Financial Management Exam Review
Course Introduction
Financial Management is a comprehensive course designed to introduce students to the fundamental principles and practices of managing an organizations financial resources. The course covers essential topics such as financial analysis, planning, and control; time value of money; risk and return; capital budgeting; cost of capital; and working capital management. Students will develop the analytical skills needed to make informed financial decisions, assess investment opportunities, and understand the impact of financial strategies on organizational performance. Through case studies and practical applications, the course prepares students for effective financial decision-making in both corporate and personal finance contexts.
Recommended Textbook Fundamentals of Investment Management, 10e by Geoffrey A. Hirt
Available Study Resources on Quizplus
24 Chapters
1585 Verified Questions
1585 Flashcards
Source URL: https://quizplus.com/study-set/2812 Page 2
Chapter 1: The Investment Setting
Available Study Resources on Quizplus for this Chatper
90 Verified Questions
90 Flashcards
Source URL: https://quizplus.com/quiz/56001
Sample Questions
Q1) What is the rate of return on a share of common stock that increased in value from $40 to $50?
A)5%
B)10%
C)20%
D)25%
E)None of the above
Answer: D
Q2) A stock that pays low or no cash dividends is:
A)eBay.
B)Duke Power.
C)AT&T.
D)All of the above Answer: A
Q3) Rare paintings and baseball cards may be considered as forms of investment.
A)True
B)False
Answer: True
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Security Markets
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/56000
Sample Questions
Q1) Why was the Sarbanes-Oxley Act enacted?
Answer: The Sarbanes-Oxley Act was enacted after the accounting frauds and scandals of the 1990s.
Explanation: The Sarbanes-Oxley Act was enacted after the accounting frauds and scandals of the 1990s.
Q2) Which of the following is true of over-the-counter markets?
A)Trading takes place by telephone or electronic network
B)It is regulated by the Securities and Exchange Commission and the National Association of Securities Dealers
C)The total securities traded represent the largest dollar volume in the U.S.
D)All of the above are true
Answer: D
Q3) NASDAQ is directly related to the operations of the NYSE.
A)True
B)False
Answer: False
Q4) NASDAQ ranks as the largest equity market in the world.
A)True
B)False
Answer: False
4
To view all questions and flashcards with answers, click on the resource link above.
Chapter 3: Participating in the Market
Available Study Resources on Quizplus for this Chatper
79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/55999
Sample Questions
Q1) The margin requirement on stock is currently 30%.
A)True
B)False
Answer: False
Q2) The tax rate that is simply the amount of taxes paid, divided by taxable income is:
A)the marginal tax rate.
B)the average tax rate.
C)the short-term capital gains tax rate.
D)the long-term capital gains tax rate.
Answer: B
Q3) A change in a high-priced stock's value has a greater impact on the Dow Jones Industrial Average than a change in a low-priced stock.
A)True
B)False
Answer: True
Q4) The NYSE sets margin requirements.
A)True
B)False Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter
Exchange-Traded Funds, Closed-End Funds, and Unit
Investment Trusts
Available Study Resources on Quizplus for this Chatper
77 Verified Questions
77 Flashcards
Source URL: https://quizplus.com/quiz/55998
Sample Questions
Q1) Closed-end funds have a fixed number of shares; open-end funds do not.
A)True
B)False
Q2) Exchange-Traded Funds offer the investor many advantages over open-end and closed-end mutual funds. Which of the following are comparative advantages?
A)There are global and international funds to choose
B)There are over 80 broad-based domestic equity index funds
C)They are bought and sold like common stocks
D)All of the above are comparative advantages
Q3) ___________ invest entirely in short-term securities, and are particularly popular during periods of high short-term interest rates.
A)Index funds
B)Balanced funds
C)Mutual stock funds
D)Money market funds
Q4) Most common stock mutual funds trade at a discount from the net asset value (NAV).
