Managerial Finance
Mock Exam
Course Introduction
Managerial Finance focuses on the principles and techniques that managers use to make financial decisions within organizations. The course covers topics such as financial analysis, planning, and control, capital budgeting, risk assessment, cost of capital, and working capital management. Emphasizing the role of financial information in decision-making, students learn how to evaluate investment opportunities, determine funding sources, and analyze the financial performance of a firm. Through case studies and problem-solving exercises, students develop the analytical skills necessary to apply financial theories and tools in real-world managerial settings.
Recommended Textbook
Introduction to Finance Markets Investments and Financial Management 15th Edition by Ronald
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18 Chapters
2654 Verified Questions
2654 Flashcards
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Chapter 1: The Financial Environment
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104 Verified Questions
104 Flashcards
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Sample Questions
Q1) A sub-prime mortgage is a home loan made to a borrower with a relatively low credit score indicating the likelihood that loan payments might be missed when due.
A)True
B)False
Answer: True
Q2) Among the six principles of finance, all are included except:
A)All decisions are ultimately financial decisions.
B)Higher returns are expected for taking on more risk
C)Diversification of investments can reduce risk
D)Financial markets are efficient in pricing securities
E)all of the above are included
Answer: A
Q3) Financial system functions include accumulating savings and lending funds.
A)True
B)False
Answer: True
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Chapter 2: Money and the Monetary System
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148 Verified Questions
148 Flashcards
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Sample Questions
Q1) Functions of money include all of the following EXCEPT:
A) Money serves as a medium of exchange.
B) Money may be held as a store of value.
C) Money serves as a standard of value.
D) All of the above are functions of money.
Answer: D
Q2) Even though credit card balances and limits are not included in any definition of money supply, these balances and limits can affect the rate of turnover of money supply and contribute to money supply expansion.
A)True
B)False
Answer: True
Q3) Fiat money is:
A)paper money issued by central banks with full metallic backing
B)government notes representing a specific amount of gold in storage
C)full-bodied money
D)none of the above
Answer: D
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Page 4
Chapter 3: Banks and Other Financial Institutions
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150 Verified Questions
150 Flashcards
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Sample Questions
Q1) One of the most significant advantages claimed by branch banking is:
A)lower interest rates are usually available from branch bank
B)convenience for customers
C)banking operations are easier to regulate
D)all the above
Answer: B
Q2) Capital notes:
A)are subject to reserve requirements
B)are assets of the banks that issue them
C)are always subordinated to the claims of bank depositors
D)reflect short-term borrowing on the part of the bank
Answer: C
Q3) The Federal Deposit Insurance Corporation Improvement Act of 1991:
A)transferred the reserves and functions of the Federal Savings and Loan Insurance Corporation to the FDIC
B)required that failed banks be handled in such a way as to provide the lowest cost to the FDIC
C)increased federal deposit insurance from $40,000 to $100,000 for each account
D)extended federal deposit insurance to S&L depositors
Answer: B
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Chapter 4: Federal Reserve System
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155 Flashcards
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Sample Questions
Q1) The __________________, passed in 1968, requires the clear explanation of consumer credit costs and garnishment procedures (taking wages or property by legal means) and prohibits overly high-priced credit transactions.
A)Consumer Credit Expansion Act
B)Credit Growth Act
C)Consumer Credit Protection Act
D)Consumer Safety Act
E)none of the above
Q2) The members of the Fed Board of Governors are:
A)elected by the member banks
B)appointed by the President of the United States with the advice and consent of the Senate
C)appointed by the Secretary of the Treasury
D)appointed by each of the Federal Reserve banks
E)none of the above
Q3) The most used monetary policy instrument used by the Fed is
A)open market operations
B)changing the discount rate
C)changing the reserve requirement
D)none of the above
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Chapter 5: Policy Makers and the Money Supply
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139 Verified Questions
139 Flashcards
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Sample Questions
Q1) The basic function served by requiring adequate bank reserves in the monetary system is to:
A)assure bank liquidity
B)influence the relative profitability of member banks
C)maintain adequate capital for investors
D)impose a burden of risk on bank stockholders
E)none of the above
Q2) Under the leadership of ______________, during the 2007-2009 financial crisis, the Treasury was actively involved in trying to help financial institutions on the brink of collapse find help through mergers with financially stronger institutions.
A)George Bush
B)Alan Greenspan
C)Ben Bernanke
D)Timothy Geithner
E)none of the above are involved
Q3) Unemployment and welfare benefits are examples of transfer payments for which no current productive services are given in return.
