Course Introduction
Managerial Finance
Pre-Test Questions
Managerial Finance focuses on the principles and techniques essential for effective financial decision-making within organizations. The course covers key topics such as financial statement analysis, budgeting, capital structure, risk management, and valuation of financial assets. Emphasizing both theoretical frameworks and practical applications, it enables students to evaluate investment opportunities, optimize financing strategies, and understand the implications of financial decisions on organizational value. Through case studies and real-world examples, students develop critical thinking skills necessary to address financial challenges and contribute to strategic planning in a managerial role.
Recommended Textbook
Financial Statement Analysis 13th Edition by
Charles H. Gibson
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13 Chapters
857 Verified Questions
857 Flashcards
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Page 2
Chapter 1: Introduction to Financial Reporting
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Sample Questions
Q1) Other than December,the most popular month for fiscal year-end is:
A)January.
B)March.
C)June.
D)September.
E)October.
Answer: D
Q2) Which of these measurement attributes is not currently used in practice?
A)Historical cost
B)Relevant cost
C)Current market value
D)Current cost
E)Present value
Answer: B
Q3) An entity usually cannot reasonably account for the profits related to inventory until that inventory is sold in the normal course of business.
A)True
B)False
Answer: True
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Page 3
Chapter 2: Introduction to Financial Statements and Other Financial Reporting Topics
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Sample Questions
Q1) Retained earnings always shows a positive balance.
A)True
B)False Answer: False
Q2) For public companies reporting to the SEC,the 10-K,10-Q,8-K,and proxy can be found at http://www.sec.gov.
A)True
B)False Answer: True
Q3) Contingent liabilities are recorded as a liability only if the loss is considered substantial and the amount is reasonably determinable.
A)True
B)False Answer: False
Q4) One is unlikely to regard a qualified opinion or an adverse opinion as casting serious doubts on the reliability of the financial statements.
A)True
B)False Answer: False
Page 4
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Chapter 3: Balance Sheet
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Sample Questions
Q1) Generally accepted accounting principles and the Internal Revenue Code of tax law require that the same depreciation method be used for both the financial statements and the federal tax return.
A)True
B)False Answer: False
Q2) A sole proprietorship form of business has only one owner.
A)True
B)False Answer: True
Q3) Noncontrolling interest reflects the ownership of noncontrolling stockholders in the equity of consolidated subsidiaries less than wholly occurred.
A)True
B)False Answer: True
Q4) The Internal Revenue Code penalizes borrowing for an ESOP.
A)True
B)False Answer: False
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Chapter 4: Income Statement
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Sample Questions
Q1) Which of the following is not a category within accumulated other comprehensive income?
A)Post retirement commitments on health plans
B)Foreign currency translation adjustments
C)Unrealized holding gains and losses on available-for-sale marketable securities
D)Changes to stockholders equity resulting from additional minimum pension liability adjustments
E)Unrealized gains and losses from derivative instruments
Q2) Fisher Company has 1,000,000 share of common stock with a par value of
$10.Additional paid-in capital totals $10,000,000 and retained earnings is $12,000,000.The directors declare a 6% stock dividend when the market value is $5.The reduction of retained earnings as a result of the declaration will be:
A)$0.
B)$300,000.
C)$600,000.
D)$500,000.
E)None of the answers are correct.
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Chapter 5: Basics of Analysis
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Sample Questions
Q1) In financial statement analysis,ratios are:
A)the only type of analysis where industry data are available.
B)absolute numbers converted to a common base.
C)fractions usually expressed in percent or times.
D)the only indication of the financial position of the firm.
E)None of the answers are correct.
Q2) Different accounting methods can cause some ratios to differ substantially.
A)True
B)False
Q3) Statements in which all items are expressed only in relative terms (percentages of a base)are termed:
A)vertical Statements.
B)horizontal Statements.
C)funds Statements.
D)common-Size Statements.
E)None of the answers are correct.
Q4) A service firm will usually have a low amount of inventory,consisting primarily of supplies.
A)True
B)False
Page 7
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Chapter 6: Liquidity of Short-Term Assets;related
Debt-Paying Ability
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Sample Questions
Q1) Which of the following does not bear on the quality of receivables?
A)Shortening the credit terms
B)Lengthening the credit terms
C)Right of return privilege
D)Lengthening the outstanding period
E)All of the answers bear on the quality of receivables
Q2) Which of the following types of business would normally have the longest operating cycle?
A)A seller of resort property
B)A car dealer
C)A car manufacturer
D)A grocery store
E)A record store
Q3) A firm that has been on lifo for many years may have some inventory costs that go back ten years or more.
A)True
B)False
Q4) The cash ratio is usually a good indication of the liquidity of the firm.