Page 6
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 5: Economic Activity
Available Study Resources on Quizplus for this Chatper
79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/55997
Sample Questions
Q1) In the last few years (since 2001), the trade deficit has increased dramatically.
A)True
B)False
Q2) Some of the major coincident indicators would be:
A)money supply (M2), consumer expectations, and stock prices (S&P 500).
B)personal income, employees on nonagricultural payrolls, and industrial production.
C)average prime rate charged by banks, labor cost per unit of output, and commercial and industrial loans outstanding.
D)All of the above are coincident indicators
Q3) Fiscal policy is implemented by:
A)the President of the U.S.
B)the Senate.
C)the House of Representatives.
D)Congress (the House and the Senate).
E)the Federal Reserve.
Q4) The most widely used tool of monetary policy is open-market operations.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Industry Analysis
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/55996
Sample Questions
Q1) The S&P 500 Index and Gross Domestic Product (GDP) seem to have similar long-term growth paths.
A)True
B)False
Q2) Analyzing the structure of an industry can help an investor to determine the profitability of the companies in that industry.
A)True
B)False
Q3) Investors who follow the bottom-up approach to stock valuation are referred to as industry-analysts.
A)True
B)False
Q4) Which of the following stages does not belong in the industry life cycle?
A)Growth
B)Stagnation
C)Decline
D)Maturity
E)Expansion
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: Valuation of the Individual Firm
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/55995
Sample Questions
Q1) The value of common stock can be viewed as:
A)a dividend stream, plus a market price at the end of the dividend stream.
B)a present value of a dividend stream, plus a market price at the end of the dividend stream.
C)the terminal value of the dividend stream.
D)the sum of the dividend stream, taken to infinity.
Q2) As inflation increases, the required rate of return on common stocks falls, as well as the prices.
A)True
B)False
Q3) In order for any dividend valuation model to reflect a valid stock price for a company,
A)the company must pay dividends.
B)the dividend growth rate must remain constant.
C)the required rate of return (discount rate) must remain constant.
D)More than one of the above is true
Q4) There is little relationship between R&D expenditures as a percent of sales, and growth of earnings per share.
A)True
B)False
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Financial Statement Analysis
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/55994
Sample Questions
Q1) Given the following financial data: net income/sales = 6%, sales/total assets = 2.5X, and debt/total assets = 25%, compute the return on assets and return on equity.
Q2) DuPont analysis deals primarily with the current and quick ratios.
A)True
B)False
Q3) Financial ratios are meaningless unless they are compared to a company standard or historical or industry data.
A)True
B)False
Q4) A firm with an average return on assets, but a high return on equity, was probably able to achieve this by keeping debt down to a very low level.
A)True B)False
Q5) The Statement of Financial Accounting Standards (SFAS) No. 95 requires that the statement of cash flows be divided into three sections: cash flows from operations, investments, and financing.
A)True B)False
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Efficient Markets and Anomalies
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/55993
Sample Questions
Q1) Value Line's Ranking System, covering 1,700 companies, has demonstrated:
A)that stocks ranked one under-perform the market.
B)that stocks ranked five perform about at the market average.
C)that stocks ranked one outperform the market.
D)that stocks ranked five outperform the market.
Q2) The three forms of the efficient market hypothesis (not in any particular order) are stated as:
A)weak, semi-strong, and superior.
B)weak, normal, and strong.
C)semi-strong, weak, and strong.
D)semi-strong, normal, and superior.
Q3) Most companies attempt to avoid the effects of synergy in putting a merger or acquisition together.
A)True
B)False
Q4) Professors Fama and French maintain that the ratio of book value to market value is more important than either the size effect or the P/E effect in explaining superior stock performance.
A)True
B)False
Page 11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Behavioral Finance and Technical Analysis
Available Study Resources on Quizplus for this Chatper
47 Verified Questions
47 Flashcards
Source URL: https://quizplus.com/quiz/55992
Sample Questions
Q1) The idea that stock prices tend to move in trends that persist for long periods, and that these trends can be detected in charts, are basic assumptions of fundamental analysis.
