1 Which of the following best describes the goal of the firm.docx
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1Whichofthefollowingbestdescribesthegoalofthefirm
1)Whichofthefollowingbestdescribesthegoalofthefirm?
A.
Themaximizationofthetotalmarketvalueofthefirm'scommonstock]
B.
Profitmaximization
C.
Riskminimization
D.
Noneoftheabove
2)Intermsoforganizationalcosts,whichofthefollowingsequencesiscorrect,movingfromlowesttohighestcost?
A.
Corporation,limitedpartnership,generalpartnership,soleproprietorship
B.
Soleproprietorship,generalpartnership,limitedpartnership,corporation
C.
Soleproprietorship,generalpartnership,corporation,limitedpartnership
D.
Generalpartnership,soleproprietorship,limitedpartnership,corporation
3)Thetrueownersofthecorporationarethe:
A.
boardofdirectorsofthefirm.
B.
preferredstockholders.
C.
commonstockholders.
D.
holdersofdebtissuesofthefirm.
4)Whenpubliccorporationsdecidetoraisecashinthecapitalmarkets,whattypeoffinancingvehicleismostfavored?
A.
Commonstock
B.
Preferredstock
C.
Corporatebonds
D.
Retainedearnings
5)Moneymarketinstrumentsinclude:
A.
corporatebonds.
B.
preferredstock.
C.
commonstock.
D.
bankers'acceptances.
6)WhichofthefollowingdoesNOTinvolveunderwritingbyaninvestmentbanker?
A.
Syndicatedpurchases
B.
Negotiatedpurchases
C.
Commissionbasispurchases
D.
Competitivebidpurchases
7)Accordingtotheagencyproblem,_________representtheprincipalsofacorporation.
A.
employees
B.
managers
C.
suppliers
D.
shareholders
8)Difficultyinfindingprofitableprojectsisdueto:
A.
ethicaldilemmas.
B.
competitivemarkets.
C.
opportunitycosts.
D.
socialresponsibility.
9)WhichofthefollowingisNOTaprincipleofbasicfinancialmanagement?
A.
Efficientcapitalmarkets
B.
Risk/returntradeoff
C.
Incrementalcashflowcounts
D.
Profitisking
10)Theaccountingrateofreturnonstockholders'investmentsismeasuredby:
A.
operatingincomereturnoninvestment.
B.
returnonassets.
C.
returnonequity.
D.
realizedrateofinflation.
11)Anothernamefortheacidtestratioisthe:
A.
inventoryturnoverratio.
B.
currentratio.
C.
quickratio.
D.
averagecollectionperiod.
12)MarshallNetworks,Inc.hasatotalassetturnoverof2.5%andanetprofitmarginof3.5%.Thefirmhasareturnonequityof17.5%.CalculateMarshall'sdebtratio.
A.
50%
B.
30%
C.
40%
D.
60%
13)Youhave$10,000toinvest.Youdonotwanttotakeanyrisk,soyouwillputthefundsinasavingsaccountatthelocalbank.Ofthefollowingchoices,whichonewillproducethelargestsumattheendof22years?
A.
Anaccountthatcompoundsinterestquarterly
B.
Anaccountthatcompoundsinterestannually
C.
Anaccountthatcompoundsinterestdaily
D.
Anaccountthatcompoundsinterestmonthly
14)Ifyouareaninvestor,whichofthefollowingwouldyouprefer?
A.
Earningsonfundsinvestedwouldcompoundmonthly.
B.
Earningsonfundsinvestedwouldcompoundannually.
C.
Earningsonfundsinvestedwouldcompounddaily.
D.
Earningsonfundsinvestedwouldcompoundquarterly.
15)NorthwestBankpaysaquotedannual(nominal)interestrateof4.75%.However,itpaysinterest(compouned)dailyusinga365-dayyear.Whatistheeffectiveannualrateofreturn(APY)?
A.
3.61%
B.
4.75%
C.
5.02%
D.
4.86%
16)Theprimarypurposeofacashbudgetisto:
A.
provideadetailedplanoffuturecashflows.
B.
determinethelevelofinvestmentincurrentandfixedassets.
C.
determineaccountspayable.
D.
determinetheestimatedincometaxfortheyear.
17)WhichofthefollowingisNOTabasicfunctionofabudget?
A.
Budgetscomparehistoricalcostsofthefirmwithitscurrentcostperformance.
B.
Budgetsindicatetheneedforfuturefinancing.
C.
Budgetsprovidethebasisforcorrectiveactionwhenactualfiguresdifferfromthebudgetedfigures.
D.
Budgetsallowforperformanceevaluation.
18)Whichofthefollowingstatementsaboutthepercent-of-salesmethodoffinancialforecastingistrue?
A.
Itinvolvesestimatingthelevelofanexpense,asset,orliabilityforafutureperiodasapercentoftheforecastforsalesrevenues.
B.
Itistheleastcommonlyusedmethodoffinancialforecasting.
C.
Itisamuchmoreprecisemethodoffinancialforecastingthanacashbudgetwouldbe.
D.
