Question

TUTORIAL EXAM 2

1. An acception in financial leverage publicly results in a selectable recompense on equity (ROE).

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True

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False

2. Leverage and liquidity publicly mollify or drop coincidently.

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True

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False

3. It is practicable for a audience to accrue faster than its sustainable accrueth blame.

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True

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False

4. Which of the subjoined relevancys uses sales in the denominator?

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Days in catalogue

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Receivables turnover

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Cash relevancy

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Average assembly limit

5. For a levered solid, EBIT is equipollent to:

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Net proceeds

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Pro shapea meritings

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Operating acquisition

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Net proceeds precedently taxes

6. Common-size financial declarations are manufactured in prescribe to:

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Adjust for inflation and surrender

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Facilitate comparisons of different-sized companies

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To submit delay SEC requirements

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All of the above

7. A solid has $100 of mediocre catalogue, clear acquisition of $500 and sales of $1,500. Its days in catalogue is:

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36.5 days

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24.3 days

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73.0 days

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Not sufficient notice

8. For which of the subjoined collective officees would you foresee a coalition of lofty asset turnbalance and low acquisition margins?

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Supermarkets

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Banks

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Software developers

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Airlines

9. Decomposition of a audience's financial declarations: Below are simplified versions of the counterpoise prevarication and proceeds declaration for Toys by Tom, Inc.Use this notice to retort interrogation 9.

Toys by Tom, Inc. has a exoteric relevancy of ____, suggesting ________.

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9.6; modetrounce ability to cbalance attention expense

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0.57; implicit illiquidity

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0.21; implicit assembly problems

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1.75; modetrounce liquidity

10. Decomposition of a audience's financial declarations: Below are simplified versions of the counterpoise prevarication and proceeds declaration for Toys by Tom, Inc. Use this notice to retort interrogation 10.

What is Toys by Tom, Inc. recompense on property (ROA)?

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6.9%

· [removed]

0.86

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18%

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1.2

11. Clear currency stream is originated by a audience's daily operations connected to evolution and sales of issue and/or employments.

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True

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False

12. In public, the decrease of an asset is a rise of funds.

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True

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False

13. The sustainable accrueth blame is the apex accrueth blame achievable balance an ample limit of term.

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True

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False

14. The currency transformation cycle is fitted as:

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Days in Catalogue + Assembly Period

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Days in Catalogue - Payables Period

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Days in Catalogue + Assembly Limit - Payables Period

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None of the above

15. A audience can shorten its currency cycle by:

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Reducing catalogue turnover

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Reducing representation payables

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Reducing days receivable

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None of the above

.

16. A audience has a discontent blame of 50%, sales of $25,000, inception equity of $50,000 and acquisition margins of 10%, an asset turnbalance relevancy of .75 and obligation of $10,000. What is its sustainable accrueth blame?

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2.5%

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1.7%

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3.75%

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Not sufficient notice absorbed

17. Scenario decomposition is a way of testing forecasts by changing one certainty at a term.

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True

· [removed]

False

18. Biases can and should regularly be eliminated in financial forecasts.

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True

· [removed]

False

19. Which of the subjoined is frequently used in preparing pro shapea declarations:

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Historical financial declarations

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Projected sales

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Efficiency relevancys

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All of the above

20. Pro shapea declarations are:

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Summaries of literal financial declarations

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Government-mandated analyses of financial declarations

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Projected declarations used in financial planning

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Estimated tax liabilities

21. Which of the subjoined liabilities shape dissect of a audience's "real" activities? 

I. Short-term obligation 
II. Accounts payable 
III. Accrued clear expenses 
IV. Long-term obligation

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III barely

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II and III

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I and IV

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I barely

22. The absorb of obligation is publicly inferior than the absorb of equity.

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True

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False

23. M&M's Affirmation I states that a audience's prize is dogged of its haughty make.

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True

· [removed]

False

24. A selectable plane of leverage publicly reduces managerial choice.

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True

· [removed]

False

25. The Pecking Prescribe Theory of haughty make implies a rare optimum haughty make.

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True

· [removed]

False

26. As EBIT drops, the recompense on equity (ROE) of a levered solid drops ______ the ROE of an inadequately selfidentical unlevered solid.

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the identical as

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relatively further than

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relatively short than

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further or short than (it cannot be stable)

27. The proprietor of Grandma's Applesauce is planning to secede succeeding the future year. She has to fund a hypothecation $50,000 plus 8 percent attention and must depend on currency stream from operations to do so. Currency stream from operations is uncertain; there is a 70% appearance it conquer correspondent $65,000, and a 30% appearance it conquer correspondent $45,000. Assuming a tax blame of 0%, what is the proprietor's foreseeed currency stream succeeding obligation employment?

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$9,000

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$5,000

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$11,000

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$7,700

28. Shareholders select lofty surrender contrivances when confrontment a lofty appearance of noncommunication because

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High surrender contrivances usually procure lofty rewards.

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Shareholders entertain the residual assertion on a audience.

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Creditors entertain the residual assertion on a audience, and consequently submit-to the surrender.

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There is a amiable befoulment the empire conquer recover them in noncommunication.

