is priced to yield 6.5%.
What is the required return of Omni's shareholders? (Assume that the tax rate is 0%.)
A) 12.33%
B) 12.50%
C) 12.63%
D) 13.00%
E) 13.50%
Q2) Under the Static Tradeoff Theory,the optimal debt-to-equity ratio is higher than under Modigliani and Miller (with taxes).
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
14
Chapter 13: Dividends, repurchases, and Splits
Available Study Resources on Quizplus for this Chatper
57 Verified Questions
57 Flashcards
Source URL: https://quizplus.com/quiz/67347
Sample Questions
Q1) Kelly Varnsen,a junior financial analyst at Vandalay Industries,has been asked to calculate this year's dividend.Kelly has gathered the following data:
CAPEX (spending on fixed assets)= $17,000
Increase in net working capital = $3,000
Target capital structure is 20% debt and 80% equity
Net income is = $17,000.
If Vandalay follows a residual dividend policy,then the dividend payout rate this year is:
A) 20%
B) 25%
C) 30%
D) 35%
E) 40%
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: Financial Planning
Available Study Resources on Quizplus for this Chatper
77 Verified Questions
77 Flashcards
Source URL: https://quizplus.com/quiz/67346
Sample Questions
Q1) Referring to Cool Looks,what is the cash balance at the end of November?
A) $17,150
B) $19,150
C) $19,750
D) $21,250
E) $22,000
Q2) Referring to Schwety,what are total cash disbursements in February?
A) $7.09
B) $8.59
C) $9.75
D) $10.59
E) $11.25
Q3) Referring to Cool Looks,what are total cash inflows in September?
A) $18,000
B) $20,000
C) $30,000
D) $38,000
E) $50,000
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: The Management of Working Capital
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/67345
Sample Questions
Q1) Frank's Franks posted a cost of goods sold of $5,000 and had an average payables of $125.Calculate the Accounts Payable Period.
A) 10.2
B) 9.125
C) 13.41
D) 7.65
E) 8.54
Q2) All of the following are part of the five "Cs" of credit analysis EXCEPT
A) currency.
B) capital.
C) collateral.
D) conditions.
E) capacity.
Q3) As the amount of credit extended increases,the ________ decreases.
A) Optimal amount of credit
B) Net cost of receivables
C) Cost of receivables
D) Revenues from increased sales
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: International Finance
Available Study Resources on Quizplus for this Chatper
80 Verified Questions
80 Flashcards
Source URL: https://quizplus.com/quiz/67344
Sample Questions
Q1) Which of the following is not a possible political risk when practicing business internationally?
A) Loss of using own specialized labor
B) Fewer opportunities for growth
C) Limited ability to convert currency
D) Additional taxes
Q2) All of the following are necessary for arbitrage to take place EXCEPT
A) no transactions costs.
B) no sales or transfer taxes.
C) the means to execute trades quickly.
D) a willingness to undertake a substantial net investment.
E) different prices in different locations.
Q3) Eurodollars are
A) currencies that will disappear once the euro is adopted.
B) funds created by the International Monetary Fund to be transferred among the world's central banks.
C) dollar-denominated deposits held in European banks.
D) European currencies deposited in U.S. banks.
E) dollar-denominated deposits held in foreign banks.
To view all questions and flashcards with answers, click on the resource link above.
Page 18