Corporate Finance
Exam Materials
Course Introduction
Corporate Finance introduces students to the fundamental principles and practices of financial management within corporations. The course covers key topics such as financial statement analysis, capital budgeting, risk and return, cost of capital, capital structure, dividend policy, and working capital management. Through case studies and real-world applications, students learn how financial managers make decisions to maximize shareholder value, allocate resources efficiently, and assess financial performance. Emphasis is placed on both the theoretical frameworks and practical tools necessary for strategic financial planning and corporate decision-making in a dynamic business environment.
Recommended Textbook
Foundations of Financial Management 17th Edition by Stanley B. Block
Available Study Resources on Quizplus
21 Chapters
2363 Verified Questions
2363 Flashcards
Source URL: https://quizplus.com/study-set/3922
Page 2
Chapter 1: The Goals and Activities of Financial Management
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/78237
Sample Questions
Q1) Under the 2017 Tax Cuts and Jobs Act, the most significant change is that the corporate tax rate goes from 35 percent to 21 percent, which puts U.S. Companies on competitive footing with many other countries.
A)True
B)False
Answer: True
Q2) A corporate restructuring can result in
A) changes in the capital structure.
B) selling of low-profit margin divisions.
C) the board of directors exercising control of the company's major decisions.
D) All of the options are true.
Answer: D
Q3) As noted in <i>Finance in Action</i>, initial public offerings have now increased because long-term results are favored by shareholders and institutional investors.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: Review of Accounting
Available Study Resources on Quizplus for this Chatper
116 Verified Questions
116 Flashcards
Source URL: https://quizplus.com/quiz/78236
Sample Questions
Q1) An increase in a liability account represents a source of positive funds on the cash flow statement.
A)True
B)False
Answer: True
Q2) Balance sheet items consider inflation and market value when assigning the amount to assets, liabilities, and equity accounts.
A)True
B)False
Answer: False
Q3) Which account represents the cumulative earnings of the firm since the firm started, minus dividends paid?
A) Paid-in capital
B) Common stock
C) Retained earnings
D) Accumulated depreciation
Answer: C
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Financial Analysis
Available Study Resources on Quizplus for this Chatper
131 Verified Questions
131 Flashcards
Source URL: https://quizplus.com/quiz/167482
Sample Questions
Q1) Asset utilization ratios relate balance sheet assets to income statement net income.
A)True
B)False
Answer: False
Q2) Asset utilization ratios can be used to measure the effectiveness of a firm's managers.
A)True
B)False
Answer: True
Q3) An increasing average receivables collection period indicates
A) the firm is generating more income.
B) accounts receivable are going down.
C) the company is becoming more efficient in its collection policy.
D) the company is becoming less efficient in its collection policy.
Answer: D
Q4) Return on equity will not change if the firm increases its use of debt.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Financial Forecasting
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/78234
Sample Questions
Q1) Firms that successfully increase their inventory turnover ratio will, among other things,
A) be able to reduce their borrowing needs.
B) be able to reduce their dividend payments to stockholders.
C) find it more difficult to be given credit by their resource suppliers.
D) have a greater need for high balances in their cash accounts.
Q2) The purpose of pro-forma financial statements is so that cash is never left short and a financial outlook of the firm is created and analyzed.
A)True
B)False
Q3) If Wiggle Corp has beginning inventory of 100 units, projected sales of 400 units, and desired ending inventory of 200 units, production must be planned for 300 units.
A)True
B)False
Q4) The percent-of-sales method would be more accurate under a steady sales assumption than with cyclical sales.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
6
Chapter 5: Operating and Financial Leverage
Available Study Resources on Quizplus for this Chatper
102 Verified Questions
102 Flashcards
Source URL: https://quizplus.com/quiz/78233
Sample Questions
Q1) Degree of operating leverage should be computed only over a profitable range of business operations.
A)True B)False
Q2) "Operating leverage" is the use of fixed costs to magnify returns at high levels of operation.
