Financial Decision Making Practice Exam
Course Introduction
Financial Decision Making is a comprehensive course designed to equip students with the analytical tools and practical knowledge necessary to make informed financial decisions within organizations. Covering core topics such as budgeting, financial statement analysis, risk assessment, capital structure, investment appraisal, and working capital management, the course emphasizes both quantitative and qualitative approaches. Real-world case studies and problem-solving exercises help students apply financial theories to actual business scenarios, fostering the skills needed to evaluate alternatives and recommend effective financial strategies. By the end of the course, students will be able to critically assess financial information and confidently participate in strategic planning and resource allocation processes.
Recommended Textbook
Foundations of Financial Management 15th Edition by Stanley B. Block
Available Study Resources on Quizplus 21 Chapters
2215 Verified Questions
2215 Flashcards
Source URL: https://quizplus.com/study-set/2948 Page 2
Chapter 1: The Goals and Activities of Financial Management
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/167402
Sample Questions
Q1) Many companies such as Tyco, Enron, and WorldCom that suffered financial distress in the late 1990s and early 2000s
A)committed fraud.
B)had failed corporate governance oversight.
C)went bankrupt.
D)All of the options are true.
Answer: D
Q2) New issues are sold in the secondary market.
A)True
B)False
Answer: False
Q3) Inflation is assumed to be a temporary problem that does not affect financial decisions.
A)True
B)False
Answer: False
Q4) Higher return always induces stockholders to invest in a company.
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
127 Verified Questions
127 Flashcards
Source URL: https://quizplus.com/quiz/167779
Sample Questions
Q1) Stockholders' equity is equal to assets minus liabilities.
A)True
B)False
Answer: True
Q2) Balance sheet items are required to be adjusted for inflation.
A)True
B)False Answer: False
Q3) Although depreciation does not provide cash to the firm directly, the fact that it is tax-deductible can provide cash inflow to the company.
A)True
B)False
Answer: True
Q4) Operating profit is essentially a measure of how efficient management is in generating revenues and controlling expenses.
A)True
B)False
Answer: True
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
90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/58684
Sample Questions
Q1) Higher debt utilization ratios will always increase a firm's return on equity given a positive return on assets.
A)True
B)False
Answer: True
Q2) If lease payments are reduced and everything else remains constant,
A)times interest earned goes up.
B)fixed charge coverage goes up.
C)fixed charge coverage stays the same.
D)fixed charge coverage goes down.
Answer: B
Q3) Intangible assets are becoming an important part of the assets in a company's financial statements because accountants are recognizing the growing impact of brand names.
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
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/58683
Sample Questions
Q1) When using the percent-of-sales method in forecasting the funds needed, which of the following is not true?
A)As the dividend payout ratio increases, the required new funds also increase.
B)Required new funds decrease as profit margin increases.
C)Required new funds increase as the dividend payout decreases.
D)As the tax rate increases, the required new funds increase.
Q2) Wiggles Right forecasted sales of $5,000 in October, $4,000 in November, and $4,000 in December. All sales are on credit. 40% is collected in the month of the sale, and the remainder in the following month. How much is collected from accounts receivable in November?
A)$5,400
B)$4,800
C)$6,000
D)$4,600
Q3) An increase in sales and/or profits means there is also an increase in cash on the balance sheet.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Operating and Financial Leverage
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/58682
Sample Questions
Q1) In break-even analysis, the contribution margin is defined as
A)price minus variable cost.
B)price minus fixed cost.
C)variable cost minus fixed cost.
D)fixed cost minus variable cost.
Q2) Firm A employs a high degree of operating leverage; Firm B takes a more conservative approach. Which of the following comparative statements about firms A and B is true?
A)A has a lower break-even point than B, but A's profit grows faster after the breakeven.
B)A has a higher break-even point than B, but A's profit grows slower after the breakeven.
C)B has a lower break-even point than A, but A's profit grows faster after the breakeven.
D)B has a lower break-even point than A, and profit grows the same rate for both companies after the break-even point.
Q3) The contribution margin is equal to sales price per unit minus total costs per unit.
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
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/58681
Sample Questions
Q1) The use of cash budgeting procedures
A)helps the firm plan its current asset levels for a given production plan.
B)makes managing inventory easier under seasonal production.
C)illustrates fluctuating levels of current assets for a given production plan.
D)All of the options are correct.
Q2) Long-term financing is usually less expensive than short-term financing because it is not as advantageous to the corporation as short-term financing.
A)True
B)False
Q3) The term structure of interest rates is influenced by A)inflation.
B)the money supply.
C)Federal Reserve activities.
D)All of the options
Q4) When using level production, inventory will peak in the month where unit sales trend above the planned production level.
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
133 Verified Questions
133 Flashcards
Source URL: https://quizplus.com/quiz/58680
Sample Questions
Q1) Cash flow does not rely on which of the following?
A)The payment patterns of customers
B)The monetary policy of the Federal Reserve
C)The speed at which suppliers and creditors process checks
D)The efficiency of the banking system
Q2) In the management of cash and marketable securities, the primary concern is profitability.