Itprojectsallliabilitiesasafixedpercentageofsales.
19)Thebreak-evenmodelenablesthemanagerofafirmto:
A.
determinethequantityofoutputthatmustbesoldtocoveralloperatingcosts.
B.
calculatetheminimumpriceofcommonstockforcertainsituations.
C.
setappropriateequilibriumthresholds.
D.
determinetheoptimalamountofdebtfinancingtouse.
20)Whichofthefollowingisanon-cashexpense?
A.
Packagingcosts
B.
Depreciationexpenses
C.
Interestexpense
D.
Administrativesalaries
21)Aplantcanremainoperatingwhensalesaredepressed:
A.
inanefforttocoveratleastsomeofthevariablecost.
B.
ifthesellingpriceperunitexceedsthevariablecostperunit.
C.
tohelpthelocaleconomy.
D.
unlessvariablecostsarezerowhenproductioniszero.
22)Howlongwillittake$750todoubleat8%compoundedannually?
A.
9years
B.
6.5years
C.
48months
D.
12years
23)Thepresentvalueofasinglefuturesum:
A.
dependsuponthenumberofdiscountperiods.
B.
increasesasthediscountrateincreases.
C.
isgenerallylargerthanthefuturesum.
D.
increasesasthenumberofdiscountperiodsincreas.
24)Whichofthefollowingistheformulaforcompoundvalue?
A.
FVn=P/(1+i)n
B.
FVn=P(1+i)-n
C.
FVn=(1+i)/P
D.
FVn=P(1+i)n
25)Whichofthefollowingisconsideredtobeaspontaneoussourceoffinancing?
A.
Inventory
B.
Accountspayable
C.
Accountsreceivable
D.
Operatingleases
26)Atoymanufacturerfollowingthehedgingprinciplewillgenerallyfinanceseasonalinventorybuild-uppriortotheChristmasseasonwith:
A.
tradecredit.
B.
preferredstock.
C.
sellingequipment.
D.
commonstock.
27)WhichofthefollowingisNOTconsideredapermanentsourceoffinancing?
A.
Preferredstock
B.
Commercialpaper
C.
Commonstock
D.
Corporatebonds
28)Computethepaybackperiodforaprojectwiththefollowingcashflows,ifthecompany'sdiscountrateis12%.Initialoutlay=$450
Cashflows:
Year1 = $325
Year2 = $65
Year3 = $100
A.
2.88years
B.
2.6years
C.
3.17years
D.
3.43years
29)DieyardBatteryRecyclersisconsideringaprojectwiththefollowingcashflows:
Initialoutlay=$13,000
Cashflows:
Year1 = $5,000
Year2 = $3,000
Year3 = $9,000
Iftheappropriatediscountrateis15%,computetheNPVofthisproject.
A.
$27,534
B.
$8,891
C.
-$466
D.
$4,000
30)Wecomputetheprofitabilityindexofacapital-budgetingproposalby:
A.
dividingthepresentvalueoftheannualafter-taxcashflowsbythecostoftheproject.
B.
dividingthepresentvalueoftheannualafter-taxcashflowsbythecostofcapital.
C.
multiplyingtheIRRbythecostofcapital.
D.
multiplyingthecashinflowbytheIRR.
31)WhichofthefollowingisconsideredtobeadeficiencyoftheIRR?
A.
Itfailstoutilizethetimevalueofmoney.
B.
Itcouldproducemorethanonerateofreturn.
C.
Itfailstoproperlyrankcapitalprojects.
D.
Itisnotusefulinaccountingforriskincapitalbudgeting.
32)ManyfirmstodaycontinuetousethepaybackmethodbutemploytheNPVorIRRmethodsassecondarydecisionmethodsofcontrolforrisk.
A.
True
B.
False
33)Mostfirmsusethepaybackperiodasasecondarycapital-budgetingtechnique,which,inasense,allowsthemtocontrolforrisk.
A.
True
B.
False
34)ABCServicecanpurchaseanewassemblerfor$15,052thatwillprovideanannualnetcashflowof$6,000peryearforfiveyears.CalculatetheNPVoftheassembleriftherequiredrateofreturnis12%.(Roundyouranswertothenearest$1.)
A.
$7,621
B.
$4,568
C.
$1,056
D.
$6,577
35)TheNPVassumescashflowsarereinvestedatthe:
A.
realrateofreturn.
B.
NPV.
C.
IRR.
D.
costofcapital.
36)Thefirmshouldacceptindependentprojectsif:
A.
theIRRispositive.
B.
theprofitabilityindexisgreaterthan1.0.
C.
thepaybackislessthantheIRR.
D.
theNPVisgreaterthanthediscountedpayback.
37)Theaveragecostassociatedwitheachadditionaldollaroffinancingforinvestmentprojectsis:
A.
risk-freerate.
B.
themarginalcostofcapital.
C.
theincrementalreturn.
D.
beta.
38)Themarginalcostofpreferredstockisequalto:
A.
(1-taxrate)timesthepreferredstockdividenddividedbynetprice.
B.
thepreferredst