Financial Analysis
Practice Exam
Course Introduction
Financial Analysis is a comprehensive course designed to equip students with the skills necessary to evaluate and interpret financial data for decision-making in business contexts. Through the examination of key financial statements, ratio analysis, cash flow analysis, and valuation techniques, students learn to assess an organization's financial health and performance. The course covers both qualitative and quantitative methods, offering practical insights into budgeting, forecasting, risk assessment, and investment analysis. By the end of the course, students will be able to critically analyze financial information to guide strategic planning and resource allocation within organizations.
Recommended Textbook
Financial Management Principles and Applications 11th Edition by Sheridan Titman
Available Study Resources on Quizplus
20 Chapters
2091 Verified Questions
2091 Flashcards
Source URL: https://quizplus.com/study-set/3556
Page 2
Chapter 1: Getting Started-Principles of Finance
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/70602
Sample Questions
Q1) Which forms of organization are free of initial legal requirements?
A)Sole proprietorship
B)General partnership
C)Corporation
D)Both A and B
Answer: D
Q2) Which of the following would be most likely to align the interests of managers and shareholders?
A)Fixed but high salaries
B)Large bonuses
C)Stock options
D)All of the above
E)None of the above
Answer: C
Q3) The life of a corporation is not dependent upon the status of the investors.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above.
3
Chapter 2: Firms and the Financial Market
Available Study Resources on Quizplus for this Chatper
35 Verified Questions
35 Flashcards
Source URL: https://quizplus.com/quiz/70603
Sample Questions
Q1) Describe the tax benefits to a corporation of issuing debt rather than issuing stock. Answer: The greatest advantage to issuing debt is that the interest payments on debt are tax deductible,and that dividend payments are not tax deductible.In addition,the interest payment is a known amount,and the required return on debt is generally lower than the investor required return on equity because the cash flows to investors are more predictable for debt than they are for equity.
Q2) In Financial markets,borrowers and lenders most both be located in the same country.
A)True
B)False Answer: False
Q3) Individuals are often savers because they wish to save for things such as a down payment on a home or graduate school.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Understanding Financial Statements, taxes, and Cash Flows
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/70604
Sample Questions
Q1) Your firm has the following balance sheet statement items: total current liabilities of $805,000;total assets of $2,655,000;fixed and other assets of $1,770,000;and long-term debt of $200,000.What is the amount of the firm's net working capital?
A)$25,000
B)$325,000
C)$770,000
D)$80,000
Answer: D
Q2) You are about to determine your corporation's taxable income.Which of the below would NOT be included as a tax-deductible expense?
A)Marketing expenses
B)Depreciation expense
C)Cost of goods sold
D)Dividend expense
Answer: D
Q3) The balance sheet describes the financial position of a firm on a given date.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Financial Analysis-Sizing up Firm Performance
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/70605
Sample Questions
Q1) Wireless Communications has a total asset turnover of 2.66,total liabilities of $1,004,162,and sales revenues of $7,025,000.What is Wireless's debt ratio?
A)38.0%
B)14.3%
C)26.7%
D)81.1%
Q2) Based on the information in Table 1,the debt ratio is:
A)0.70.
B)0.20.
C)0.74.
D)0.42.
Q3) Marshall Networks,Inc.has a total asset turnover of 2.5 and a net profit margin of 3.5%.The firm has a return on equity of 17.5%.Calculate Marshall's debt ratio.
A)30%
B)40%
C)50%
D)60%
Q4) Discuss the limitations of ratio analysis.
To view all questions and flashcards with answers, click on the resource link above.
6
Chapter 5: Time Value of Money-The Basics
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/70606
Sample Questions
Q1) If you want to have $90 in four years,how much money must you put in a savings account today? Assume that the savings account pays 8.5% and it is compounded monthly (round to the nearest $1).
A)$64
B)$65
C)$66
D)$71
Q2) The present value of $400 to be received at the end of 10 years,if the discount rate is 5%,is:
A)$400.00.
B)$248.40.
C)$313.60.
D)$245.60.
Q3) If you are a borrower,which of the choices would lower your APR?
A)Repay your loan in monthly installments
B)Repay your loan in quarterly installments
C)Repay your loan in semiannual installments
D)Repay your loan in annual installments
E)You would be indifferent to how frequent your loan payments are.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: The Time Value of Money-Annuities and Other Topics
Available Study Resources on Quizplus for this Chatper
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/70607
Sample Questions
Q1) You are thinking of buying a miniature golf course.It is expected to generate cash flows of $40,000 per year in years one through four and $50,000 per year in years five through eight.If the appropriate discount rate is 10%,what is the present value of these cash flows?
