Financial Management Test Questions
Course Introduction
Financial Management is a comprehensive course that explores the fundamental principles and practices involved in the efficient acquisition, allocation, and control of financial resources within an organization. Topics covered include financial analysis, planning and forecasting, working capital management, capital budgeting, risk and return assessment, and the cost of capital. Students will learn to make informed financial decisions using quantitative and qualitative techniques, understand the role of financial markets and institutions, and evaluate investment opportunities to maximize shareholder value. The course emphasizes practical applications through case studies and problem-solving exercises, preparing students for real-world financial decision-making in businesses and organizations.
Recommended Textbook
Corporate Finance Asia 1st Global Edition by Stephen Ross
Available Study Resources on Quizplus
16 Chapters
1174 Verified Questions
1174 Flashcards
Source URL: https://quizplus.com/study-set/3718
Page 2
Chapter 1: Introduction to Corporate Finance
Available Study Resources on Quizplus for this Chatper
61 Verified Questions
61 Flashcards
Source URL: https://quizplus.com/quiz/74148
Sample Questions
Q1) Agency costs refer to:
A)the total dividends paid to stockholders over the lifetime of a firm.
B)the costs that result from default and bankruptcy of a firm.
C)corporate income subject to double taxation.
D)the costs of any conflicts of interest between stockholders and management.
E)the total interest paid to creditors over the lifetime of the firm.
Answer: D
Q2) The person generally directly responsible for overseeing the cash and credit functions,financial planning,and capital expenditures is the:
A)treasurer.
B)director.
C)controller.
D)chairman of the board.
E)chief operations officer.
Answer: A
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Financial Statements and Cash Flow
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/74147
Sample Questions
Q1) Note that we added depreciation back to operating cash flow and to additions to fixed assets.Why add it back twice? Isn't this double-counting?
Answer: In both cases,depreciation is added back because it was previously subtracted when obtaining ending balances of net income and fixed assets.Also,since depreciation is a noncash expense,we need to add it back in both instances,so there is no double counting.
Q2) As seen on an income statement:
A)interest is deducted from income and increases the total taxes incurred.
B)the tax rate is applied to the earnings before interest and taxes when the firm has both depreciation and interest expenses.
C)depreciation is shown as an expense but does not affect the taxes payable.
D)depreciation reduces both the pretax income and the net income.
E)interest expense is added to earnings before interest and taxes to get pretax income. Answer: D
To view all questions and flashcards with answers, click on the resource link above.
4
Chapter 3: Financial Statements Analysis and Long-Term Planning
Available Study Resources on Quizplus for this Chatper
117 Verified Questions
117 Flashcards
Source URL: https://quizplus.com/quiz/74146
Sample Questions
Q1) The Green Giant has a 5% profit margin and a 40% dividend payout ratio.The total asset turnover is 1.40 and the equity multiplier is 1.50.What is the sustainable rate of growth?
A)6.30%
B)6.53%
C)6.72%
D)6.80%
E)6.83%
Answer: C
Q2) If a firm decreases its operating costs,all else constant,then:
A)the profit margin increases while the equity multiplier decreases.
B)the return on assets increases while the return on equity decreases.
C)the total asset turnover rate decreases while the profit margin increases.
D)both the profit margin and the equity multiplier increase.
E)both the return on assets and the return on equity increase.
Answer: E
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 5: Net Present Value and Other Investment Rules
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/74145
Sample Questions
Q1) Graham and Harvey (2001)found that ___ and ___ were the two most popular capital budgeting methods.
A)Internal Rate of Return;Payback Period
B)Internal Rate of Return;Net Present Value
C)Net Present Value;Payback Period
D)Modified Internal Rate of Return;Internal Rate of Return
E)Modified Internal Rate of Return;Net Present Value
Q2) An investment is acceptable if its IRR:
A)is exactly equal to its net present value (NPV).
B)is exactly equal to zero.
C)is less than the required return.
D)exceeds the required return.
E)is exactly equal to 100%.
Q3) Payback is frequently used to analyze independent projects because:
A)it considers the time value of money.
B)all relevant cash flows are included in the analysis.
C)it is easy and quick to calculate.
D)it is the most desirable of all the available analytical methods from a financial perspective.
E)it produces better decisions than those made using either NPV or IRR.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 8: Interest Rates and Bond Valuation
Available Study Resources on Quizplus for this Chatper
67 Verified Questions
67 Flashcards
Source URL: https://quizplus.com/quiz/74144
Sample Questions
Q1) Emmett Corporation has issued a $1,000 face value zero-coupon bond.Which of the following values is closest to the correct price for the bond if the appropriate discount rate is 4% and the bond matures in 8 years?
A)$644.61
B)$869.32
C)$1,000.00
D)$1,058.00
E)This problem cannot be worked without the annual interest payments provided
Q2) The rate of return required by investors in the market for owning a bond is called the: A)coupon.
B)face value.
C)maturity.
D)yield to maturity.
E)coupon rate.
Q3) Define what is meant by interest rate risk.Assume you are the manager of a $100 million portfolio of corporate bonds and you believe interest rates will fall.What adjustments should you make to your portfolio based on your beliefs?
