Choose the correct optionamong the choices given below: 1. Who determine the mar
ID: 2770713 • Letter: C
Question
Choose the correct optionamong the choices given below:
1. Who determine the market price of a share of commonstock?
a. The board of directors of the firm
b. The stock exchange on which the stock is listed
c. The president of the company
d. Individuals buying and selling the stock
2. What should be the focal point of financial management ina firm?
a. The number and types of products or services provided bythe firm
b. The minimization of the amount of taxes paid by thefirm
c. The creation of value for shareholders
d. The dollars profits earned by the firm
3. Which of the following would generally have unlimitedliability?
a. A limited partner in a partnership
b. A shareholder in a corporation
c. The owner of a sole proprietorship
d. A member in a limited liability company (LLC)
4. Which of the following is equal to the average taxrate?
a. Total tax liability divided by taxable income
b. Rate that will be paid on the next dollar of taxableincome
c. Median marginal tax rate
d. Percentage increase in taxable income from the previousperiod
5. Felton Farm Supplies, Inc., has 8 % return on total assetsof Rs.300,000 and a net
profit margin of 5 %. What are its sales?
a. Rs. 3, 750,000
b. Rs. 480, 000
c. Rs. 300, 000
d. Rs. 1, 500,000
FinancialManagement Quiz 1
Spring Semester 2009
6. Which of the following would not improve the currentratio?
a. Borrowing on short term to finance additional fixedassets
b. Issue long-term debt to buy inventory
c. Sell common stock to reduce current liabilities
d. Sell fixed assets to reduce accounts payable
7. With continuous compounding at 8% for 20 years, what isthe approximate future
value of a Rs.20,000 initial investment?
a. Rs. 52,000
b. Rs .93,219
c. Rs. 99,061
d. Rs. 915,240
8. In 2 years you are to receive Rs.10,000. If the interestrate were to suddenly
decrease, the present value of that future amount to you would__________.
a. Fall
b. Rise
c. Remain unchanged
d. Incomplete information
9. Cash budgets are prepared from past:
a. Balance sheets
b. Income statements
c. Income tax and depreciation data
d. None of the given options
FinancialManagement Quiz 1
Spring Semester 2009
10. Which of the following is part of an examination of the sourcesand uses of
funds?
a. A forecasting technique
b. A funds flow analysis
c. A ratio analysis
d. Calculations for preparing the balance sheet
11. An annuity due is always worth _____ a comparableannuity.
a. Less than
b. More than
c. Equal to
d. Cannot be found
12. As interest rates go up, the present value of a stream of fixedcash flows _____.
a. Goes down
b. Goes up
c. Stays the same
d. Cannot be found
13. ABC Company is expected to generate Rs.125 million per yearover the next three
years in free cash flow. Assuming a discount rate of 10%, what isthe present
value of that cash flow stream?
a. Rs. 375 million
b. Rs. 338 million
c. Rs. 311 million
d. Rs. 211 million
14. If we were to increase ABC company’ cost of equityassumption, what would we
expect to happen to the present value of all future cashflows?
a. An increase
b. A decrease
c. No change
d. Incompleteinformation
FinancialManagement Quiz 1
Spring Semester 2009
15. In proper capital budgeting analysis we evaluate incremental__________ cash
flows.
a. Accounting
b. Operating
c. Before-tax
d. Financing
16. A capital budgeting technique through which discount rateequates the present
value of the future net cash flows from an investment project withthe project’s
initial cash outflow is known as:
a. Payback period
b. Internal rate of return
c. Net present value
d. Profitability index
17. Discounted cash flow methods provide a more objective basis forevaluating and
selecting an investment project. These methods take intoaccount:
a. Magnitude of expected cash flows
b. Timing of expected cash flows
c. Both timing and magnitude of cash flows
d. None of the given options
18. Which of the followings make the calculation of NPVdifficult?
a. Estimated cash flows
b. Discount rate
c. Anticipated life of the business
d. All of the given options
19. From which of the following category would be the cash flowreceived from sales
revenue and other income during the life of the project?
a. Financing activity
b. Operating activity
Investing activity
c.
d. All of the given options
FinancialManagement Quiz 1
Spring Semester 2009
20. Which of the following technique would be used for a projectthat has non –
normal cash flows?
a. Multiple internal rate of return
b. Modified internal arte of return
c. Net present value
Explanation / Answer
Question Number
Selected Option
1
B
2
C
3
C
4
A
5
B
6
A
7
C
8
B
9
D
10
B
11
B
12
A
13
C
14
B
15
B
16
B
17
B
18
D
19
B
20
B
Question Number
Selected Option
1
B
2
C
3
C
4
A
5
B
6
A
7
C
8
B
9
D
10
B
11
B
12
A
13
C
14
B
15
B
16
B
17
B
18
D
19
B
20
B