A)True
B)False
Q2) A high ratio of specialist short sales compared to exchange short sales is interpreted as bearish.
A)True
B)False
Q3) The essence of _______ is to determine whose judgment about the market is wrong.
A)key indicators
B)smart money rules
C)contrary opinion rules
D)None of the above
Q4) Short-selling by market specialists provides future demand potential to cover their short position.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Bond and Fixed-Income Fundamentals
Available Study Resources on Quizplus for this Chatper
73 Verified Questions
73 Flashcards
Source URL: https://quizplus.com/quiz/55991
Sample Questions
Q1) Assume a $1,000 Treasury bill is quoted to pay 6% interest over a three-month period. How much interest would the investor receive?
A)$10
B)$15
C)$20
D)$30
E)$60
Q2) Interest on federally-sponsored credit agency issues (such as the Federal Home Loan Bank) is not tax-free to the recipient.
A)True
B)False
Q3) Commercial paper represents a short-term credit instrument.
A)True
B)False
Q4) An investor in a municipal bond will receive 8% interest. He is in a 33% tax bracket. The comparable before-tax yield on a taxable investment is 14%.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 12: Principles of Bond Valuation and Investment
Available Study Resources on Quizplus for this Chatper
53 Verified Questions
53 Flashcards
Source URL: https://quizplus.com/quiz/55990
Sample Questions
Q1) Yield to maturity is equivalent to market rate of interest.
A)True
B)False
Q2) When the bond investor believes interest rates are going to fall, the best strategy would be to:
A)take a bearish position in the market by selling long-term bonds.
B)take a bullish position in the market by buying long-term bonds.
C)move out of bonds completely.
D)keep his portfolio unchangeD.
Q3) As the economy recovers from a recession, what changes can be expected in the yield spread of corporate Baa bonds and U.S. government bonds?
A)The yield on Baa bonds will approach that of government securities
B)The yield spread between U.S. government bonds and BBB corporate bonds will stay the same
C)The yield spread will increase
D)Either A or B will occur
Q4) Deep discount bonds reflect questionable quality.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Convertible Securities and Warrants
Available Study Resources on Quizplus for this Chatper
64 Verified Questions
64 Flashcards
Source URL: https://quizplus.com/quiz/55989
Sample Questions
Q1) Which of the following statements about a convertible security is not true?
A)It may be either a bond or share of preferred stock
B)It provides level interest payments
C)The best time to buy is when both bond and stock prices are low
D)All of the statements are true
Q2) The leverage associated with a warrant increases as the stock price increases.
A)True
B)False
Q3) Which of the following statements explains the premium paid over the intrinsic value of a warrant?
A)The higher the price volatility of the common stock, the greater the premium
B)The market value may fall below the intrinsic value because of the downside risk
C)The greater the time period over which the option may be exercised, the higher the premium
D)More than one of the above are true
Q4) The market price of the bond will not go below the pure bond value regardless of what happens to the price of the common stock.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Put and Call Options
Available Study Resources on Quizplus for this Chatper
81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/55988
Sample Questions
Q1) The intrinsic value of a call option equals the market price minus the strike price of the option.
A)True
B)False
Q2) The popularity of options is due to the likelihood of an average investor earning superior returns.
A)True
B)False
Q3) An Arthur Corp. 25 put option is selling for $3 when the stock is trading at $22.
A)The intrinsic value is $3 and the speculative premium is 0
B)The intrinsic value is $3 and the speculative premium is $3
C)The time to expiration must be very close
D)A and C
Q4) If you buy one option and write one option on the same underlying stock, you are creating a "spread."
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Commodities and Financial Futures
Available Study Resources on Quizplus for this Chatper
79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/55987
Sample Questions
Q1) Margin requirements on commodities contracts:
A)are much higher than those on common stock transactions.
