Financial Planning
Exam Solutions
Course Introduction
Financial Planning is a comprehensive course designed to equip students with the knowledge and skills necessary to manage personal and organizational finances effectively. The course covers a wide range of topics including budgeting, savings, investments, retirement planning, tax strategies, and risk management. Students will learn how to assess financial goals, develop actionable financial plans, analyze various investment options, and understand the implications of financial decisions. Through practical exercises and case studies, the course emphasizes ethical considerations and realistic strategies for achieving long-term financial stability and growth.
Recommended Textbook
Financial Management Core Concepts 2nd Edition by Raymond Brooks
Available Study Resources on Quizplus
18 Chapters
1867 Verified Questions
1867 Flashcards
Source URL: https://quizplus.com/study-set/2743
Page 2
Chapter 1: Financial Management
Available Study Resources on Quizplus for this Chatper
119 Verified Questions
119 Flashcards
Source URL: https://quizplus.com/quiz/54723
Sample Questions
Q1) Bonds are bought and sold in ________ markets.
A) equity
B) debt
C) derivatives
D) foreign exchange
Answer: B
Q2) Which of the following is NOT an example of an agency cost?
A) Paying an accounting firm to audit your financial statements
B) Paying an insurance company to assure that building codes have been met for new construction
C) Paying a landscaping firm to maintain your firm's grounds
D) All of the above are agency costs.
Answer: C
Q3) The principal-agent problem is most severe for the sole proprietorship because there are fewer owners who can monitor the relationship.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Financial Statements
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/54706
Sample Questions
Q1) There are four primary financial statements that are used to measure the performance of a firm. Which of the choices below are included among these four?
A) The balance statement and income statement
B) The income sheet and statement of retained earnings
C) The statement of cash flow and statement of balance
D) The balance sheet and statement of cash flow
Answer: D
Q2) Three fundamental issues separate net income and cash flow. Which of the answers below is NOT one of these three fundamental issues?
A) Accrual accounting
B) Non-cash accounting
C) Non-cash expense items
D) Interest expense
Answer: B
Q3) The 10-K is a quarterly report that must be filed within 60 days after the end of the company's fiscal year.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: The Time Value of Money Part 1
Available Study Resources on Quizplus for this Chatper
122 Verified Questions
122 Flashcards
Source URL: https://quizplus.com/quiz/54707
Sample Questions
Q1) When solving for a present value, the interest rate is commonly referred to as the compound rate, but when solving for the future value, the interest rate is called the discount rate.
A)True
B)False
Answer: False
Q2) Which of the following actions will INCREASE the present value of an investment?
A) Decrease the interest rate.
B) Decrease the future value.
C) Increase the amount of time.
D) All of the above will increase the present value.
Answer: A
Q3) The one-time payment of money at a future date is often called a ________.
A) lump-sum payment
B) present value
C) principal amount
D) perpetuity payment
Answer: A
Q4) Compare and contrast the discount rate with the compound (or growth) rate.
Answer: 11ea6dfa_8f0d_f735_8816_eff4860aa601_TB2644_00
Page 5
To view all questions and flashcards with answers, click on the resource link above.
Chapter 4: The Time Value of Money Part 2
Available Study Resources on Quizplus for this Chatper
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/54708
Sample Questions
Q1) By choosing to attend college today, you have agreed to pay $17,000 per year in tuition and fees for the next five years. (What you really thought that you would graduate in four years?) In addition to the tuition and fees, you have also given up the ability to work full time and earn $23,000 per year for the next five years. If your required rate of return is 5% (the U.S. long-run average rate of inflation plus an average real rate of return), what is the total cost in today's dollars of your college degree, assuming that all of the aforementioned cash flows are ordinary annuities?
Q2) A series of equal periodic finite cash flows that occur at the beginning of the period are known as a/an ________.
A) ordinary annuity
B) annuity due
C) perpetuity
D) amortization
Q3) Amortization tables are common and can be used for all but which of the following?
A) Car loans
B) Mortgage loans
C) Consumer product loans
D) Amortization tables may be used for all of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Interest Rates
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/54709
Sample Questions
Q1) What is the EAR if the APR is 10.52% and compounding is daily?