A)True
B)False
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Page 7
Chapter 6: International Finance and Trade
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) The lowest quotation on foreign exchange is given for: Not in chapter
A)cable rates
B)banker's time drafts
C)banker's sight drafts
D)banker's acceptance
Q2) A documentary draft is a draft that is accompanied by an order bill of lading and other documents.
A)True
B)False
Q3) The exchange rate is the rate at which a given unit of foreign currency is quoted in terms of:
A)commodity prices
B)the domestic currency
C)the foreign currency
D)gold
Q4) A stronger U.S.dollar generally
A)results in more imports of foreign merchandise
B)leads to concern about worsening trade deficits
C)results in lower domestic inflation
D)all of the above
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Chapter 7: Savings and Investment Process
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146 Flashcards
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Sample Questions
Q1) Gross domestic product is equal to the sum of all of the following EXCEPT:
A)personal consumption expenditures
B)gross exports D is the answer as net exports are gross exports - imports.Could be confusing to students.Note the next item is identical to this one without the misleading term.
C)government expenditures
D)all of the above are included
Q2) The primary factors that influence the total amount of savings in an economy in any given period include the trade surplus or deficit and exchange rates.
A)True
B)False
Q3) The corporate retention rate is simply another term for the corporate savings rate.
A)True B)False
Q4) The federal debt is the same thing as the budget deficit.
A)True
B)False
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9
Chapter 8: Interest Rates
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162 Flashcards
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Sample Questions
Q1) Which of the following factors is most correct?
A)Demand-pull inflation traditionally exists during periods of economic expansion when the demand for goods and services exceeds the available supply of such goods and services.
B)Cost-push inflation occurs when prices are raised to cover rising production costs, such as wages
C)Speculative inflation is caused by the expectation that prices will continue to rise, resulting in increased buying to avoid even higher future prices
D)All of the above are correct
E)none of the above are correct
Q2) Administrative inflation is the tendency of prices, aided by union-corporation contracts, to rise during economic expansion and to resist declines during recessions.
A)True
B)False
Q3) Holding demand constant, an increase in the supply of loanable funds will result in an increase in interest rates.
A)True
B)False
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10
Chapter 9: Time Value of Money
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137 Verified Questions
137 Flashcards
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Sample Questions
Q1) If we will receive $100 per year beginning one year from now for a period of three years with a 12% discount rate, what would be the value of our investment today?
A)$230
B)$240
C)$250
D)$260
Q2) A generous benefactor to the local university plans to make a one-time endowment which would provide the university with $150,000 per year into perpetuity.The rate of interest is expected to be 5 percent for all future time periods.How large must the endowment be?
A)$300,000
B)$3,000,000.
C)$750,000.
D)$1,428,571.
Q3) Money has a time value so long as interest is earned by saving or investing money.
A)True
B)False
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11
Chapter 10: Bonds and Stocks: Characteristics and Valuation
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158 Verified Questions
158 Flashcards
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Sample Questions
Q1) A sinking fund:
A)is a special fund set up to pay of the creditors of bankrupt firms
B)requires specific approval by the firm's the board of directors
C)requires the issuer to retire a bond issue incrementally over time
D)none of the above
Q2) Most of the annual funds raised from security issues come from corporate bond sales.
A)True
B)False
Q3) Ameritech has just issued a $1,000 par value bond that will mature in 10 years.This bond pays interest of $45 every six months.If the annual yield to maturity of this bond is 8%, what is the price of the Ameritech bond if the market is in equilibrium?
A)$991.50
B)$1,067.96
C)$1,112.82
D)none of the above
Q4) Credit risk is another term for default risk.
A)True
B)False
Page 12
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Chapter 11: Securities Markets
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153 Verified Questions
153 Flashcards
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Sample Questions
Q1) Which of the following statements is most correct?
A)Because a specialist is given the monopoly power to make a market on a particular stock, all trades must pass through the specialist.
B)A specialist can also perform the function of a commission broker.
C)A floor broker acts as an agent to execute customer's orders for securities purchases and sales.
D)Each of the above statements is false.
Q2) Newly created securities are sold in the:
A)primary market
B)secondary market
C)third market
D)fourth market
Q3) Sales of securities that the seller does not own is called a:
A)stop-loss order
B)short sale
C)limit order
D)maintenance margin
Q4) Existing securities are traded in the primary market.
A)True
B)False
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Chapter 12: Financial Return and Risk Concepts
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145 Flashcards
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Sample Questions
Q1) If you invest 40% of your investment in GE with an expected rate of return of 10% and the remainder in IBM with an expected rate of return of 16%, the expected return on your portfolio is:
A)12.4%
B)13%
C)13.6%
D)14.5%
Q2) The existence of chartists or technicians suggests that some investors believe that markets are not weak form efficient.