A)True B)False
Q3) Firms with a high degree of operating leverage are
A) easily capable of surviving large changes in sales volume.
B) usually trading off lower levels of risk for higher profits.
C) significantly affected by changes in interest rates.
D) trading off higher fixed costs for lower per-unit variable costs.
Q4) A lower sales price for the firm's product will reduce the firm's break-even point.
A)True B)False
Q5) As the contribution margin rises, the break-even point goes down. A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Working Capital and the Financing Decision
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/78232
Sample Questions
Q1) Short-term financing is risky because of the possibility of rising short-term rates and the inability to pay off debt within a short period of time.
A)True
B)False
Q2) When actual sales are greater than forecasted sales
A) inventory will decline.
B) production schedules might have to be revised upward.
C) accounts receivable will rise.
D) All of the options are true.
Q3) Short-term interest rates have historically been more volatile than long-term rates.
A)True
B)False
Q4) Liquidating current assets is like liquidating fixed assets since they have lives greater than one year.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Current Asset Management
Available Study Resources on Quizplus for this Chatper
140 Verified Questions
140 Flashcards
Source URL: https://quizplus.com/quiz/78231
Sample Questions
Q1) Proper management of sales, receivables, payables, and inventory form the basis of cash flow.
A)True
B)False
Q2) SWIFT has combated the growing issue of electronic fraud with smart card technology that no longer requires users to manually log in to the network, and thus eliminates any paper trail.
A)True
B)False
Q3) "Float" has been largely reduced because of electronic payments and improvements in business-to-business relationships.
A)True
B)False
Q4) Which of the following securities typically trades on a discount basis?
A) Treasury notes
B) Treasury bills
C) Money market funds
D) Certificates of deposit
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Sources of Short-Term Financing
Available Study Resources on Quizplus for this Chatper
117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/182025
Sample Questions
Q1) A term loan is usually characterized by
A) a maturity of one to seven years.
B) a variable interest rate.
C) monthly or quarterly installment payments.
D) all of these options are true.
Q2) A blanket inventory lien is where items are not identified or tagged, and there is no physical transfer of control of the inventory by the borrower.
A)True
B)False
Q3) Firms exposed to the risk of interest rate changes may reduce that risk by A) obtaining a Eurodollar loan.
B) hedging in the commodities market.
C) hedging in the financial futures market.
D) pledging or factoring accounts receivable.
Q4) The lender's primary concern is whether the borrower's capacity to generate accounts receivables is sufficient to liquidate the loan as it comes due.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
10
Chapter 9: The Time Value of Money
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/78229
Sample Questions
Q1) If an individual's cost of capital were 6%, the person would prefer to receive $110 at the end of one year rather than $100 right now.
A)True
B)False
Q2) The interest factor for the future value of an annuity is simply the sum of the interest factors for the future value using the same number of periods.
A)True
B)False
Q3) Cash flow decisions that ignore time value of money will probably not be as accurate as those decisions that do consider time value of money.
A)True
B)False
Q4) The shorter the length of time between a present value and its corresponding future value,
A) the lower the present value, relative to the future value.
B) the higher the present value, relative to the future value.
C) the higher the interest rate used in the discounting to the present value.
D) None of these options are correct.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Valuation and Rates of Return
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/78228
Sample Questions
Q1) A 10-year bond, with a par value equaling $1,000, pays 7% annually. If similar bonds are currently yielding 6% annually, what is the market value of the bond? Use semiannual analysis. Use time value of money tables in Appendix B and Appendix D.
A) $700.00
B) $927.50
C) $1,074.70
D) $1,520.70
Q2) A 10-year bond pays 5% on a face value of $1,000. If similar bonds are currently yielding 10%, what is the market value of the bond? Use annual analysis. Use time value of money tables in Appendix B and Appendix D.
A) $693.25
B) $386.00
C) $3,390.85
D) $1,386.09
Q3) The longer the time to maturity
A) the greater the bond price increase from an increase in interest rates.
B) the less the bond price increase from an increase in interest rates. C) the greater the bond price increase from a decrease in interest rates.
