Introduction to Financial Management Exam Review
Course Introduction
Introduction to Financial Management provides students with a foundational understanding of the principles and practices involved in managing an organizations financial resources. The course covers essential topics such as financial statement analysis, budgeting, time value of money, risk and return, capital structure, and financial planning. Through real-world examples and practical applications, students learn how to make informed financial decisions, evaluate investment opportunities, and understand the role of finance in strategic business operations. This course equips students with the analytical tools necessary for effective financial management in both personal and professional contexts.
Recommended Textbook
Foundations of Financial Management 10th Canadian Edition by Stanley B. Block
Available Study Resources on Quizplus
21 Chapters
2599 Verified Questions
2599 Flashcards
Source URL: https://quizplus.com/study-set/2663
Page 2
Chapter 1: The Goals and Activities of Financial Management
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/138576
Sample Questions
Q1) A financial manager's goal of maximizing current or short-term earnings may not be appropriate because:
A) it considers the timing of the benefits.
B) increased earnings may be accompanied by acceptably higher levels of risk.
C) share ownership is widely dispersed.
D) earnings are subjective; they can be defined in various ways such as accounting or economic earnings.
Answer: D
Q2) Which of the following is not a major area of concern and emphasis in modern financial management and in this text?
A) Marginal analysis
B) Risk-return trade-off
C) Commodity trading
D) Changing financial institutions
Answer: C
Q3) List the occasional functions of the finance manager connected to the efficient raising and investing of funds.
Answer: Intermediate financing,bond issues,leasing,stock issues,capital, budgeting, dividend, decisions, forecasting
Page 3
To view all questions and flashcards with answers, click on the resource link above.
Chapter 2: Review of Accounting
Available Study Resources on Quizplus for this Chatper
151 Verified Questions
151 Flashcards
Source URL: https://quizplus.com/quiz/53148
Sample Questions
Q1) It is not possible for a company with a high profit margin to have a low operating profit.
A)True
B)False
Answer: False
Q2) The P/E ratio is strongly related to the past performance of the firm.
A)True
B)False
Answer: False
Q3) All of the following would be included in Cash Flows from Investing,except:
A) investments in Plant.
B) merchandise Purchases.
C) purchases of Investments.
D) sale of Long-Term Investments.
Answer: B
Q4) Cash flow consists of illiquid cash equivalents which are difficult to convert to cash within 90 days.
A)True
B)False
Answer: False
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
124 Verified Questions
124 Flashcards
Source URL: https://quizplus.com/quiz/167480
Sample Questions
Q1) If a firm has both interest expense and lease payments:
A) times interest earned will be smaller than fixed charge coverage.
B) times interest earned will be greater than fixed charge coverage.
C) times interest earned will be the same as fixed charge coverage.
D) fixed charge coverage cannot be computed.
Answer: B
Q2) Asset utilization ratios measure the returns on various assets such as return on total assets.
A)True
B)False
Answer: False
Q3) As long as prices continue to rise faster than costs in an inflationary environment,reported profits will generally continue to rise.
A)True
B)False
Answer: True
Q4) A current ratio of 2 to 1 is always acceptable,for a company in any industry.
A)True
B)False
Answer: False
Page 5
To view all questions and flashcards with answers, click on the resource link above.
Chapter 4: Financial Forecasting
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/167487
Sample Questions
Q1) Ideally,sales projections should be derived from:
A) an external viewpoint.
B) an internal viewpoint.
C) both internal and external viewpoints.
D) the marketing department.
Q2) A firm has forecasted sales of $8,000 in January,$12,000 in February,and $11,000 in March.All sales are on credit.40% is collected the month of sale and the remainder the following month.How much is collected from accounts receivable in February?
A) $10,800
B) $9,600
C) $12,000
D) $6,000
Q3) The generation of sales and profits ensures that there will be adequate cash on hand to meet financial obligations as they come due.
