Assignment

Question 1
Working capital is:
cash on hand.
current assets minus current liabilities.
property, plant, and equipment.
money invested in short-term projects.

Question 2
In theory, the capital structure should be set to:
minimize risk.
minimize the weighted average cost of capital.
the industry standard.
minimize the cost of equity.

Question 3
The ability of a firm to pay its short-term debts is measured by:
liquidity ratios.
times-interest-earned.
profitability ratios .
ROE.

Question 4
How does an increase in the risk-free rate affect the required rate of return of common stocks?
Decreases
No effect
Increases
Undetermined effect

Question 5
The future value of $100 today earning 6% for three years is:
$129.
$119.
$98.
$108.

Question 6
In the U.S., what form of business organization generates a substantial majority of revenue and profits?
Partnerships
Corporations
Sole proprietorships
Limited partnerships

Question 7
The amount of time it takes from the cash outlay for a purchase of raw materials to the cash inflow for the sale of a finished product is called the:
cash conversion cycle.
accounts receivable.
liquidity ratio.
days inventory outstanding.

Question 8
A compensating balance:
Question 8 options:
raises the nominal interest rate.
raises the effective interest rate.
lowers the nominal interest rate.
lowers the effective interest rate.

Question 9
According to the constant growth valuation (Gordon) model, the value of a share of common stock is equal to the:
future stock price discounted at the cost of equity.
assets minus debts.
present value of all expected future dividends.
present value of all future cash flows.

Question 10
The portfolio that maximizes return for a given level of risk or minimizes risk for a given level of return is called the __________ portfolio.
frontier
efficient
risk-free
investment banker

Question 11
The __________ provides a snapshot of a firm's financial position.
statement of cash flows
retained earnings statement
income statement
balance sheet

Question 12
What impact will an increase in risk usually have on the required rate of return on an investment?
No impact
A decrease
An increase
An increase and then a decrease

Question 13
Which of these is true?
The future value of a 10-year, $100 annuity due is always greater than the future value of a 10-year, $100 ordinary annuity with identical risk.
The future value of a 10-year, $100 annuity due is always less than the future value of a 10-year, $100 ordinary annuity with identical risk.
There is not enough information to compare these two annuities.
The main difference between a 10-year, $100 annuity due and a 10-year, $100 ordinary annuity is the level of risk.

Question 14
The __________ summarizes a firm's revenues, expenses, and profit during a specific period.
balance sheet
statement of cash flows
retained earnings statement
income statement

Question 15
If the exchange rate between the U.S. dollar and the Euro is $1.40 per Euro, how many Euros will be needed to purchase a $10,000 asset?
0.0001
10,000
14,000
7,143

Question 16
The beta of the market portfolio is:
changes yearly.
1.
greater than 1.
0.

Question 17
What is the market value of a financial asset?
The present value of all future cash flows
The present value of all future profits
The future value of all future profits
The future value of all future cash flows

Question 18
Using the economic order quantity (EOQ):
minimizes total inventory costs.
minimizes inventory carrying costs.
minimizes inventory order quantities.
minimizes inventory ordering costs.

Question 19
According to the DuPont analysis, return on assets (ROA) consists of:
profit margin x asset turnover.
ROE x debt ratio.
ROE / (1 - Debt/Assets).
gross profits x equity margin.

Question 20
What is a characteristic of an efficient market?
Prices are unaffected by new information.
Prices slowly adjust to reflect new information.
Prices quickly adjust to reflect new information.
Prices are unrelated to true value.