D) the less the bond price decrease from a decrease in interest rates.
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
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/78227
Sample Questions
Q1) Under the capital asset pricing model (CAPM), the required return for common stock (or other investments) can be described by the following formula: Kj = Rf + b(Km Rf), where Km is equal to the return expected in the market as measured by an appropriate index.
A)True B)False
Q2) If the flotation cost goes up, the cost of retained earnings will A) go up.
B) go down.
C) stay the same.
D) slowly increase.
Q3) In determining the cost of debt, a firm could use its yields and prices of outstanding bonds.
A)True B)False
Q4) A firm's cost of preferred stock is equal to the preferred dividend divided by market price plus the dividend growth rate (K<sub>p</sub> = D/P<sub>0</sub> + g).
A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: The Capital Budgeting Decision
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/78226
Sample Questions
Q1) It is the difference in the reinvestment assumptions that can be significant in determining when to use the net present value or internal rate of return methods.
A)True
B)False
Q2) Which of the following is not a step in the capital budgeting decision-making process?
A) Search for and discovery of investment opportunities.
B) Collection of data.
C) Evaluation and decision making.
D) All of the above are steps used in this process
Q3) The net present value's primary advantage over the internal rate of return method is that it does not require the time value of money calculations that the internal rate of return requires.
A)True
B)False
Q4) Capital budgeting decisions involve a minimum time horizon of five years.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Risk and Capital Budgeting
Available Study Resources on Quizplus for this Chatper
90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/78225
Sample Questions
Q1) The coefficient of variation (V) can be defined as the A) expected value multiplied by the standard deviation.
B) standard deviation divided by the mean (expected value).
C) mean (expected value) divided by the standard deviation.
D) standard deviation squared, divided by the expected value.
Q2) Projects that are totally uncorrelated should provide some overall reduction in portfolio risk.
A)True
B)False
Q3) A correlation coefficient of zero indicates
A) the projects have the same expected value.
B) there is no correlation and no risk reduction when the projects are combined.
C) there is no correlation, but there is some risk reduction when the projects are combined.
D) the projects have the same standard deviation.
Q4) Generally, because of the unpredictability of earnings, cyclical stocks are given higher price-earnings multiples than growth stocks.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Capital Markets
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/78224
Sample Questions
Q1) Which of the following was NOT a major supplier of funds to credit markets in 2008?
A) Households
B) Government sponsored agencies
C) Mutual funds and ETFs
D) All of the options were major suppliers of funds
Q2) The purpose of the Securities Act of 1933 is to protect the investors by forcing companies to reveal more relevant financial information.
A)True
B)False
Q3) The future of the NYSE is uncertain due to their unwillingness to adapt to the increase in internationalization and electronic trading in the markets.
A)True
B)False
Q4) The Sarbanes-Oxley Act of 2002 holds a firm's internal auditors legally accountable for the accuracy of their firm's financial statements.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Investment Banking: Public and Private
Placement
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/78223
Sample Questions
Q1) Stock prices for Amazon and eBay managed to avoid the turbulent price movements that followed the collapse of the Internet bubble.
A)True
B)False
Q2) The out-of-pocket cost to issue new common stock is always paid by the investment banker.
A)True
B)False
Q3) Maxwell Corp. is coming to the market with a new offering of 450,000 shares of stock at $22 to the public. Maxwell will receive $19 per share. The firm has one million shares outstanding and earnings of $6 million before recording the new issue. What is the amount of dilution in earnings per share?
A) $1.86
B) $1.38
C) $1.77
D) $6.00
Q4) Shelf registration is most frequently used with new issues of common stock.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Long-Term Debt and Lease Financing
Available Study Resources on Quizplus for this Chatper
137 Verified Questions
137 Flashcards
Source URL: https://quizplus.com/quiz/78222
Sample Questions
Q1) The costs of bond refunding are the call premium and the underwriting costs on the old and new bond issue.