A) Slightly above 10.09%
B) Slightly below 11.09%
C) Slightly above 11.09%
D) Over 11.25%
Q2) Suppose you postpone consumption and invest at 9% when inflation is 3%. What is the approximate real rate of your reward for saving?
A) 3%
B) 5%
C) 6%
D) 7%
Q3) The number of periods for a consumer loan (n) is equal to the ________.
A) number of years times compounding periods per year
B) number of years
C) number of years in a period
D) number of compounding periods
Q4) Most consumer loans payments are monthly.
A)True
B)False
Q5) Why are there different interest rates on loans and securities?
Page 7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Bonds and Bond Valuation
Available Study Resources on Quizplus for this Chatper
91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/54710
Sample Questions
Q1) When pricing a zero-coupon bond, the convention is to use the semiannual pricing formula rather than the annual pricing formula.
A)True
B)False
Q2) Which of the following types of bonds may the issuer buy back before maturity?
A) Callable bond
B) Putable bond
C) Convertible bond
D) Zero-coupon bond
Q3) Which of the following are issued with the shortest time to maturity?
A) Treasury bills
B) Treasury notes
C) Treasury bonds
D) Treasury stocks
Q4) When a bond is callable, the ability to call the bond is an option for ________.
A) the bond issuer
B) the bond purchaser
C) a mutual decision between the issuer and the purchaser of the bond
D) the trustee holding the bond
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Stocks and Stock Valuation
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/54711
Sample Questions
Q1) Which of the statements below is TRUE?
A) Buying of shares is the selling of ownership in the company.
B) A company is said to go "private" when it opens up its ownership structure to the general public through the sale of common stock.
C) Private companies choose to sell stock to attract permanent financing through equity ownership of the company.
D) Most companies have the resident expertise to complete an initial public offering (IPO), or first public equity issue.
Q2) Like a bond, common stock provides no specific promise of when and how much you will receive.
A)True
B)False
Q3) The term "preferred" comes from the fact that preferred shareholders receive all past (if cumulative) and present dividends before common shareholders can receive any cash dividends -- in other words, their dividend claims are preferred over common stock dividend claims.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Risk and Return
Available Study Resources on Quizplus for this Chatper
119 Verified Questions
119 Flashcards
Source URL: https://quizplus.com/quiz/54712
Sample Questions
Q1) What are the two investment rules identified in the text? Evaluate the validity of the following statement and justify your reasoning. "Investors do not like risk and will always choose the investment with the least risk."
Q2) The terms ________ and ________ mean the same thing.
A) nondiversifiable risk, unsystematic risk
B) diversifiable risk, systematic risk
C) diversifiable risk, unsystematic risk
D) total risk, unique risk
Q3) ________ is risk that cannot be diversified away.
A) Unsystematic risk
B) Systematic risk
C) Firm-specific risk
D) Diversifiable risk
Q4) Even if there is certainty of future payoffs, there can still be risk.
A)True
B)False
Q5) Explain the difference in the two main measures of risk: the standard deviation and the beta.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Capital Budgeting Decision Models
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/54713
Sample Questions
Q1) Find the Modified Internal Rate of Return (MIRR) for the following annual series of cash flows, given a discount rate of 10.50%: Year 0: -$75,000; Year 1: $15,000; Year 2: $16,000; Year 3: $17,000; Year 4: $17,500; and, Year 5: $18,000.
A) About 6.35%
B) About 6.88%
C) About 7.35%
D) About 7.88%
Q2) Acme, Inc. is considering a four-year project that has initial outlay or cost of $100,000. The respective cash inflows for years 1, 2, 3 and 4 are: $50,000, $40,000, $30,000 and $20,000. Acme uses the discounted payback period method, and has a discount rate of 11.50%. Will Acme accept the project if its payback period is 37 months?
A) Yes, because it pays back in less than 37 months.
B) No, because it pays back in over 37 months.
C) No, because it pays back in over 38 months.
D) No, because it pays back in over 40 months.