A)True
B)False
Q3) Although gold is a risky investment by itself, including gold in a stock portfolio can make the portfolio less risky.
A)True
B)False
Q4) The variance is the square root of the standard deviation.
A)True
B)False
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Page 14
Chapter 13: Business Organization and Financial Data
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151 Verified Questions
151 Flashcards
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Sample Questions
Q1) Suppose Ningbo Steel had sales revenue of $1011,000 sales revenue, cost of goods sold of $5,000, operating expenses of $3000, interest expense of $1,000, a tax rate of 20%, and 12,000 shares of common stock outstanding.Based on this information, earnings per share was:
A)$2.001.20
B)$1.00
C)$0.5080
D)$0.08
E)none of the above
Q2) The average tax rate on a corporation with $75,000 in income and a tax liability of $15,000 is:
A)15%
B)20%
C)25%
D)39%
Q3) Which of the following is a source of cash?
A)an increase in an asset account ab.a decrease in an asset account
B)a decrease in a liability account
C)a decrease in an equity account
D)none of the above
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Chapter 14: Financial Analysis and Long-Term Financial Planning
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145 Flashcards
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Sample Questions
Q1) If a firm's sales are $2,000,000, its cost of goods sold is $1,500,000, and its fixed assets are $1,000,000, what is fixed asset turnover?
A)2.0 times
B)1.5 times
C)0.5 times
D).67 times
Q2) If a firm has sales of $100, total expenses (including interest and taxes) of $50, has a stock that is selling at $50 per share and has 10 shares of stock outstanding, then the firm has a P/E ratio of:
A)2.00
B)1.00
C)10.0
D)0.20
Q3) If a firm has no debt and pays no taxes, then the firm's operating profit margin will be ___________ the firm's net profit margin.
A)greater than B)less than C)the same as D)we can't tell
Page 16
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Chapter 15: Managing Working Capital
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153 Flashcards
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Sample Questions
Q1) Theoretically, the transactions demand for cash could be reduced to zero.
A)True
B)False
Q2) If a firm's inventories on hand are $200,000 and its cost of goods sold is $600,000, what is the inventory turnover?
A)2.0 times
B)3.0 times
C)4.0 times
D)5 0.33 times
Q3) Fixed capital would be defined as the firm's fixed assets, which include plant, equipment and property.
A)True
B)False
Q4) The disbursement float is the delay in transferring the means of payment from the payor (customer) to the payee (the provider of goods or services).
A)True
B)False
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Chapter 16: Short-Term Business Financing
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143 Verified Questions
143 Flashcards
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Sample Questions
Q1) Which of the following is not an important source of short-term funds to small businesses?
A)commercial banks
B)commercial paper
C)accounts receivable secured loans and/or use of factors
D)the Small Business Administration
Q2) Which would not be likely to be accepted as collateral for an inventory loan?
A)nails at a hardware store
B)cars at an automobile dealership
C)clothing at a fashion store
D)all the above would be likely to be accepted
Q3) The effective annual interest rate on a one-year, $1,000,000, 12% discount loan that requires a 10% compensating balance is
A)15.422%.
B)13.3%.
C)13.6%.
D)12.0%.
E)none of the above
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18
Chapter 17: Capital Budgeting Analysis
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Sample Questions
Q1) When applied to the analysis of independent projects, NPV and IRR never provide conflicting resultsaccept or reject decisions.
A)True
B)False
Q2) A firm's cost of capital is discount rate used in the evaluation of capital budgeting projects using NPV and IRR.
A)True
B)False
Q3) Examples of non-financial data required for project analysis include all of the following except:
A)financing costs
B)quantity and quality of labor force in different locations
C)labor-management relations
D)status of technological change in the industry
E)all of the above are included
Q4) A higher-risk project needs to be evaluated using a lower required rate of return.
A)True
B)False
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Chapter 18: Capital Structure and the Cost of Capital
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Sample Questions
Q1) The initial impact of increasing the use of debt for a firm which had no prior debt financing is to:
A)lower the cost of capital
B)lower the weight of the debt component
C)increase the cost of capital
D)lower the cost of retained earnings
Q2) A company with a DCL of 12 and a DFL of 2 has a DOL of?
A)24
B)14
C)6
D)cannot tell from this information
Q3) Finance theory favors the use of ____________ value weights in the calculation of the weighted average cost of capital.
A)book
B)future
C)market
D)none of the above
Q4) A non-optimal capital structure may lead to higher financing costs.
A)True
B)False
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