Managerial Finance Test Bank
Course Introduction
Managerial Finance provides an in-depth understanding of financial decision-making within organizations, focusing on how managers plan, analyze, and control financial resources to achieve business objectives. The course covers fundamental concepts such as financial statement analysis, budgeting, capital structure, working capital management, investment evaluation, and risk assessment. Students will learn how financial data is used to inform managerial strategies, optimize resource allocation, and maximize shareholder value. Through real-world case studies and applied exercises, the course equips students with the analytical tools necessary to make informed financial decisions in a dynamic business environment.
Recommended Textbook
Essentials of Corporate Finance 9th Edition by Stephen Ross
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18 Chapters
1640 Verified Questions
1640 Flashcards
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Chapter 1: Introduction to Financial Management
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58 Verified Questions
58 Flashcards
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Sample Questions
Q1) Margie opened a used bookstore and is both the 100 percent owner and the store's manager.Which type of business entity does Margie own if she is personally liable for all the store's debts?
A)Sole proprietorship
B)Limited partnership
C)Corporation
D)Joint stock company
E)General partnership
Answer: A
Q2) When conducting a financial analysis of a firm,financial analysts:
A)cannot use accounting information as it is historical.
B)rely solely on accounting information.
C)frequently use accounting information.
D)ignore accounting information but do use marketing information.
E)assume the future will be a repeat of the past as reflected in the firm?s accounting reports.
Answer: C
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Chapter 2: Financial Statements,Taxes,and Cash Flow
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106 Verified Questions
106 Flashcards
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Sample Questions
Q1) Andre's Dog House had current assets of $67,200 and current liabilities of $71,100 last year.This year,the current assets are $82,600 and the current liabilities are $85,100.The depreciation expense for the past year is $9,600 and the interest paid is $8,700.What is the amount of the change in net working capital?
A)-$2,800
B)-$1,400
C)$1,400
D)$2,100
E)$2,800
Answer: C
Q2) Net working capital is defined as:
A)the depreciated book value of a firm's fixed assets.
B)the value of a firm's current assets.
C)available cash minus current liabilities.
D)total assets minus total liabilities.
E)current assets minus current liabilities.
Answer: E
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Chapter 3: Working With Financial Statements
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119 Flashcards
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Sample Questions
Q1) Discount Outlet has net income of $389,100,a profit margin of 2.8 percent,and a return on assets of 8.6 percent.What is the capital intensity ratio?
A).33
B).67
C)1.49
D)1.34
E)3.07
Answer: A
Q2) Peterboro Supply has a current accounts receivable balance of $391,648.Credit sales for the year just ended were $5,338,411.How long did it take on average for credit customers to pay off their accounts during the past year? Assume a 365-day year.
A)24.78 days
B)26.78 days
C)29.09 days
D)31.15 days
E)33.33 days
Answer: B
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Chapter 4: Introduction to Valuation: The Time Value of Money
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Sample Questions
Q1) You have $500 today and want to triple your money in 6 years.What interest rate must you earn if the interest is compounded annually?
A)18.08 percent
B)19.90 percent
C)22.15 percent
D)20.09 percent
E)21.21 percent
Q2) Lester had $6,270 in his savings account at the beginning of this year.This amount includes both the $6,000 he originally invested at the beginning of last year plus the $270 he earned in interest last year.This year,Lester earned a total of $282.15 in interest even though the interest rate on the account remained constant.This $282.15 is best described as:
A)simple interest.
B)interest on interest.
C)discounted interest.
D)complex interest.
E)compound interest.
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6
Chapter 5: Discounted Cash Flow Valuation
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114 Flashcards
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Sample Questions
Q1) What is the effective annual rate of 9.6 percent compounded semiannually?
A)9.71 percent
B)9.83 percent
C)9.79 percent
D)9.68 percent
E)9.92 percent
Q2) All else held constant,the future value of an annuity will increase if you:
A)decrease both the interest rate and the time period.
B)increase the time period.
C)decrease the present value.
D)decrease the payment amount.
E)decrease the interest rate.
Q3) Sporting Goods charges .85 percent interest per month.What rate of interest are its credit customers actually paying?
A)11.00 percent
B)11.92 percent
C)10.26 percent
D)9.31 percent
E)10.69 percent
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Chapter 6: Interest Rates and Bond Valuation
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115 Verified Questions
115 Flashcards
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Sample Questions
Q1) Which one of the following statements concerning sinking funds is correct?
A)Bond issuers must fund a sinking fund at the time the bonds are issued.
B)Sinking funds must include at least one "balloon payment."
C)Sinking funds must be funded annually, starting on the issue date.
D)Sinking funds may be used to purchase bonds in the open market.
E)Sinking funds can be used only to call bonds.