A)$285,288
B)$167,943
C)$235,048
D)$828,230
Q2) Charlie Stone wants to retire in 30 years,and he wants to have an annuity of $1,000 a year for 20 years after retirement.Charlie wants to receive the first annuity payment at the end of the 30th year.Using an interest rate of 10%,how much must Charlie invest today in order to have his retirement annuity (round to the nearest $10)?
A)$500
B)$490
C)$540
D)$570
Q3) The present value of a $100 perpetuity discounted at 5% is $1200.
A)True
B)False
Page 8
To view all questions and flashcards with answers, click on the resource link above.
Chapter 7: An Introduction to Risk and Return-History of
Financial Market Returns
Available Study Resources on Quizplus for this Chatper
44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/70608
Sample Questions
Q1) Less risky investments have lower standard deviations than do more risky investments.
A)True
B)False
Q2) Stock prices go up when there is positive information about a company,and go down when there is negative information about the company.
A)True
B)False
Q3) Spartan Sofas,Inc.is selling for $50.00 per share today.In one year,Spartan will be selling for $48.00 per share,and the dividend for the year will be $3.00.What is the cash return on Spartan stock?
A)0%
B)2%
C)6%
D)10%
Q4) Arithmetic average rate of return takes compounding into effect.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 9
Q5) Are markets moving toward being more efficient or toward being less efficient?
Chapter 8: Risk and Return-Capital Market Theory
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/70609
Sample Questions
Q1) Beta is a statistical measure of:
A)hyperbolic.
B)total risk.
C)the standard deviation.
D)the relationship between an investment's returns and the market return.
Q2) Hefty stock has a beta of 1.2.If the risk-free rate is 7% and the market risk premium is 6.5%,what is the required rate of return on Hefty?
A)14.8%
B)14.4%
C)12.4%
D)13.5%
Q3) Your broker mailed you your year-end statement.You have $25,000 invested in Dow Chemical,$18,000 tied up in GM,$36,000 in Microsoft stock,and $11,000 in Nike.The betas for each of your stocks are 1.55 for Dow,1.12 for GM,2.39 for Microsoft,and .76 for Nike.What is the beta of your portfolio?
A)1.46
B)1.70
C)2.60
D)0.41
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: Debt Valuation and Interest Rates
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/70610
Sample Questions
Q1) The current yield of a bond will equal its coupon rate when the bond is selling at par value.
A)True
B)False
Q2) Bonds cannot be worth less than their book value.
A)True
B)False
Q3) Zoro Sword Company bonds pay an annual coupon rate of 9 1/2%.They have eight years to maturity and face value,or par,of $1,000.Compute the value of Zoro bonds if investors' required rate of return is 10%.
A)$1,516.18
B)$973.33
C)$1,027.17
D)$950.00
Q4) Mortgage bonds:
A)are a type of debenture.
B)are secured by a lien on real property.
C)usually pay little or no interest.
D)can only be issued by financial institutions.
Q5) Compare and contrast current yield and yield to maturity.
Page 11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Stock Valuation
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/70611
Sample Questions
Q1) Tri State Pickle Company preferred stock pays a perpetual annual dividend of 2 1/2% of its par value.Par value of TSP preferred stock is $100 per share.If investors' required rate of return on this stock is 15%,what is the value of per share?
A)$37.50
B)$15.00
C)$16.67
D)$6.00
Q2) Common stock represents a claim on residual income.
A)True
B)False
Q3) The expected rate of return on a share of common stock whose dividends are growing at a constant rate (g)is which of the following?
A)(D<sub>1</sub> + g)/Vc
B)D<sub>1</sub>/Vc + g
C)D<sub>1</sub>/g
D)D<sub>1</sub>/Vc
Q4) Distinguish between primary stock market transactions and secondary stock market transaction.
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Investment Decision Criteria
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/70612
Sample Questions
Q1) A new forklift under consideration by Home Warehouse requires an initial investment of $100,000 and produces annual cash flows of $50,000,$40,000,and $30,000.Which of the following will not change if the required rate of return is increased from 10% to 12%.
A)The net present value.
B)The internal rate of return.