B)vary over time, and even among exchanges, for a given commodity.
C)typically are 2-10% of the value of the contract.
D)None of the above are true
Q2) All of the following are characteristics of the cash market except:
A)that the spot price represents the actual dollar value for the immediate transfer of a commodity.
B)that there must be a transfer of the actual physical possession of the goods.
C)that prices in the cash market are independent of prices in the futures market.
D)All of the above are characteristics of the cash market
Q3) If a financial manager wishes to protect against an interest rate drop, he can go long in the futures market.
A)True
B)False
Q4) The high risk in commodities contracts is due primarily to the volatility of price movements.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 17
Chapter 16: Stock Index Futures and Options
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/55986
Sample Questions
Q1) Stock index futures represent an efficient approach to:
A)only taking on unsystematic risk.
B)only taking on systematic risk.
C)taking on zero risk, because the index is fully diversified.
D)taking on lots of risk, due to the fact that the indexes are usually composed of lots of stocks, not just a few.
Q2) A perfect hedge using stock index futures eliminates both losses and gains on a stock portfolio.
A)True
B)False
Q3) The Mini S&P 500 contract is made up of different stocks than the traditional S&P 500 contract.
A)True
B)False
Q4) With stock options and stock index options, an investor's maximum loss is her premium on the contract.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: A Basic Look at Portfolio Management and Capital Market Theory
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/55985
Sample Questions
Q1) Assume a portfolio has the possibility of returning 7%, 8%, 10%, or 12%, with likelihood of 20%, 30%, 25%, and 25%, respectively. The standard deviation for the portfolio is:
A)5.717%.
B)3.510%.
C)1.873%.
D)6.480%.
E)3.842%.
Q2) Systematic risk is rewarded with a premium in the marketplace because:
A)risk is particular to the stock or industry.
B)it represents a random occurrence which could not have been foreseen.
C)it is associated with market movements which cannot be eliminated through diversification.
D)None of the above
Q3) The expected value for a portfolio is a weighted average of the individual securities' expected values.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Page 19
Chapter 18: Duration and Bond Portfolio Management
Available Study Resources on Quizplus for this Chatper
55 Verified Questions
55 Flashcards
Source URL: https://quizplus.com/quiz/55984
Sample Questions
Q1) It is possible that a bond with a shorter maturity than another bond may actually have a longer duration and be more sensitive to interest rate changes.
A)True
B)False
Q2) Duration will not help international bond managers choose bonds for their portfolios because of the foreign exchange risk.
A)True B)False
Q3) One of the benefits of zero-coupon bonds is that they lock in a compound rate of return (or reinvestment rate) for the life of the bond, if held to maturity.
A)True
B)False
Q4) The duration on an 8%, 25-year bond is ______ the duration on a 9%, 30-year bond.
A)greater than B)less than C)equal to D)there is not enough information to tell
To view all questions and flashcards with answers, click on the resource link above.
Page 20
Chapter 19: International Securities Markets
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/55983
Sample Questions
Q1) Risk exposure to foreign currency changes can be hedged through foreign exchange contracts or foreign currency options.
A)True
B)False
Q2) Information on publicly traded foreign securities is not as regulated or as available as it is on United States securities.
A)True
B)False
Q3) Correlations of foreign stock market movements to U.S. stock market movements show that the period from 1997 to 2002 had higher correlations than in the past.
A)True
B)False
Q4) Indirect international investment effectively eliminates problems with:
A)taxation by foreign governments.
B)administration of foreign securities problems.
C)different cultures and reporting standards.
D)All of the above
To view all questions and flashcards with answers, click on the resource link above.
21
Chapter 20: Investments in Real Assets
Available Study Resources on Quizplus for this Chatper
63 Verified Questions
63 Flashcards
Source URL: https://quizplus.com/quiz/55981
Sample Questions
Q1) In evaluating a general partner of a limited partnership, an investor should be sensitive to his or her:
A)experience.