Q2) A callable bond:
A)is generally call protected during the entire term of the bond issue.
B)generally will have a call protection period during the final three years prior to maturity.
C)may be structured to pay bondholders the current value of the bond on the date of call.
D)is prohibited from having a sinking fund also.
E)is frequently called at a price that is less than par value.
Q3) Generally speaking,bonds issued in the U.S.pay interest on a(n)_____ basis.
A)annual
B)semiannual
C)quarterly
D)monthly
E)daily
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Chapter 7: Equity Markets and Stock Valuation
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91 Verified Questions
91 Flashcards
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Sample Questions
Q1) Lamey Gardens has a dividend growth rate of 5.6 percent, a market price of $13.16 a share, and a required return of 14 percent. What is the amount of the last dividend this company paid?
A) $1.05
B) $1.55
C) $1.60
D) $1.15
E) $1.30
Q2) The Toy Chest will pay an annual dividend of $2.64 per share next year and currently sells for $48.30 a share based on a market rate of return of 11.67 percent. What is the capital gains yield?
A) 7.35 percent
B) 7.78 percent
C) 9.23 percent
D) 6.20 percent
E) 4.49 percent
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Chapter 8: Net Present Value and Other Investment Criteria
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109 Verified Questions
109 Flashcards
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Sample Questions
Q1) A project has the following cash flows.What is the internal rate of return?
\[\begin{array} { | c | r | }
\hline \text { Year } & \text { Cash Flow } \\
\hline 0 & - \$ 89,300 \\
\hline 1 & 32,900 \\
\hline 2 & 64,200 \\
\hline 3 & 5,800 \\
\hline \end{array}\]
A)11.21 percent
B)10.47 percent
C)10.72 percent
D)8.57 percent
E)9.19 percent
Q2) Generally speaking,payback is best used to evaluate which type of projects?
A)Low-cost, short-term
B)High-cost, short-term
C)Low-cost, long-term
D)High-cost, long-term
E)Any size of long-term project
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Page 10
Chapter 9: Making Capital Investment Decisions
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105 Verified Questions
105 Flashcards
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Sample Questions
Q1) Lake City Plastics currently produces plastic plates and silverware.The company is considering expanding its product offerings to include plastic serving trays.All of the following are relevant costs to this project with the exception of:
A)the cost of additional utilities required to operate the serving tray production operation.
B)any change in the expected sales of plates and silverware gained from offering trays also.
C)a percentage of the current operating overhead.
D)the additional plastic raw materials that would be required.
E)the cost to acquire the forms needed to mold the trays.
Q2) Contingency planning focuses on the:
A)opportunity costs involved with a project.
B)sunk costs related to a project.
C)economic effects on a project's profitability.
D)managerial options implicit in a project.
E)optional capital requirements of a project.
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Chapter 10: Some Lessons From Capital Market History
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86 Verified Questions
86 Flashcards
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Sample Questions
Q1) Based on the period 1926-2014,what rate of return should you expect to earn over the long-term if you are unwilling to bear risk?
A)Between 0 and 1 percent
B)Between 1 and 2 percent
C)Between 2 and 3 percent
D)Between 3 and 4 percent
E)Between 4 and 5 percent
Q2) One year ago,you purchased a 6 percent coupon bond with a face value of $1,000 when it was selling for 98.6 percent of par.Today,you sold this bond for 101.2 percent of par.What is your total dollar return on this investment?
A)$86
B)$60
C)$64
D)$74
E)$82
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12
Chapter 11: Risk and Return
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39 Flashcards
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Sample Questions
Q1) Assume you own a portfolio of diverse securities which are each correctly priced.Given this,the reward-to-risk ratio:
A)for the portfolio must equal 1.0.
B)for the portfolio must be less than the market risk premium.
C)for each security must equal zero.
D)of each security is equal to the risk-free rate.
E)of each security must equal the slope of the security market line.
Q2) The risk premium for an individual security is based on which one of the following types of risk?
A)Total
B)Surprise
C)Diversifiable
D)Systematic
E)Unsystematic
Q3) The slope of the security market line represents the:
A)risk-free rate.
B)market risk premium.
C)beta coefficient.
D)risk premium on an individual asset.
E)market rate of return.
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Chapter 12: Cost of Capital
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Sample Questions
Q1) Lester lent money to The Corner Store by purchasing bonds issued by the store.The rate of return that he and the other lenders require is referred to as the:
A)pure play cost.
B)cost of debt.
C)weighted average cost of capital.
D)subjective cost.
E)cost of equity.
Q2) Which one of the following will affect the capital structure weights used to compute a firm's weighted average cost of capital?
