Choose the correct option among the choices givenbelow: 1. Who determine the mar
ID: 2770714 • Letter: C
Question
Choose the correct option among the choices givenbelow:
1. Who determine the market price of ashare of common stock?
a. The board of directors of the firm
b. The stock exchange on which the stock islisted
c. The president of the company
d. Individuals buying and selling the stock
2. What should be the focal point offinancial management in a firm?
a. The number and types of products or servicesprovided by the firm
b. The minimization of the amount of taxes paidby the firm
c. The creation of value for shareholders
d. The dollars profits earned by the firm
3. Which of the following wouldgenerally have unlimited liability?
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 tothe average tax rate?
a. Total tax liability divided by taxableincome
b. Rate that will be paid on the next dollar oftaxable income
c. Median marginal tax rate
d. Percentage increase in taxable income fromthe previous period
5. Felton Farm Supplies, Inc., has 8 %return on total assets of 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
6. Which of the following would notimprove the current ratio?
a. Borrowing on short term to financeadditional fixed assets
b. Issue long-term debt to buy inventory
c. Sell common stock to reduce currentliabilities
d. Sell fixed assets to reduce accountspayable
7. With continuous compounding at 8%for 20 years, what is the approximate future value of a Rs.20,000initial investment?
a. Rs. 52,000
b. Rs .93,219
c. Rs. 99,061
d. Rs. 915,240
8. In 2 years you are to receiveRs.10,000. If the interest rate were to suddenly
decrease, the present value of that future amount to youwould __________.
a. Fall
b. Rise
c. Remain unchanged
d. Incomplete information
9. Cash budgets are prepared frompast:
a. Balance sheets
b. Income statements
c. Income tax and depreciation data
d. None of the given options
10. Which of the following is part ofan examination of the sources and uses of
funds?
a. A forecasting technique
b. A funds flow analysis
c. A ratio analysis
d. Calculations for preparing the balancesheet
11. An annuity due is always worth_____ a comparable annuity.
a. Less than
b. More than
c. Equal to
d. Cannot be found
12. As interest rates go up, thepresent value of a stream of fixed cash flows _____.
a. Goes down
b. Goes up
c. Stays the same
d. Cannot be found
13. ABC Company is expected to generateRs.125 million per year over the next three years in free cashflow. Assuming a discount rate of 10%, what is thepresent
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 ABCcompany’ cost of equity assumption, what wouldwe
expect to happen to the present value of all future cashflows?
a. An increase
b. A decrease
c. No change
d. Incomplete information
15. In proper capital budgetinganalysis we evaluate incremental __________ cashflows.
a. Accounting
b. Operating
c. Before-tax
d. Financing
16. A capital budgeting techniquethrough which discount rate equates the present
value of the future net cash flows from an investmentproject with the project’s initial cash outflow is knownas:
a. Payback period
b. Internal rate of return
c. Net present value
d. Profitability index
17. Discounted cash flow methodsprovide a more objective basis for evaluating 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 thecalculation of NPV difficult?
a. Estimated cash flows
b. Discount rate
c. Anticipated life of the business
d. All of the given options
19. From which of the followingcategory would be the cash flow received from sales revenue andother income during the life of the project?
a. Financing activity
b. Operating activity
c. Investing activity
d. All of the given options
20. Which of the following techniquewould be used for a project that has non –normal cashflows?
a. Multiple internal rate of return
b. Modified internal arte of return
c. Net present value
d. Internal rate of return
Explanation / Answer
1.A
2.C
3.C
4.A
5.D
6.A
7.C
8.A
9.D
10.B
11.B
12.A
13.C
14.B
15.A
16.C
17.B
18.C
19.B
20.A