To view all questions and flashcards with answers, click on the resource link above.
Chapter 10: Risk and Return: Lessons From Market History
Available Study Resources on Quizplus for this Chatper
81 Verified Questions
81 Flashcards
Source URL: https://quizplus.com/quiz/74143
Sample Questions
Q1) The excess return you earn by moving from a relatively risk-free investment to a risky investment is called the:
A)geometric average return.
B)inflation premium.
C)risk premium.
D)time premium.
E)arithmetic average return.
Q2) The returns on your portfolio over the last 5 years were -5%,20%,0%,10% and 5%.What is the standard deviation of your return?
A)2.74%
B)5.21%
C)9.62%
D)10.12%
E)12.70%
Q3) What securities have offered the highest average annual returns over the last several decades? Can we conclude that return and risk are related in real life?
Q4) What are the lessons learned from capital market history? What evidence is there to suggest these lessons are correct?
To view all questions and flashcards with answers, click on the resource link above.
8
Chapter 11: Return and Risk: the Capital Asset Pricing Model
Available Study Resources on Quizplus for this Chatper
125 Verified Questions
125 Flashcards
Source URL: https://quizplus.com/quiz/74142
Sample Questions
Q1) Diversification can effectively reduce risk.Once a portfolio is diversified the type of risk remaining is:
A)individual security risk.
B)riskless security risk.
C)risk related to the market portfolio.
D)total standard deviations.
E)None of the above.
Q2) If investors possess homogeneous expectations over all assets in the market portfolio,when riskless lending and borrowing is allowed,the market portfolio is defined to:
A)be the same portfolio of risky assets chosen by all investors.
B)have the securities weighted by their market value proportions.
C)be a diversified portfolio.
D)All of the above.
E)None of the above.
Q3) According to the CAPM,the expected return on a risky asset depends on three components.
Describe each component,and explain its role in determining expected return.
Q4) Explain in words what beta is and why it is important.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 12: An Alternative View of Risk and Return: the Arbitrage Pricing Theory
Available Study Resources on Quizplus for this Chatper
45 Verified Questions
45 Flashcards
Source URL: https://quizplus.com/quiz/74141
Sample Questions
Q1) Calculate the stock's total return if the company announces that they had an industrial accident and the operating facilities will close down for some time thus resulting in a loss by the company of 7% in return.
A)-4.05%
B)-2.05%
C)4.55%
D)0.40%
E)1.85%
Q2) If the expected rate of inflation was 3% and the actual rate was 6.2%;the systematic response coefficient from inflation,\(\beta\)<sub>I</sub>,would result in a change in any security return of ___ \(\beta\)<sub>I</sub>.
A)9.2
B)3.2
C)-3.2
D)3.0
E)6.2
Q3) Discuss the Fama-French three factor model;both what it means and the factors of the model.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 14: Efficient Capital Markets and Behavioral Challenges
Available Study Resources on Quizplus for this Chatper
50 Verified Questions
50 Flashcards
Source URL: https://quizplus.com/quiz/74140
Sample Questions
Q1) Financial managers must be cognizant of market efficiency because:
A)manipulating earnings by accounting changes does not fool the market.
B)timing security sales is futile because without private information the current price reflects all known information.
C)there is limited price pressure from any large sale of stock depressing prices only momentarily before recovering to prior levels.
D)All of the above.
E)None of the above.
Q2) If the market is weak form efficient:
A)semistrong form efficiency holds.
B)strong form efficiency must hold.
C)semistrong form efficiency may hold.
D)markets are not weak form efficient.
E)None of the above.
Q3) Suppose your cousin invests in the stock market and doubles her money in a single year while the market,on average,earned a return of only about 15%.Is your cousin's performance a violation of market efficiency?
Q4) Explain why it is that in an efficient market,investments have an expected NPV of zero.
Page 11
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Long-Term Financing: an Introduction
Available Study Resources on Quizplus for this Chatper
43 Verified Questions
43 Flashcards
Source URL: https://quizplus.com/quiz/74139
Sample Questions
Q1) The amount of loan a person or firm borrows from a lender is the:
A)creditor.
B)indenture.
C)debenture.
D)principal.
E)amortization.
Q2) Holden Bicycles has 2,000 shares outstanding each with a par value of $0.50.If they are sold to shareholders at $12 each,what would the capital surplus be?
A)$1,000
B)$12,000
C)$15,000
D)$23,000
E)$24,000
Q3) Shares of stock that have been repurchased by the corporation are called:
A)treasury stock.
B)undistributed capital stock.
C)retained equity.
D)capital surplus shares.
E)None of the above.
Q4) From this information,calculate Eaton's book value per share.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 20: Raising Capital
Available Study Resources on Quizplus for this Chatper
65 Verified Questions
65 Flashcards
Source URL: https://quizplus.com/quiz/74138
Sample Questions
Q1) In a best efforts offering the investment banker makes their money primarily by:
A)earning the spread between the buying and offering price.
B)earning a commission on each share sold.
C)earning the discount between the buying and offering price.
D)charging a flat fee for all services.
E)None of the above.