A)True
B)False
Q2) Disclosure requirements for a Eurobond are ________ demanding than those of the Securities and Exchange Commission or other domestic regulatory agencies. A) more B) less
C) the same
D) More information is needed to determine an answer.
Q3) Under a sinking fund arrangement, semiannual or annual contributions are made by the corporation into a fund administered by a trustee for purposes of debt retirement.
A)True B)False
Q4) The fact that interest payments on debt are fixed is both an advantage and a drawback to both parties involved.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Common and Preferred Stock Financing
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/78221
Sample Questions
Q1) Floating rate preferred stock would be ideal to have when the stock price fluctuates and when there are tax benefits to owning preferred stock.
A)True
B)False
Q2) Participating preferred stock is advantageous to common stockholders because it receives more dividends.
A)True
B)False
Q3) The effect of a rights offering on a stockholder is
A) the right to sell stocks, in which the stockholder's wealth only increases if the stock is sold.
B) the right to own more stocks, in which the stockholder's wealth increases only if the new stock is purchased.
C) the right to own more shares at a cheaper price, while the wealth of the stockholder's original shares goes up.
D) the right to own more shares at a cheaper price, but the wealth of the stockholder's original shares goes down.
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Dividend Policy and Retained Earnings
Available Study Resources on Quizplus for this Chatper
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/78220
Sample Questions
Q1) Investors should try to invest in tax-exempt retirement accounts to try to avoid the higher taxes placed on some investments.
A)True
B)False
Q2) The marginal principle of retained earnings means that each potential project to be financed by retained earnings must
A) provide a higher rate of return than the stockholders can on their after-tax dividend income.
B) yield a return equal to or greater than the marginal cost of capital.
C) provide enough return to pay the corporation's marginal tax rate.
D) provide enough return to pay future dividends.
Q3) A firm will pay dividends as long as it has cash available.
A)True
B)False
Q4) According to the "marginal principle of retained earnings," dividends are A) the active variable.
B) the passive variable.
C) not usually paid.
D) a certain fixed percentage of earnings.
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Convertibles, Warrants, and Derivatives
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/180059
Sample Questions
Q1) If the stock price rises substantially above the conversion price, an advantage to the corporation would be that
A) the premium would decrease.
B) the floor price would offer the investor downside protection.
C) the bond would most likely be converted into common stock and the debt would not have to be repaid.
D) None of these options are advantages to the corporation.
Q2) Convertible securities are attractive because of their downside protection characteristics, as well as their upside potential.
A)True
B)False
Q3) In general, the average size of convertible issues is small compared to normal bond issues.
A)True
B)False
Q4) For the most downside protection, an investor should search for convertibles trading below par value near their floor value.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: External Growth Through Mergers
Available Study Resources on Quizplus for this Chatper
86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/78218
Sample Questions
Q1) Synergy is
A) the 2 + 2 = 3 effect.
B) the 2 + 2 = 4 effect.
C) the 2 + 2 = 5 effect.
D) always present in a merger.
Q2) Selling stockholders generally receive a price below the current market value of their prior stock during a merger.
A)True
B)False
Q3) Which of the following is NOT a financial motive, but rather an operating motive for mergers and consolidations?
A) The portfolio diversification effect
B) Tax loss carryforward
C) Greater financing capability
D) Synergy
Q4) Nonfinancial motives for mergers include
A) synergy.
B) the portfolio effect.
C) vertical integration.
D) synergy and vertical integration.
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: International Financial Management
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/78217
Sample Questions
Q1) You travel to Cancun Mexico for spring break. The current exchange rate is 13 pesos to the dollar. When you arrive, you convert $1,000 into how many pesos?
A) 1,300 pesos
B) 80 pesos
C) 13,000 pesos
D) 77 pesos
Q2) All of the countries that joined the "Eurozone" have experienced economic success for various reasons.
A)True
B)False
Q3) A rising euro and a falling dollar will cause an increase in U.S. exports to Europe.
A)True
B)False
Q4) Transaction exposure associated with changes in the exchange rate between countries can be hedged with a currency futures contract.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
23