Q3) Capital budgeting decisions are typically long-term decisions.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above.
11
Chapter 10: Cash Flow Estimation
Available Study Resources on Quizplus for this Chatper
96 Verified Questions
96 Flashcards
Source URL: https://quizplus.com/quiz/54714
Sample Questions
Q1) The remaining book value when a project is terminated is the ________ minus accumulated depreciation over the life of the project.
A) original cost
B) ending cost
C) salvage cost
D) sunk cost
Q2) Managers typically look at the initial outlay for the project as its capital expenditure and determine ________ from this capital expenditure.
A) interest expenses
B) dividends
C) depreciation
D) CEO expenses
Q3) Erosion is the additional cash generated by a new project beyond the current cash flow with the addition of a specific new project.
A)True
B)False
Q4) Explain the distinction between profits and cash flow.
Q5) Explain why one must be careful when accounting for erosion.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: The Cost of Capital
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/54715
Sample Questions
Q1) Which of the following is the proper way to adjust the cost of debt to estimate the after-tax cost of debt?
A) R<sub>d</sub> ÷ (1+T<sub>c</sub>)
B) R<sub>d</sub> ÷ (1-T<sub>c</sub>)
C) R<sub>d</sub> × (1-T<sub>c</sub>)
D) R<sub>d</sub> × (1+T<sub>c</sub>)
Q2) Flotation costs reduce the cost of borrowing funds for the firms.
A)True
B)False
Q3) The ________ of an asset or liability is its cost carried on the balance sheet.
A) market value
B) book value
C) hybrid value
D) theoretical value
Q4) An investment banker's fees are part of the ________ realized for issuing new debt or equity.
A) flotation costs
B) opportunity costs
C) revenues
D) benefits
Page 13
To view all questions and flashcards with answers, click on the resource link above.
Chapter 12: Forecasting and Short-Term Financial Planning
Available Study Resources on Quizplus for this Chatper
105 Verified Questions
105 Flashcards
Source URL: https://quizplus.com/quiz/54716
Sample Questions
Q1) There are two primary tools used to forecast and set in action a company plan. Which of the tools below is one of these?
A) Statements of retained earnings
B) Profit budgets
C) Income statements
D) Pro forma statements
Q2) In short-term cash management as it pertains to the operations of the firm, which of the below is NOT one of the general objectives?
A) Determining the cash surplus
B) Determining the job satisfaction level of employees
C) Determining the money the company can invest
D) Determining the cash deficit
Q3) Pro forma statements are tools used by the company to help highlight areas that the company needs to avoid as part of its short-term financial planning.
A)True
B)False
Q4) Briefly describe the costs included in the production process.
Q5) Name three things that a pro forma income statement can tell us.
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Working Capital Management
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/54717
Sample Questions
Q1) When a business customer buys on credit from another business, the seller of the product will often offer an extended payment period for the product or service, but with an incentive to delay payment of the bill in an effort to earn a finance charge.
A)True
B)False
Q2) Peach Sign Company of Atlanta, Georgia, has credit terms of 1/10 net 30. Customers should take the discount and pay in 10 days if they CANNOT earn more than ________ (APR) on their investments.
A) 13.01%
B) 20.13%
C) 18.43%
D) 12.29%
Q3) ________ is the order quantity that minimizes total cost, and it is the result of trading off carrying costs and ordering costs.
A) Q/2
B) ABC
C) EOQ
D) None of the above
To view all questions and flashcards with answers, click on the resource link above.
15
Chapter 14: Financial Ratios and Firm Performance
Available Study Resources on Quizplus for this Chatper
78 Verified Questions
78 Flashcards
Source URL: https://quizplus.com/quiz/54718
Sample Questions
Q1) To convert an income statement into a common-size income statement, we restate all the numbers as percentages of ________.
A) total revenues
B) cost of goods sold
C) net income
D) total assets
Q2) Comparing two companies using ________ may point out differences in management styles.
A) common-size financial statements
B) sales growth
C) historical share prices
D) earnings per share
Q3) Describe the three components of the DuPont ratio.