Q2) The diagonal listing of investment bankers on tombstone advertisements reflects their ____ relative to the other investment bankers listed below.
A)prestige
B)ability to manage selling syndicates
C)role as a firm commitment buyer
D)role as a best efforts seller
E)None of the above
Q3) The market for venture capital refers to the:
A)private financial marketplace for servicing small,young firms.
B)bond markets.
C)market for selling rights to individuals who already own shares.
D)market for selling equity securities for firms with equity already outstanding.
E)None of the above.
To view all questions and flashcards with answers, click on the resource link above.
Page 13
Chapter 22: Options and Corporate Finance
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/74137
Sample Questions
Q1) The act where an owner of an option buys or sells the underlying asset,as is his right,is called ______ the option.
A)striking
B)exercising
C)opening
D)splitting
E)strangling
Q2) What are the upper and lower bounds for an American call option? Explain what would happen in each case if the bound was violated.
Q3) Three weeks ago,you purchased a July 45 put option on RPJ stock at an option price of $3.20.The market price of RPJ stock three weeks ago was $42.70.Today,RPJ stock is selling at $44.75 a share and the July 45 put is priced at $.80.What is the intrinsic value of your put contract?
A)-$295
B)-$210
C)$0
D)$25
E)$110
Q4) How do options apply to capital budgeting? Explain and give an example.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 23: Options and Corporate Finance: Extensions and Applications
Available Study Resources on Quizplus for this Chatper
42 Verified Questions
42 Flashcards
Source URL: https://quizplus.com/quiz/74136
Sample Questions
Q1) The CEO of NuValue was granted 1,000,000 options.The stock price at the time of the granting of the options was $45 and the options are at the money.The risk free rate was 5% and the options expire in 5 years.The variance on the stock is .04.What is the value of the options contract? If he had negotiated a larger salary and only 10,000 options,what would be the value of the options contract?
Q2) What is d<sub>1</sub>?
A).1842
B).4102
C).4583
D).4909
E).5412
Q3) If a project has optionality:
A)the shorter the available life of the project the less valuable the project is.
B)the longer the available life of the project the less valuable the project is.
C)the shorter the available life of the project the more valuable the project is.
D)available project life does not change optionality.
E)None of the above.
Q4) What is the value of Mr.Maxim's options?
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 24: Warrants and Convertibles
Available Study Resources on Quizplus for this Chatper
52 Verified Questions
52 Flashcards
Source URL: https://quizplus.com/quiz/74135
Sample Questions
Q1) What would the conversion price and conversion ratio be if Looper Industries had a 4 for 1 stock split?
A)$15.0;120
B)$12.5;80
C)$12.5;120
D)$15.0;80
E)None of the above.
Q2) A bond/warrant package is priced to sell at a face value of $1,000.Each bond comes with 50 detachable warrants.A warrant gives the owner the right to buy 1 share of stock at $20 per share.The value of a warrant has been estimated at $2.The bonds mature in 20 years.Similar bonds without warrants yield 10%.What is the bond's annual coupon?
Q3) What would your gain per share be from exercising the warrants,assuming all are exercised?
A)$0.00 per share
B)$1.96 per share
C)$2.00 per share
D)$25.00 per share
E)$27.00 per share
Q4) Why are warrants and convertibles issued?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 25: Derivatives and Hedging Risk
Available Study Resources on Quizplus for this Chatper
56 Verified Questions
56 Flashcards
Source URL: https://quizplus.com/quiz/74134
Sample Questions
Q1) A financial institution has equity equal to one-tenth of its assets.If its asset duration is currently equal to its liability duration,then to immunize,the firm needs to:
A)decrease the duration of its assets.
B)increase the duration of its assets.
C)decrease the duration of its liabilities.
D)do nothing,i.e. ,keep the duration of its liabilities equal to the duration of its assets.
Q2) A forward contract is described by:
A)agreeing today to buy a product at a later date at a price to be set in the future.
B)agreeing today to buy a product today at its current price.
C)agreeing today to buy a product at a later date at a price set today.
D)agreeing today to buy a product if and only if its price rises above the exercise price today at its current price.
E)None of the above.
Q3) The futures markets are labeled as pure speculation and even gambling.Why is this an inaccurate portrayal of the market's function?
Q4) Calculate the duration of Tiger State Bank's assets and liabilities.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 31: International Corporate Finance
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/74133
Sample Questions
Q1) Describe the foreign currency and home currency approaches to capital budgeting.Which is better? Which approach would you recommend a U.S.firm use? Justify your answer.
Q2) An agreement to exchange currencies at some point in the future using an agreed-upon exchange rate is called a _____ trade.
A)spot
B)forward
C)swap
D)floating
E)triangle
Q3) What is required for absolute purchasing power parity to hold? Do you think absolute PPP would hold in the case where a computer retailer in the U.S.sits directly across the border from a computer retailer in Canada? How about Houston,Texas,and Winnipeg,Manitoba?
Q4) Spot trades must be settled:
A)on the day of the trade.
B)on the day following the day of the trade.
C)within two business days.
D)within three business days.
E)within one week of the trade date.
To view all questions and flashcards with answers, click on the resource link above. Page 18