29. The _________ states that the prize of the solid is stable solely by the prize of its property.

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Static Tradeoff Model

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M&M affirmation I

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The Pecking Prescribe Model

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Agency Theory

30. Which of the subjoined expresses the prize of a levered solid (V_L) in the Static Tradeoff type of optimal haughty make? [Note: V_U denotes the prize of the unlevered solid; CFD denotes foreseeed absorbs of financial distress; and PV denotes exhibit prize.]

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V_L = PV(Tax Shield) - PV(CFD)

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V_L = V_U + PV(Tax Shield) / PV(CFD)

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V_L = V_U + PV(Tax Shield) - PV(CFD)

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V_L = V_U + PV(Tax Shield)

31. A copy of alien absorbs of noncommunication is

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Court absorbs

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Attorney and advisor fees

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Lost sales due to absorbumers and suppliers past trust

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All of the above

32. Which of the subjoined are equipollent beneath M&M affirmation I?

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Maximizing solid prize and maximizing solid acquisition

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Maximizing solid prize and minimizing the absorb of haughty

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Minimizing solid's absorb of haughty and minimizing solid's obligation burden

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Maximizing acquisition and minimizing taxes

33. Which of the subjoined is not an certainty beneathlying M&M affirmation I?

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No arbitrage

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No taxes

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Corpoblame sieges are surrender-free

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Symmetric notice

34. Which line is frequently set-up in obligation contracts?

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Seniority

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Covenants

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Callability

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All of the above

35. Selecting siege contrivances according to administrations fixed either on contrivance NPV or IRR results in maximizing solid prize.

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True

· [removed]

False

36. A dollar today is merit further than a dollar tomorrow.

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True

· [removed]

False

37. The NPV administration, which says companies should endow in contrivances for which NPV is senior than 0, depends on the certainty of prize maximization.

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· [removed]

True

· [removed]

False

38. If you endow $2,000 today for three years at 5% attention compensated every-year, you conquer merit a completion of $______ in attention. Assume you re-endow all attention.

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205.00

· [removed]

300.00

· [removed]

315.25

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500.00

39. The quantity by which a contrivance acceptions the prize of the solid is absorbed by which of the subjoined?

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The contrivance's representationing blame of recompense

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The contrivance's net exhibit prize (NPV).

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The contrivance's inside blame of recompense (IRR).

· [removed]

The contrivance's exhibit prize.

40.Which items are essential in circumspect the net exhibit prize of a contrivance? 

I. Siege outlays 
II. Abatement blame 
III. Incremental currency stream 
IV. Term limit for the contrivance

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· [removed]

I, II and IV

· [removed]

I, II and III

· [removed]

II, III and IV

· [removed]

All of the above

41. Compute the net exhibit prize of an siege delay 5 years of annual currency inflows of $100 and two currency outflows, one today of $100 and one at the inception of the succor year of $50. Use a abatement blame of 10 percent.

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$229.08

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$287.60

· [removed]

$233.62

· [removed]

$271.53

42. Suppose a surrendershort contrivance requires an modereprove siege of $10 and conquer geneblame a one-term currency instream of $30 two years forthcoming. Assuming a surrender-free attention blame of 5%, which of the subjoined declarations about the contrivance is NOT penny?

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The net exhibit prize of the contrivance is indisputable

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The IRR is senior than 50 percent.

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The representationing blame of recompense on the contrivance is indisputable.

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The payback limit is short than 2 years.

43. What is the exhibit prize of a continuity of $100 absorbed a abatement blame of 5%?

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$ 2,000

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$ 3,000

· [removed]

$ 1,500

· [removed]

$ 500

44. All else correspondent, when a audience's obligation relevancy mollifys, its beta drops.

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· [removed]

True

· [removed]

False

45. If you hypothecate haughty to rouse a office and the coin is supposing attention-free, then your absorb of haughty is nothing.

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· [removed]

True

· [removed]

False

46. Increasing a audience's leverage has no commodities on its absorb of equity.

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· [removed]

True

· [removed]

False

47. Which of the subjoined certaintys in-reference-to endowor comportment are required by the CAPM? 

I. Investors try to maximize their wealth 
II. Investors infer barely surrender when making sieges 
III. Investors are surrender averse 
IV. Investors incorporate a long-term perspective

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· [removed]

I and III

· [removed]

I, II and III

· [removed]

I and IV

· [removed]

All of the above

48. For a solid delay an optimal haughty make, the weighted mediocre absorb of haughty (WACC) is:

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preferable than the absorb of equity

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inferior than the absorb of obligation

· [removed]

inferior than the absorb of unlevered equity

· [removed]

dogged of the haughty make

49. Which is NOT required notice when circumspect the weighted mediocre absorb of haughty for a audience delay obligation?

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· [removed]

its haughty make relevancys

· [removed]

its absorb of obligation

· [removed]

its exoteric relevancy

· [removed]

its tax blame

50. In the CAPM, the parameter beta measures:

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non-systematic (diversifiable) surrender

· [removed]

systematic (non-diversifiable) surrender

· [removed]

completion surrender

· [removed]

risk-adjusted accumulation recompenses