A)True
B)False
Q4) Pro forma income statements follow a sales forecast and production plan.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Operating and Financial Leverage
Available Study Resources on Quizplus for this Chatper
106 Verified Questions
106 Flashcards
Source URL: https://quizplus.com/quiz/167488
Sample Questions
Q1) If sales volume is less than the break-even point,the firm will experience:
A) an operating loss.
B) an operating profit.
C) an increase in plant and equipment.
D) an increase in share price.
Q2) Firms with a high degree of operating leverage are:
A) easily capable of surviving large changes in sales volume.
B) usually trading off lower levels of risk for higher profits.
C) significantly affected by changes in interest rates.
D) trading off higher fixed costs for lower per-unit variable costs.
Q3) A firm with a high degree of combined leverage will,other things being equal,experience higher earnings in the expansionary part of the business cycle.
A)True
B)False
Q4) This firm's break-even point is:
A) 4,800 units.
B) 14,634 units.
C) 7,142 units.
D) 18,000 units.
Q5) Compute his break-even point in dollars.
Page 7
To view all questions and flashcards with answers, click on the resource link above.
Chapter 6: Working Capital and the Financing Decision
Available Study Resources on Quizplus for this Chatper
123 Verified Questions
123 Flashcards
Source URL: https://quizplus.com/quiz/167351
Sample Questions
Q1) An aggressive,risk-oriented firm will likely:
A) borrow long-term and carry low levels of liquidity.
B) borrow short-term and carry low levels of liquidity.
C) borrow long-term and carry high levels of liquidity.
D) borrow short-term and carry high levels of liquidity.
Q2) Which of the following yield curves would be characteristic at peak periods of economic expansions?
A) Upward sloping
B) Downward sloping
C) Horizontal
D) Humped
Q3) Risk exposure due to heavy short-term borrowing can be compensated for by:
A) carrying highly liquid assets.
B) carrying illiquid assets.
C) carrying longer term,more profitable current assets.
D) carrying more receivables to increase cash flow.
Q4) Define working capital management.Why is it important to a firm?
Q5) A normal yield curve is downward sloping to the right.
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
147 Verified Questions
147 Flashcards
Source URL: https://quizplus.com/quiz/167780
Sample Questions
Q1) Because they generally run a surplus budget,Crown corporations are able to issue securities with slightly lower yields than direct Treasury issues.
A)True
B)False
Q2) The "SWIFT" transfer system was developed to aid bank fund transfers within Canada.
A)True B)False
Q3) It is possible for companies to operate with negative cash balances on their books.
A)True B)False
Q4) A lockbox is used to safeguard the corporation's marketable securities. A)True B)False
Q5) List and explain the "4C's of credit" as discussed by the author.
Q6) The 4 C's of credit include character,capital,capacity,and conditions. A)True B)False
Q7) SWIFT stands for the Society for Worldwide International Funds Transfer.
Page 9
To view all questions and flashcards with answers, click on the resource link above.
Chapter 8: Sources of Short-Term Financing
Available Study Resources on Quizplus for this Chatper
118 Verified Questions
118 Flashcards
Source URL: https://quizplus.com/quiz/182023
Sample Questions
Q1) A large manufacturing firm has been selling on a 3/10,net 30 basis.The firm changes its credit terms to 2/20,net 90.What change might be expected on the balance sheets of its customers?
A) Decreased receivables and increased bank loans.
B) Increased receivables and increased bank loans.
C) Increased payables and decreased bank loans.
D) Increased payables and increased bank loans.
Q2) Which of the following is not a characteristic of commercial paper?
A) Issued by large prestigious firms.
B) One-to-two year maturity.
C) Rates are usually below prime rates on business loans.
D) Usually in denominations of $100,000 or more.
Q3) Sears Canada Receivables Trust receives a better credit rating than Sears Canada because:
A) credit card receivables have a low default rate.
B) the interest rate on receivables is better than a Sears credit card.
C) a trust has the backing of the government through financial legislation.
D) securitization automatically qualifies for a better rating.
Q4) What is a compensating balance and what is its purpose? Is it commonly used? Why or why not?
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
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/167761
Sample Questions
Q1) Pension fund retirement accounts use the present value of an annuity to calculate the ending value upon retirement.