Q4) Financial ratios ________ industries.
A) can vary across
B) are unchanging across
C) are homogeneous across
D) are always different across
Q5) What does it mean to benchmark by industry? Why is this needed when conducting a financial ratio analysis?
To view all questions and flashcards with answers, click on the resource link above. Page 16
Chapter 15: Raising Capital
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/54719
Sample Questions
Q1) Asian Motors Inc. plans to issue $3,000,000 of commercial paper with a 6-month maturity at 98% of par value. What is the 6-month interest rate?
A) 2.00%
B) 4.00%
C) 2.04%
D) 4.08%
Q2) The process for selling stock for the very first time is known as a/an ________.
A) an initial public offering
B) primary market
C) first refusal rights
D) rookie offering
Q3) Citizens' Bank of Business commercial loans are currently posted as having an 8.50% APR, with monthly payments due over a three-year period. If your firm takes out a $25,000 loan, what is the monthly payment, and what is the EAR? Use a financial calculator to determine your answer.
Q4) List the five active phases of a business life cycle as identified by the textbook. Do all business go through these five phases?
To view all questions and flashcards with answers, click on the resource link above.
17
Chapter 16: Capital Structure
Available Study Resources on Quizplus for this Chatper
114 Verified Questions
114 Flashcards
Source URL: https://quizplus.com/quiz/54720
Sample Questions
Q1) Theoretically, the more the earnings, the more a firm should use debt for financing purposes.
A)True
B)False
Q2) At the optimal debt-to-equity ratio, the cost of capital (WACC) is ________ for the firm. This point reflects the maximum benefit of leverage.
A) the lowest
B) the highest
C) at the midpoint
D) irrelevant
Q3) Above the break-even EBIT, there is no benefit in debt financing.
A)True
B)False
Q4) Below the break-even EBIT, the owners can benefit from financial leverage.
A)True
B)False
Q5) Describe in detail the costs of bankruptcy. In your answer discuss both the direct and indirect costs.
Q6) Describe the Pecking Order Hypothesis.
Page 18
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Dividends, Dividend Policy, and Stock Splits
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/54721
Sample Questions
Q1) Legal capital equals the par value of common stock minus the paid-in-excess of par on the common shares.
A)True
B)False
Q2) Identify and explain two reasons for reverse stock splits.
Q3) Which of the following statements is NOT true?
A) Odd lots consist of the purchase or sale of fewer than 100 shares of stock.
B) The commission rates on odd lots are often less expensive on a per share basis than for round lots.
C) Most trades on the NYSE are done via round lots.
D) When stock prices begin to rise above the preferred trading range, the cost of a round lot may move out of the range of several small retail traders.
Q4) Rough Rider Disposal Inc. is having a stock split. The current price is $57 per share, and you own 500 shares. The split is a one-and-one-half-shares-for-one share split.
What is the expected per share price after the split? What is your wealth before and after the split? Based on empirical evidence , does the market value of outstanding shares (new price times new quantity) tend to increase or decrease on average when stocks split into a greater number (but lower priced) shares, as in this problem?
To view all questions and flashcards with answers, click on the resource link above.
Page 19
Chapter 18: International Financial Management
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/54722
Sample Questions
Q1) Operating exposure reflects the impact on the short-run viability of a foreign business when unexpected exchange rates move against the domestic company.
A)True
B)False
Q2) Cultural risk arises from differences in customs, social norms, attitudes, assumptions, and expectations of the local society in a host country. Name and describe two of the five specific issues as identified in the textbook relating to cultural differences.
Q3) Lets return to the Big Mac Index and the concept of Purchasing Power Parity. If the price of a Big Mac burger in the United States is $4.25 and the current /$ exchange rate is 0.7506/$, what is the implied price of a Big Mac in France?
A) $3.19
B) 3.19
C) 5.66
D) 4.25
Q4) Assume the cross-rate is off. Explain what you can do to exploit this situation.
Q5) Describe business risk and political risk.
Q6) Describe transaction, operating, and translation exposure.
To view all questions and flashcards with answers, click on the resource link above.
Page 20