A)Decrease in the book value of a firm's equity
B)Decrease in a firm's tax rate
C)Increase in the market value of the firm's common stock
D)Increase in the market risk premium
E)Increase in the firm's beta
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Chapter 13: Leverage and Capital Structure
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Sample Questions
Q1) Ernst Electrical has 7,500 shares of stock outstanding and no debt.The new CFO is considering issuing $50,000 of debt and using the proceeds to retire 600 shares of stock.The coupon rate on the debt is 8.5 percent.What is the break-even level of earnings before interest and taxes between these two capital structure options?
A)$48,360
B)$50,020
C)$49,740
D)$52,500
E)$53,125
Q2) Roller Coaster's has a WACC of 11.6 percent,ignoring taxes.It has a target capital structure of 60 percent equity and 40 percent debt and a cost of equity of 14.27 percent.What is the cost of debt?
A)5.5 percent
B)7.6 percent
C)9.3 percent
D)9.4 percent
E)18.7 percent
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Chapter 14: Dividends and Dividend Policy
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87 Flashcards
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Sample Questions
Q1) Kaylor's Tool Shoppe has 8,600 shares of stock outstanding at a market price of $8 a share.Which one of the following stock splits should the firm declare if it wants to increase the stock price to exactly $36a share? Ignore any taxes or market imperfections.
A)3-for-4 stock split
B)2-for-11 stock split
C)2-for-7 reverse stock split
D)2-for-9 reverse stock split
E)2-for-8 reverse stock split
Q2) All of the following are means of reducing the number of outstanding shares with the exception of a(n):
A)open market purchase.
B)reverse stock split.
C)tender offer.
D)rights offer.
E)targeted repurchase
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16
Chapter 15: Raising Capital
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Sample Questions
Q1) The quiet period is designed to:
A)prevent the original investors in a firm from selling their shares and destabilizing a security's price during the first six months of public trading.
B)ensure that all potential investors have fair access to identical information.
C)ensure that all bidders are heard in a Dutch auction.
D)stabilize the aftermarket.
E)silence the market so the SEC can fairly set the offer price on an IPO
Q2) Stock prices tend to _____ following the announcement of a new equity issue and tend to _____ following the announcement of a new debt issue.
A)increase; increase B)increase; decrease
C)increase; remain relatively constant
D)decrease; increase E)decrease; remain relatively constant
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17
Chapter 16: Short-Term Financial Planning
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Sample Questions
Q1) The Warehouse has projected sales for June through September of $56,700,$68,900,$70,200,and $54,300.The company collects 46 percent of its sales in the month of sale,51 percent in the month following the month of sale,and 2 percent in the second month following the month of sale.The remaining sales are never collected.What is the amount of the August collections?
A)$65,863
B)$68,565
C)$62,158
D)$67,288
E)$65,516
Q2) Kurt's Entertainment has a receivables turnover rate of 14.8,a payables turnover rate of 10.4 and an inventory turnover rate of 22.6.What is the length of the firm's operating cycle?
A)34.89 days
B)39.80 days
C)40.81 days
D)42.56 days
E)38.77 days
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18
Chapter 17: Working Capital Management
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Sample Questions
Q1) On May 12,you purchased $6,200 of merchandise from a supplier.The terms of the sale were 2/10,net 20.The discounted amount due is _____ which is payable no later than ____.May has 31 days.
A)$2,960; June 1
B)$3,515; June 1
C)$5,580; May 22
D)$6,076; May 22
E)$5,960; May 22
Q2) As of Monday morning,the ledger balance and the available balance for a firm was $2,100.During the day,the firm wrote three checks in the amounts of $674,$420,and $236.The firm deposited a check for $387 and a check for $638.What is the amount of the collection float as of the end of the day assuming none of these checks have cleared?
A)$305
B)$1,330
C)$840
D)$1,025
E)$2,355
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Chapter 18: International Aspects of Financial Management
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Sample Questions
Q1) Given the following exchange rates,which of the following currencies are selling at a premium against the dollar? \[\begin{array} { | c | r | r | }
\hline & \text { USD equiv } & \text { Currency per USD } \\
\hline \text { Australia dollar } & .8507 & 1.1755 \\
\hline \text { 1-mo forward } & .8489 & 1.1780 \\
\hline \text { Japanyen } & .00843 & 118.62 \\
\hline \text { 1-mo forward } & .00844 & 118.49 \\
\hline \text { Switzerland franc } & 1.0357 & .9655 \\
\hline \text { 1-mo forward } & 1.0362 & .9651 \\
\hline \text { UK pound } & 1.5649 & .6390 \\
\hline \text { 1-mo forward } & 1.5646 & .6391 \\
\hline \end{array}\]
A)Japanese yen only
B)Swiss franc and Australian dollar only
C)UK pound only
D)Australian dollar, Swiss franc, and UK pound only
E)Japanese yen and Swiss franc only
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Page 20