A)True
B)False
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Chapter 7: Long-Term Debt-Paying Ability
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Sample Questions
Q1) Jones Company has long-term debt of $1,000,000,while Smith Company,Jones' competitor,has long-term debt of $200,000.Which of the following statements best represents an analysis of the long-term debt position of these two firms?
A)Smith Company's times interest earned should be lower than Jones.
B)Jones obviously has too much debt when compared to its competitor.
C)Jones should sell more stock and use less debt.
D)Smith has five times better long-term borrowing ability than Jones.
E)Not enough information to determine if any of the answers are correct.
Q2) Under generally accepted accounting principles,an item must clearly represent a commitment to pay out funds in the future in order to be classified as a liability.
A)True
B)False
Q3) Capitalized interest should not be considered as part of interest in the times interest earned computation.
A)True
B)False
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Chapter 8: Profitability
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Sample Questions
Q1) Vertical,common-size statement
A)Full or partial statements expressed in percentages of a given base.
B)Requires full financial statements on a quarterly basis.
C)All statement figures are expressed as a percentage of a base figure from that year's statement.
D)A breakdown by major lines of business,only required in SEC reporting.
E)A breakdown by major lines of business.
F)All statement figures are expressed as a percentage of base-year figures.
G)Requires estimation of some expense items.
H)A comparison of financial data over time.
I)Visual aids to understanding financial data.
Q2) Which of the following would most likely cause a rise in net profit margin?
A)Increased sales
B)Decreased preferred dividends
C)Increased cost of sales
D)Decreased operating expenses
E)Decreased earnings per share
Q3) The SEC requires interim financial data on Form 10-Q.
A)True
B)False
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Chapter 9: For the Investor
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Sample Questions
Q1) A firm might have a low dividend payout ratio if it were planning a major expansion.
A)True
B)False
Q2) The ratio percentage of earnings retained is the same as that termed:
A)dividend yield.
B)dividend payout.
C)this year's retained earnings to net income.
D)return on common equity.
E)book value.
Q3) Book value per share may not approximate market value per share because:
A)the book value is after tax.
B)book values are based on replacement costs rather than market values.
C)book value is related to book figures and market value is related to the future potential as seen by investors.
D)investors do not understand book value.
E)book value is not related to dividends.
Q4) Dividend yield relates dividends per share to market price per share.
A)True
B)False
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Chapter 10: Statement of Cash Flows
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Sample Questions
Q1) Sale of equipment for cash is an operating activity.
A)True
B)False
Q2) Payment of cash dividends is an operating activity.
A)True
B)False
Q3) A supporting schedule to the statement of cash flows may include noncash flow items.
A)True
B)False
Q4) Issuance of long-term debt for cash
A)Operating
B)Investing
C)Financing
D)Item would not appear
Q5) Sale of inventory for cash
A)Operating
B)Investing
C)Financing
D)Item would not appear
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Chapter 11: Expanded Analysis
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Sample Questions
Q1) A column graph has columns in horizontal form.
A)True
B)False
Q2) Which of the following is not a multiple approach to valuation?
A)Discounted cash flow
B)Price-to-earnings (PE)
C)Price-to-book
D)Price-to-operating cash flow
E)Price-to-sales
Q3) Which of the following statements is not true?
A)The depreciation method and the period of time selected to depreciate an asset can have a significant influence on income.
B)There are many depreciation methods.
C)The depreciation methods that recognize a large amount of depreciation in the later years of an asset's life are conservative.
D)The straight-line depreciation method recognizes depreciation in equal amounts over each year of the life of the asset.
E)There is sometimes a material difference in the lives used for depreciation between firms.
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Page 13
Chapter
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Sample Questions
Q1) It is generally perceived that utilities that have cash flow problem will not be increasing their dividend.
A)True
B)False
Q2) The regulated utility is building into the cost base an amount for an assumed rate of return on equity funds by increasing the balance sheet account (Construction Work in Progress)for an assumed rate of return on equity funds.
A)True
B)False
Q3) Banks operate either under a federal or state charter.
A)True
B)False
Q4) There are basically four types of insurance organizations.Which of the following is not one of these four types?
A)Group
B)Stock companies
C)Mutual companies
D)Fraternal benefit societies
E)Assessment companies
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Chapter 13: Personal Financial Statements and Accounting
for Governments and Not-For-Profit Organizations
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Q1) The statement of changes in net worth is presented in terms of realized increases (decreases)and unrealized increases (decreases).
A)True
B)False
Q2) For personal financial statements,the statement of changes in net worth replaces the income statement.
A)True
B)False
Q3) For personal financial statements,the statement of financial condition is similar to a balance sheet.
A)True
B)False
Q4) Which of the following would not likely be a reason for preparing personal financial statements?
A)Obtaining personal credit
B)Determining the tax basis of marketable securities
C)Income tax planning
D)Retirement planning
E)Estate planning
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