C)The profitability index.
D)The modified internal rate of return.
Q2) Project Sigma requires an investment of $1 million and has a NPV of $10.Project Delta requires an investment of $500,000 and has a NPV of $150,000.The projects involve unrelated new product lines.
A)Both projects should be accepted because they have positive NPV's.
B)Neither project should be accepted because they might compete with one another.
C)Only project Delta should be accepted.Alpha's NPV is too low for the investment.
D)The company should look at other investment criteria,not just NPV.
Q3) The higher the discount rate,the greater the importance of the early cash flows.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Analyzing Project Cash Flows
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/70613
Sample Questions
Q1) If an investment project would make use of land which the firm currently owns,the project should be charged with:
A)a sunk cost.
B)an opportunity cost.
C)amortization.
D)interest.
E)abuse of power.
Q2) The machine's initial cash outflow is:
A)$20,000.
B)$21,000.
C)$27,000.
D)$23,000.
Q3) The machine's IRR is:
A)less than 0.
B)greater than 12 percent.
C)less than 12 percent.
D)equal to 12 percent.
Q4) Working capital for a project includes investment in fixed assets.
A)True
B)False
14
To view all questions and flashcards with answers, click on the resource link above.
Chapter 13: Risk Analysis and Project Evaluation
Available Study Resources on Quizplus for this Chatper
103 Verified Questions
103 Flashcards
Source URL: https://quizplus.com/quiz/70614
Sample Questions
Q1) Which of the following is a real option with respect to a capital budgeting decision?
A)A call option on the company's stock.
B)A put option on securities sold to finance the project.
C)An option to expand the scale of the project.
D)An option to purchase that will be used for the manufacturing facility.
Q2) What is the expected net operating profit after tax (NOPAT)if the most likely estimates are used?
A)$493,500
B)$330,000
C)$300,000
D)$124,500
Q3) Sensitivity analysis shows how the distribution of possible net present values is affected by a change in one input variable.
A)True
B)False
Q4) What are the consequences of excessive optimism or pessimism in forecasting expected project cash flows?
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: The Cost of Capital
Available Study Resources on Quizplus for this Chatper
130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/70615
Sample Questions
Q1) Stonehedge Dairy will expand its organic yogurt production capacity at a cost of $10,000,000.The expansion will increase after-tax operating cash by $1.4 million dollars per year for the next 20 years.Stonehedge's WACC is 10%.To raise the $10,000,000 Stonehedge will need to issue new securities at a weighted average flotation cost of 10%.What is the NPV of the expansion?
A)$918,989
B)$807,878
C)$11,918,989
D)$1,918,989
Q2) The weighted cost of capital assumes that the company maintains a constant debt to equity ratio.
A)True
B)False
Q3) Why are market values preferred to book (balance sheet)values when computing a firm's weighted average cost of capital.
Q4) All things equal,as the tax rate increases,the incentive to use more debt financing increases.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Capital Structure Policy
Available Study Resources on Quizplus for this Chatper
108 Verified Questions
108 Flashcards
Source URL: https://quizplus.com/quiz/70616
Sample Questions
Q1) Which of the following is a reasonable conclusion from the Tradeoff theory of capital structure?
A)A high debt ratio will result in a maximum price of a firm's common stock.
B)A firm's common stock price will not be affected by the amount of debt a firm uses.
C)A low debt ratio will result in a maximum price for a firm's common stock.
D)Modest levels of debt have a more favorable impact on a firm's average cost of capital and stock price than no debt.
Q2) The firm's optimal capital structure is the mix of financing sources that:
A)minimizes the risk of financial distress.
B)maximizes after-tax earnings.
C)maximizes the total value of the firm's debt and equity.
D)all of the above.
Q3) Briefly explain what the empirical evidence suggests about financial managers' actions as they relate to the capital structure theory.
Q4) List and briefly explain at least two important reasons why capital structures tend to differ between industries and even companies within the same industry.
Q5) Why is the Debt to Assets Ratio always higher than the Debt to Value ratio?
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Dividend Policy
Available Study Resources on Quizplus for this Chatper
130 Verified Questions
130 Flashcards
Source URL: https://quizplus.com/quiz/70617
Sample Questions
Q1) What are the effects of stock splits and stock dividends? Why are they popular?
Q2) Which of the following is most likely to have a negative impact on stock price?