A)True
B)False
Q2) Janice Hardin sets aside $5,000 each year for 10 years.She then withdraws the funds on an equal annual basis for the next 10 years.The two tables she should use in the correct order are:
A) present value of an annuity of $1; future value of an annuity of $1.
B) future value of an annuity of $1; present value of an annuity of $1.
C) future value of an annuity of $1; present value of $1.
D) future value of an annuity of $1; future value of $1.
Q3) The Swell Computer Company has developed a new line of desktop computers.It is estimated that the cash returns generated by the new product line will be $800,000 per year for the next five years,and then $500,000 per year for 3 years after that (the cash returns occur at the end of each year).At a 9% interest rate,what is the present value of these cash returns?
Q4) In January,2005 Harold Black bought 100 shares of Country homes for $37.50 per share.He sold them in January,2015 for a total of $9,727.50.Calculate Harold's annual rate of return.
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
115 Verified Questions
115 Flashcards
Source URL: https://quizplus.com/quiz/168418
Sample Questions
Q1) A rise in yield to maturity would be coupled with an increase in the price of a bond.
A)True
B)False
Q2) A 15-year bond pays 11% on a face value of $1,000.If similar bonds are currently yielding 8%,what is the market value of the bond?
A) Over $1,000
B) Under $1,000
C) Over $1,200
D) Under $800
Q3) The price of preferred stock may react strongly to a change in k<sub>p</sub> because:
A) preferred stock may be cumulative.
B) preferred stock dividends have to be paid before common stock dividends.
C) there is no maturity date.
D) preferred stock dividends pass tax free between corporations.
Q4) List and explain the factors that influence the investors required rate of return.
Q5) How is a supernormal growth firm's common stock valued?
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
145 Verified Questions
145 Flashcards
Source URL: https://quizplus.com/quiz/168420
Sample Questions
Q1) If the investor desires less risk than the market,he or she:
A) buys stocks with alphas of zero.
B) buys stocks with betas less than 1.0.
C) makes sure the risk-free rate is higher than the expected market return.
D) buys stocks only when the slope of the security market line is on a 45 degree angle.
Q2) The risk-free rate of interest:
A) is independent of market rates of returns on short-term securities.
B) can be thought of as a real rate of interest on a short-term riskless government security.
C) is influenced by the treasury bill's beta.
D) is calculated by multiplying the market rate of risk by beta.
Q3) The capital asset pricing model:
A) expresses a linear relationship between returns on individual stocks and the market over time.
B) can be used to examine common stock returns but not the risk of the stock.
C) is not very useful because it is unrealistically a linear model.
D) is a linear model used to evaluate risk free rate.
Q4) Why are the options for raising capital in a small business limited?
Q5) Briefly explain what a firm's cost of capital is and how it is determined.
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
133 Verified Questions
133 Flashcards
Source URL: https://quizplus.com/quiz/168421
Sample Questions
Q1) In using the internal rate of return method,it is assumed that cash flows can be reinvested at:
A) the cost of equity.
B) the cost of capital.
C) the internal rate of return.
D) the prevailing interest rate.
Q2) The cash inflow from the sale of an old asset decreases the cost of the new asset.
A)True
B)False
Q3) Under the net present value method,cash flows are assumed to be reinvested at the firm's weighted average cost of capital.
A)True
B)False
Q4) Explain the Net Present Value (NPV)method of evaluating investment proposals.What are the advantages of this method in comparison with the other methods discussed in the text?
Q5) Explain the payback period method for evaluating capital expenditures.What are the disadvantages and advantages of this method?
To view all questions and flashcards with answers, click on the resource link above. Page 14
Chapter 13: Risk and Capital Budgeting
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/168885
Sample Questions
Q1) A project's total risk is measured by _________________________.
A) Beta
B) Sharpe Ratio
C) Chi Square
D) coefficient of variation
Q2) The "efficient frontier" indicates:
A) alternatives with neutral combinations of risk and return.
B) alternatives with the highest returns.
