Financial management quiz | Business & Finance homework help

1. The date on which a company mails dividend checks is the: 
a. Date of declaration.
b. Ex-dividend date. 
c. Date of record.
d. Payment date.

2. To say that an investor is “risk-averse” means that the investor:
a. Will only buy U.S. government securities.
b. The investor requires more return to take on more risk.
c. Will not invest in the stock market at all.
d. Is willing to pay to assume additional risk.

3. Diversification refers to the process of:
a. Increasing expected return by investing in more than one asset.
b. Using the correlation between assets to increase risk and hence expected return.
c. Purchasing a portfolio.
d. Reducing risk by holding only U.S. government bonds.

4. Temporary working capital is additional working capital that is:
a. Not recorded in the current accounts.
b. Always required.
c. Due to variation in business activity.
d. Not needed and should be avoided at all times.

5. Unsystematic risk refers to the component of total risk that:
a. Is not shared by other companies.
b. Depends on events in the overall economy.
c. Cannot be eliminated by holding a well diversified portfolio.
d. Is caused by overall stock market movements.

6. The price of a security:
a. The security’s worth.
b. Always unknown.
c. Different for different investors.
d. What the security is selling for.

7. To say that an investor is risk neutral means that the investor:
a. Hates risk.
b. Does not consider risk when making investment decisions.
c. Sees risk as a problem.
d. Will only invest in risk-free securities.

8. The price of a security equals the value of the security:
a. When the price is greater than the required rate of return.
b. When the security is traded in an efficient market.
c. If the future cash flows of the security are unknown.
d. On the day when interest payments are paid by the borrower.

9. The cash flows investors receive from a bond are its ______________ and its ______________.
a. price, maturity value
b. interest payments, price
c. coupon, face value
d. par value, yield to maturity

10. With everything else held constant, if the market interest rate for a bond falls:
a. The price of the bond falls.
b. The price of the bond rises.
c. The coupon rate of the bond falls.
d. The coupon rate of the bond rises

11. An investor who holds a portfolio:
a. Owns investments in several industries.
b. Owns more than one investment.
c. Owns both bonds and stocks.
d. Has invested an equal amount in several securities

12. How does the valuation of stocks differ from that of bonds?
a. The cash flows of stocks must be discounted; the cash flows of bonds need not be discounted.
b. The cash flows of stocks are quite uncertain; the cash flows of bonds are relatively certain.
c. Stocks theoretically have an infinite life; bonds generally have a known and finite life.
d. b and c.

13. The cost of capital is an incremental cost in that it is:
a. The cost of purchasing a new investment.
b. Based on the rates of return investors require today.
c. A measure of the next money the company will spend. 
d. Money that has not yet been spent.

14. The first step in calculating a cost of capital is to:
a. Determine investors’ required rates of return.
b. Identify the firm’s sources of capital.
c. Calculate the cost of each capital source.
d. Determine the financing proportions the firm will use.

15. Flotation costs are:
a. The interest on debt securities.
b. The face values of securities.
c. Money paid to retire securities.
d. Amounts paid to issue securities.

16. Which of the following is a financing sources available to a firm:
a. Bonds.
b. Preferred stock.
c. Common stock.
d. All of the above.

17. Forms of dividends include all the following except:
a. Cash.
b. Leveraged buyouts.
c. Common stock.
d. Spinoffs of business units.

18. Capital budgeting refers to:
a. Long-term strategic planning.
b. Evaluating long-term investment opportunities.
c. Day-to-day cash management.
d. Monthly bank borrowing.

19. Which of the following is a noncash expense?
a. Labor costs.
b. Material costs.
c. Depreciation.
d. Taxes.

20. The net present value is the ______ of the present value of cash benefits and the present value of cash costs.
a. sum
b. difference
c. product
d. quotient

21, The term “working capital” is used to summarize a company=s financial resources that are used for:
a. Investing in plant and equipment.
b. Retiring non-current debt.
c. Repurchasing common stock.
d. Day-to-day operations.

22. Permanent working capital is:
a. The level of working capital required at all times.
b. Specific current assets that remain on the books permanently.
c. Composed of long-term assets.
d. Working capital financed by equity that does not have to be repaid.

23. Which group of investors would most likely prefer a high dividend-payout stock, given the existence of taxes and financial friction?
a. Investors saving for retirement.
b. Investors in a high tax bracket.
c. Investors needing current income.
d. Investors seeking high capital gains.

24. All of the following create a need for temporary working capital except:
a. Business cycle fluctuations causing variability in asset needs.
b. Long-term sales growth that required added current assets.
c. Seasonal sales create a need for current assets.
d. Daily and weekly events that impact resource needs.

25. A corporation’s “annual report” is its:
a. Required filing with the SEC.
b. Budget for the coming year.
c. Report to its shareholders.
d. Strategic plan.

26. Hedging in financial managing is:
a. Building a process border around financial management functions.
b. Combining a risky financial position with a similar equally risky position.
c. Balancing a risky financial position with an opposite position to cancel out the risk.
d. Taking a position in a derivative security with financial risk unrelated to the risk in the business.

27. The two ways that shareholders receive value from their investment are:
a. Stock splits and capital appreciation.
b. Agency costs and cash dividends.
c. Stock dividends and distributions of net present values.
d. Cash dividends and capital appreciation.

28. The date on which a company determines who receives a dividend is the:
a. Date of declaration.
b. Ex-dividend date.
c. Date of record.
d. Payment date.

29. Security analysts normalize earnings in order to:
a. Eliminate losses.
b. Remove the impact of one-time events.
c. See what earnings would be under GAAP rules.
d. Show the company in its best light.

30. The comprehensive annual report containing audited financial statements that large publically-held corporations must file with the SEC is the:
a. 8-K.
b. 8-Q.
c. 10-K.
d. 10-Q.

31. The relationship between risk and return in financial markets can be summarized by saying:
a. The more risk, the more the actual return an investor will receive.
b. The more risk, the greater the return demanded by investors.
c. The more risk, the less the actual return an investor will receive.
d. The more risk, the less the return demanded by investors.

32. All the following are included in flotation costs except:
a. Underwriting fees.
b. Interest costs.
c. Printing costs.
d. Legal fees.

33. All else held constant, as a bond selling at par value approaches its maturity date, its price:
a. Increases.
b. Decreases.
c. Remains the same.
d. Can do any of the above

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