A)Omitting a stock repurchase offer
B)Failure to increase the dividend at the same rate as previous years
C)Cutting the dividend per share in dollar terms
D)Reducing the dividend payout ratio
Q3) Dividends tend to be more stable than:
A)cash flow.
B)earnings.
C)preferred stock.
D)both B and C.
Q4) The ex-dividend date occurs prior to the declaration date.
A)True
B)False
Q5) Georges Bizet owns 10,000 shares of Pearl Co.purchased at an average price of $15 per share.The tax rate on both dividends and capital gains is 15%.Would Bizet prefer a $2.00 per share dividend or to sell 1,000 shares back to the company at $20 per share?
Compute his after-tax income from each option.
Q6) Compare the Stable Dividend Payout to the Residual Dividend Policy.
Q7) What is meant by "dividend clienteles"? Give specific examples.
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Financial Forecasting and Planning
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/70618
Sample Questions
Q1) Holding all other variables constant,as the dividend payout ratio decreases,the sustainable growth rate increases.
A)True
B)False
Q2) Banner's projected retained earnings for 2005 are:
A)$260,000.
B)$280,000.
C)$340,000.
D)$350,000.
Q3) When forecasting statements,assets always increase proportionately to sales regardless of capacity.
A)True
B)False
Q4) A discretionary form of financing would be:
A)notes payable.
B)accounts payable.
C)accrued expenses.
D)none of the above.
Q5) Discuss the basic functions that budgets perform for a firm.
Q6) What is meant by spontaneous financing?
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Working Capital Management
Available Study Resources on Quizplus for this Chatper
146 Verified Questions
146 Flashcards
Source URL: https://quizplus.com/quiz/70619
Sample Questions
Q1) The annual percentage rate (APR)on short-term loans from Bank A is 5.75% per year.Bank B claims that their interest rate is only 5.44% per year.However,Bank B charges interest on a discount basis.Which bank is charging the lowest APR on a one-year loan?
Q2) Georgia Peaches Corporation (GPC)has a line of credit with Trust Company Bank that allows GPC to borrow up to $300,000 at an annual interest rate of 5.5%.However,GPC must keep a compensating balance of 20% of any amount borrowed on deposit at the Trust Company Bank.GPC does not normally have a cash balance account with the Trust Company.What is the effective annual cost of credit?
A)6.875%
B)6.975%
C)7.075%
D)7.775%
Q3) Which of the following is most consistent with the self-liquidating debt principle in working capital management?
A)Fixed assets should be financed with short-term notes payable.
B)Inventory should be financed with preferred stock.
C)Accounts receivable should be financed with short-term lines of credit.
D)Borrow on a floating rate basis to finance investments in permanent assets.
To view all questions and flashcards with answers, click on the resource link above.
Page 20
Chapter 19: International Business Finance
Available Study Resources on Quizplus for this Chatper
122 Verified Questions
122 Flashcards
Source URL: https://quizplus.com/quiz/70620
Sample Questions
Q1) The asked rate is the price a customer will receive from a foreign currency trader when selling a foreign currency.
A)True
B)False
Q2) Suppose International Trading Enterprises purchased 25,000 kilograms of Belgian chocolate for a price of 100,000 euros.If the current exchange rate is .69368 euros to the U.S.dollar,what is the purchase price of the chocolate in dollars?
A)$14,416
B)$693,368
C)$69,368
D)$144,159
Q3) A theory that relates the ratios of spot and forward exchange to differences in interest rates in two countries or currency zones is known as:
A)interest rate parity.
B)purchasing power parity.
C)market efficiency.
D)forward/spot equivalence hypothesis.
Q4) What is the role of arbitrage in the foreign exchange markets?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 20: Corporate Risk Management
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/70621
Sample
Questions
Q1) As the risk free rate of return increases,the value of call options ________ and the value of put options ________.
A)decreases,increases
B)increases,increases
C)decreases,decreases
D)increases,decreases
Q2) Futures and currency swaps eliminate unfavorable price movements,whereas options can be used to eliminate the effect of both favorable and unfavorable price movements.
A)True
B)False
Q3) The term futures margin refers to:
A)the percent of potential margin for profit associated with a futures contract.
B)the "good faith" money the purchaser puts down to ensure that the contract will be carried out.
C)the interest-earning account associated with a futures contract.
D)the number of contracts outstanding on a particular futures contract.
Q4) Some risks cannot be transferred to other parties.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 22