C) alternatives with no risk.
D) the best risk return line for a firm.
Q3) The coefficient of variation (V)can be defined as the:
A) expected value multiplied by the standard deviation.
B) standard deviation divided by the mean (expected value).
C) mean (expected value)divided by the standard deviation.
D) standard deviation squared,divided by the expected value.
Q4) Decision trees present a tabular or graphical comparison of projected decision outcomes.
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
128 Verified Questions
128 Flashcards
Source URL: https://quizplus.com/quiz/53160
Sample Questions
Q1) The NASDAQ National Market is composed of large nation-wide companies that are traded in the over-the-counter market.
A)True
B)False
Q2) In an efficient market:
A) all financial transactions have an NPV greater than zero.
B) the investor does not receive abnormal returns consistently.
C) the investor is not compensated properly for risk borne.
D) information flow is exclusively through investment dealers.
Q3) The major supplier of funds for investment in the whole economy is:
A) businesses.
B) households.
C) government.
D) financial institutions.
Q4) Due to a lack of certainty concerning their income stream,fixed-income securities trade in relatively inefficient markets.
A)True
B)False
Q5) List 5 funding sources of nonfinancial institutions as described in the text.
Q6) List and briefly describe the 4 key components of a good organized exchange?
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Investment Banking: Public and Private Placement
Available Study Resources on Quizplus for this Chatper
113 Verified Questions
113 Flashcards
Source URL: https://quizplus.com/quiz/138608
Sample Questions
Q1) The investment industry functions include merger and acquisition services,advisory services and international investment banking services.
A)True
B)False
Q2) An investment dealer acts as a middleperson between a corporation needing funds and investors with funds.
A)True
B)False
Q3) SFC's most recent reported EPS is _____________.
A) $3.40
B) $5.00
C) $6.40
D) $3.00
Q4) Which of the following is not an advantage of private placement?
A) No expensive registration process.
B) Higher interest rates.
C) More flexibility in negotiation.
D) No extensive public relations requirements.
Q5) List and describe the trends in the securities industry in Canada.
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
192 Verified Questions
192 Flashcards
Source URL: https://quizplus.com/quiz/168895
Sample Questions
Q1) Under the borrowing-purchasing decision compared to leasing,we must consider not only the amount of the payment but also separate out those items that are tax deductible.
A)True
B)False
Q2) If a corporation offers greater protection to a given class of bondholders,it must raise the interest rate on its bonds to make them more attractive.
A)True
B)False
Q3) The document that outlines the covenants and duties existing between bondholders and the issuing corporation is called:
A) an indenture.
B) a debenture.
C) secured debt.
D) protective covenants.
Q4) List and rank from highest to lowest the 8 possible ratings a bond can have,as determined by Dominion Bond Rating Service and S&P's rating service.What factors determine these ratings? What influence do the ratings have?
To view all questions and flashcards with answers, click on the resource link above. Page 18
Chapter 17: Common and Preferred Stock Financing
Available Study Resources on Quizplus for this Chatper
112 Verified Questions
112 Flashcards
Source URL: https://quizplus.com/quiz/169073
Sample Questions
Q1) Given that there are 4,000,000 shares outstanding in a corporation,how many shares will be required for a minority group of shareholders to elect 3 of the 11 members on the board of directors? (Assume cumulative voting required)
A) 800,001
B) 1,000,001
C) 1,090,910
D) 1,000,000
Q2) If a corporate charter includes a provision for preemptive rights,the shareholders:
A) must sell their shares to the company.
B) get first option to buy additional issues of common shares.
C) may purchase existing treasury shares.
D) cannot utilize cumulative voting procedures.
Q3) Occasionally,a company will have several classes of common stock,with each class carrying different rights to dividends and income.
A)True
B)False
Q4) Describe income trusts.What is the purpose of an income trust?
Q5) Define and describe the characteristics of American Depositary Receipts (ADRs).