A)True
B)False
Q3) The costs of carrying inventory do not include
A)the interest on funds tied up in inventory.
B)the cost of warehouse space.
C)ordering costs.
D)insurance and handling costs.
Q4) Treasury bills are unique in that they trade on a premium basis.
A)True
B)False
Q5) Bankers' acceptances are short-term securities that arise from foreign trade.
A)True
B)False
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
122 Verified Questions
122 Flashcards
Source URL: https://quizplus.com/quiz/182024
Sample Questions
Q1) The effective rate on a $20,000 installment loan with quarterly payments and $2,000 in interest for two years is approximately ______.
A)16%
B)7.4%
C)29.5%
D)8.9%
Q2) Factoring accounts receivable, unlike pledging accounts receivable, typically passes the risk of loss on the receivable to the buyer.
A)True
B)False
Q3) If a firm has invested in corporate bonds, it may engage in a financial futures contract in order to protect itself from
A)declining interest rates.
B)rising interest rates.
C)inflation.
D)changes in hedging activities.
Q4) Finance paper usually carries a higher rate of interest than direct paper.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: The Time Value of Money
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/58678
Sample Questions
Q1) The interest factor for the future value of a single sum is equal to (1 + n)<sup>i</sup>.
A)True
B)False
Q2) In determining the interest factor (IF) for the present value of $1, one could use the reciprocal of that IF for the future value of $1 at the same rate and time period.
A)True
B)False
Q3) In January, 2000, Harold Black bought 100 shares of Country Homes for $37.50 per share. He sold them in January 2010 for a total of $9,715.02. Calculate Harold's approximate annual rate of return.
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
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Valuation and Rates of Return
Available Study Resources on Quizplus for this Chatper
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/58677
Sample Questions
Q1) Which of the following regarding preferred stock is true?
A)If the price decreases, the required rate of return has decreased.
B)If the required rate of return increases, the price decreases.
C)If the required rate of return increases, the price increases.
D)The price in the market remains at par.
Q2) The dividend valuation model stresses the
A)importance of earnings per share.
B)importance of dividends and legal rules for maximum payment.
C)relationship of dividends to market prices.
D)relationship of dividends to earnings per share.
Q3) By using different discount rates, the market allocates capital to companies based on their risk, efficiency, and expected returns.
A)True
B)False
Q4) The preferred stock of Lewis-Schultz Enterprises pays an annual dividend of $1.32.
What is the required return if the market value of the preferred stock is:
a) $40
b) $30
c) $20
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
99 Verified Questions
99 Flashcards
Source URL: https://quizplus.com/quiz/58676
Sample Questions
Q1) In the capital asset pricing model (CAPM), beta measures the volatility of the market. Beta represents the volatility of one particular stock against an index of the overall market.
A)True
B)False
Q2) A firm's cost of financing, in an overall sense, is equal to its
A)weighted average cost of capital.
B)required yield that investors seek for various kinds of securities.
C)required rate of return that investors seek for various kinds of securities.
D)All of these options
Q3) The cost of debt, preferred stock, and common equity must all be adjusted for tax implications.
The cost of debt financing has direct tax implications; equity financing does not. A)True
B)False
Q4) All firms within particular industries have similar optimum capital structures.
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
111 Verified Questions
111 Flashcards
Source URL: https://quizplus.com/quiz/58675
Sample Questions
Q1) The payback method has several disadvantages, among them:
A)Payback fails to choose the optimum or most economic solution to a capital budgeting problem.
B)Payback ignores cash inflows after the payback period.
C)Payback fails to choose the optimum or most economic solution to a capital budgeting problem, and it ignores cash inflows after the payback period.
D)None of these options
Q2) All of the following is information required to create a net present value profile except for which one?
A)NPV at a 0 discount rate
B)NPV at the risk-free rate
C)NPV at the cost of capital
D)IRR of investment
Q3) It is not unusual for a corporate president, who deals with security analysts, to be as sensitive to after-tax income as to cash flow.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
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/168886
Sample Questions
Q1) A project that carries a normal amount of risk and does not affect the risk exposure of the firm should be discounted back at the
A)coefficient of variation.
B)beta.
C)risk-free rate.
D)firm's weighted average cost of capital.
Q2) Which investment has the least amount of risk?
A)Standard deviation = $450, expected return = $4,500
B)Standard deviation = $600, expected return = $400
C)Standard deviation = $500, expected return = $800
D)Standard deviation = $400, expected return = $5,000
Q3) If one project has a higher standard deviation than another,
A)it always has a greater risk.
B)it always has a higher expected value.
C)it has fewer possible outcomes.
D)it may be riskier, but this can only be determined by the coefficient of variation.
Q4) The investor's portfolio should always be on the efficient frontier.
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
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/58673
Sample Questions
Q1) The "capital structure" of the firm consists of long-term debt and equity.
A)True
B)False
Q2) The Sarbanes-Oxley Act of 2002 holds the CEO and CFO legally accountable for the accuracy of their firm's financial statements.
A)True
B)False
Q3) The Federal National Mortgage Association buys mortgage loans from local lenders, bundles them together, and resells them as securities.
