1. A P/E ratio for a firm that is higher than the industry average may indicate:

A. the firm’s growth prospects are seen as being below its competitors

B. the share is probably underpriced and so you would give a ‘buy’recommendation

C. the share is probably underpriced so you would give a ‘sell’ recommendation

D. the share is relatively expensive

E. None of these.

2. Which of the following is NOT an advantage for a firm of using equity rather than debt financing?

A. Lower cost.

B. Lower risk of insolvency.

C. Lower funding risks.

D. No legal liability to pay dividends.

E. No requirement to repay capital.

3. Debt financing can be raised by firms in the __________________markets.

A. money and share

B. bond and FX

C. share and derivative

D. money and bond

E. share and FX