B)possible lawsuits.
C)law degree.
D)A and B
Q2) Compared to other investments, which of the following is not a disadvantage of investing in real assets?
A)The initial amount of money is usually large
B)The absence of a relatively efficient, liquid market
C)High transaction and incidental costs
D)All of the above are disadvantages
Q3) A shopping center has annual net operating income of $1,050,000 and a capitalization rate of 8%. What is its value?
Q4) The value of the comparable sales approach to real estate valuation is that it is highly theoretical.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 22
Chapter 21: Alternative Investments: Private Equity and Hedge Funds
Available Study Resources on Quizplus for this Chatper
31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/55980
Sample Questions
Q1) A follow-on fund is:
A)a fund which follows new emerging ventures.
B)an existing fund that is raising another fund.
C)a very risky hedge fund.
D)a special type of CD.
Q2) Hedge funds are:
A)regulated by the SEC.
B)private limited partnerships.
C)unregulated by the SEC.
D)Both B and C
Q3) Hedge funds:
A)are open about their trading strategies.
B)are secretive about their strategies.
C)trade using only one brokerage.
D)None of the above
Q4) The first hedge fund was created in 1949 by:
A)Dow Jones.
B)William P. Standard.
C)Alfred Jones.
D)Michael Milken.
To view all questions and flashcards with answers, click on the resource link above. Page 23
Chapter 22: Measuring Risks and Returns of Portfolio Managers
Available Study Resources on Quizplus for this Chatper
53 Verified Questions
53 Flashcards
Source URL: https://quizplus.com/quiz/55978
Sample Questions
Q1) When the U.S. T-bill rate is 5.75%, the excess returns on a portfolio earning 14% would be 8.25%.
A)True
B)False
Q2) Over 20-year rolling periods, the worst performance by small company stocks was positive, according to Ibbotson and Associates.
A)True
B)False
Q3) Jensen uses alpha as a measure of performance.
A)True
B)False
Q4) R<sup>2</sup> is a good measure of efficient diversification.
A)True B)False
Q5) Asset allocation is generally ________________ stock selection. A)less important than B)more important than C)of equal importance to D)none of the above are true
Page 24
To view all questions and flashcards with answers, click on the resource link above.
Chapter 23: A Comprehensive Analysis for Real Estate
Investment Decisions
Available Study Resources on Quizplus for this Chatper
2 Verified Questions
2 Flashcards
Source URL: https://quizplus.com/quiz/55982
Sample Questions
Q1) An apartment complex has net operating income of $15,000, depreciation of $8,000, and interest expense of $13,000. The tax rate is 30%. a) What is taxable income or loss?
B) What is the tax shield benefit or tax owed?
Q2) A duplex was purchased for $120,000, and depreciation of $3,300 has been taken for the last seven years. The net proceeds from the sale of the property were $135,000. A) Assuming the property qualifies for capital gains treatment at a 15% rate, what is the tax owed?
B) What are the net funds from the sale?
To view all questions and flashcards with answers, click on the resource link above.
25
Chapter 24: The Makeup of Institutional Investors
Available Study Resources on Quizplus for this Chatper
6 Verified Questions
6 Flashcards
Source URL: https://quizplus.com/quiz/55979
Sample Questions
Q1) Which of the following are NOT examples of institutional investors?
A)Mutual funds and pension funds
B)Insurance companies
C)Commercial banks
D)All of the above are institutional investors
Q2) ___________ represent permanent capital funds that are donated to universities, churches, or civic organizations.
A)Trusts
B)Endowments
C)Commingled funds
D)Annuities
Q3) The largest category of institutional investors is:
A)foundations.
B)personal trusts.
C)mutual savings banks.
D)pension funds.
Q4) Foundations represent profitable organizations set up to accomplish social, educational, or charitable purposes.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 26