A)True
B)False
Q4) U.S. government agency securities are directly guaranteed by the full faith and credit of the U.S. Treasury.
A)True
B)False
Q5) NASD regulates stockbrokers and brokerage firms.
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
109 Verified Questions
109 Flashcards
Source URL: https://quizplus.com/quiz/168893
Sample Questions
Q1) Dilution is
A)the short-term impact of a new issuance upon earnings per share.
B)the result of underwriting expenses.
C)generally acceptable by corporations and investors.
D)Two of the options
Q2) Investment bankers can help a firm undertake a secondary offering when the company is too small for a primary offering IPO.
Secondary offerings are about the sale of supplemental shares, as well as those held by owners from the primary offering, rather than the size of the company.
A)True
B)False
Q3) A branch of investment banking that has been very opportunistic in recent years has been the increase in sales of foreign securities of companies formerly owned by the government.
A)True
B)False
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
120 Verified Questions
120 Flashcards
Source URL: https://quizplus.com/quiz/58671
Sample Questions
Q1) The call premium tends to increase with the passage of time. The advantage of the call feature includes the time value of money on the remaining interest payments and the principal balance. Therefore, the shorter the time remaining, the less of a call premium "penalty" the issuer can be expected to make.
A)True
B)False
Q2) Many bonds have some orderly, preplanned, alternative system of repayment. Which of the following apply?
A)Sinking funds
B)Serial bonds
C)Income bonds
D)Sinking funds and serial bonds
Q3) Zero-coupon bonds are sold at a deep discount primarily because investors are not interested in owning them.
"Zeroes" are sold at a deep discount with the strategy in mind that they will grow to maturity, providing the investor with income equal to the spread.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Common and Preferred Stock Financing
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/58670
Sample Questions
Q1) Kuhns Corp. has 200,000 shares of preferred stock outstanding that is cumulative. The dividend is $3.00 per share and has not been paid for three years. If Kuhns earned $1 million this year, what could be the maximum payment to the preferred stockholders on a per share basis?
A)$9.50 per share
B)$15.00 per share
C)$6.00 per share
D)$5.00 per share
Q2) Participating preferred stock gives its owners voting rights.
A)True B)False
Q3) North stock sells for $65 rights-on, and the subscription price is $55. Nine rights are required to purchase one share. The value of a right is ________.
A)$0.11
B)$1.11
C)$1.00
D)$1.50
To view all questions and flashcards with answers, click on the resource link above.
19
Chapter 18: Dividend Policy and Retained Earnings
Available Study Resources on Quizplus for this Chatper
102 Verified Questions
102 Flashcards
Source URL: https://quizplus.com/quiz/58669
Sample Questions
Q1) Most dividends, like interest on corporate bonds, are paid semi-annually.
A)True
B)False
Q2) An investor's preference for dividends rather than capital gains is influenced by their level of income.
A)True
B)False
Q3) Investors in high marginal tax brackets usually prefer companies that reinvest most of their earnings, thus creating more growth in earnings and stock prices and deferring taxes into the future.
A)True
B)False
Q4) One way companies responded to the financial crisis of 2008-2009 was to cut their cash dividends to stockholders.
A)True B)False
Q5) The "ex-dividend date" will typically precede the "holder of record date."
A)True
B)False
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
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/58668
Sample Questions
Q1) The price of a convertible bond
A)has downside as well as upside limitations.
B)has only upside limitations.
C)has only downside limitations.
D)has no upside or downside limitations.
Q2) The principle device used by the corporation to force conversion
A)is setting the conversion price above the current market price.
B)is reducing the amount of interest payments.
C)is buying bonds back at below par value.
D)is a call provision.
Q3) The face value of a convertible bond divided by the conversion price equals the number of shares a bondholder will receive upon conversion.
A)True
B)False
Q4) Convertible securities are attractive because of their downside protection characteristics, as well as their upside potential.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
21
Chapter 20: External Growth Through Mergers
Available Study Resources on Quizplus for this Chatper
79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/180061
Sample Questions
Q1) Risk-averse investors may discount the future earnings of the merged firm at a higher rate if they move in different directions during business cycles.
A)True
B)False
Q2) The earnings-per-share impact of a merger is influenced by relative price-earnings ratios and the terms of exchange.
A)True
B)False
Q3) A business combination of two or more companies in which the resulting firm maintains the identity of the acquiring company is defined as a A)consolidation.
B)holding company.
C)conglomerate.
D)merger.
Q4) For mergers occurring after 2001, goodwill must be amortized and written off over 40 years or less.
A)True
B)False
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
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/58666
Sample Questions
Q1) Three years ago, the U.S. dollar's exchange rate with the Iceland krona was .0008 dollars per krona. Today, the exchange rate is .0006 dollars per krona. These figures indicate that over this three-year period, the dollar
A)strengthened against the krona.
B)weakened against the krona.
C)is not highly correlated to the krona.
D)The answer cannot be determined without knowing the number of kronas needed to buy a dollar.
Q2) 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
B)80
C)13,000
D)Not enough information is given to determine an answer.
Q3) 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. Page 23