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Dividend Policy and Retained Earnings
Available Study Resources on Quizplus for this Chatper
110 Verified Questions
110 Flashcards
Source URL: https://quizplus.com/quiz/169074
Sample Questions
Q1) Retained earnings accurately portray the liquidity position of the firm.
A)True
B)False
Q2) A corporation may wish to repurchase some of its shares in the market for all the following reasons except:
A) this action might maximize after-tax benefit to shareholders.
B) it can stabilize or increase the market price of the stock.
C) the stock may be needed for an employee compensation plan.
D) corporations may have strategic goals for the organization that may be adversely E) impacted by the number of shares outstanding.
Q3) In Stage III growth,stock dividends and stock splits are eliminated.
A)True
B)False
Q4) A firm with excess cash and few investment alternatives might logically:
A) declare a stock dividend.
B) split its stock two-for-one.
C) repurchase some of its own shares.
D) choose to issue preferred stock.
Q5) Why might a company repurchase its own shares?
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
147 Verified Questions
147 Flashcards
Source URL: https://quizplus.com/quiz/180058
Sample Questions
Q1) If the market opportunity cost of funds increases:
A) the value of a call option will increase,but a put option will decrease.
B) the value of a call option will decrease,but a put option will increase.
C) the value of a call option will decrease,and a put option will decrease.
D) the value of a call option will increase,but a put option will increase.
Q2) The writer of a call option has the obligation:
A) but not the right to sell an asset at a predetermined price.
B) but not the right to buy an asset at a predetermined price.
C) and the right to sell an asset at a predetermined price.
D) and the right to buy an asset at a predetermined price.
Q3) A convertible bond is currently selling for $1,125.It is convertible into 20 shares of common which presently sell for $40 per share.The conversion premium is:
A) $325.
B) $215.
C) 66.74 shares.
D) 23.80 shares.
$40 stock price × 20 shares = $800 conversion value
Conversion premium = Bond price of $1,125 - Conversion value of $800 = $325
Q4) Define and give examples of convertible securities.
Q5) Describe the similarities and differences between options and futures.
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: External Growth Through Mergers
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/53166
Sample Questions
Q1) Which of the following is not a potential benefit of a merger?
A) Improved financing posture.
B) Portfolio effect.
C) Dilution of earnings per share.
D) Tax loss carry-forward.
Q2) A white knight benefits the:
A) acquiring firm.
B) acquiring firm's shareholders.
C) officers of the acquired company.
D) potential acquired firm.
Q3) Officers of a selling firm are almost always released.
A)True
B)False
Q4) White knights:
A) advise companies on ways to avoid being taken over.
B) offer a higher purchase price and a friendlier offer in the event of an unsolicited and unfriendly takeover attempt.
C) attempt to make money in the stock market on shares that are likely merger candidates.
D) buy depressed stock of quality companies when merger talks are discontinued.
Page 22
To view all questions and flashcards with answers, click on the resource link above.
Chapter 21: International Financial Management
Available Study Resources on Quizplus for this Chatper
129 Verified Questions
129 Flashcards
Source URL: https://quizplus.com/quiz/53167
Sample Questions
Q1) The following are the prices in the foreign exchange market between the Canadian dollar and another local currency (LC). \(\begin{array} { l l }
\text { Spot } & \$ 0.02465 / \mathrm { LC } \\
3 \text {-month forward } & \$ 0.02473 / \mathrm { LC } \\ \text { 6-month forward } & \$ 0.02474 / \mathrm { LC } \end{array}\) What was the discount or premium on 3-month forward for LC?
A) 1.2980% premium
B) 0.0325% premium
C) 0.0325% discount
D) 1.2980% discount
Q2) Which of the following statements about the International Finance Corporation is not true?
A) The decision to assist a venture depends on both profitability of the project and potential benefit to the host country's economy
B) IFC assumes no managerial responsibility and exercises no voting rights
C) IFC may either buy equity shares or provide long-term loans
D) The IFC is owned by the member countries of the United Nations
Q3) Why do foreign investments offer higher rates of return than the rate of return on domestic investments?
To view all questions and flashcards with answers, click on the resource link above.
Page 23