Question 1. Question
:

Earnings reinvested in the firm are represented on a balance
sheet by:

total equity.

paid-in capital.

current assets.

retained earnings.

Question 2. Question
:

The ability of a firm to pay its short-term debts is
measured by:

profitability ratios .

liquidity ratios.

times-interest-earned.

ROE.

Question 3. Question
:

What feature permits a bond issuer to repurchase bonds at a
stated price prior to maturity?

Par

Conversion

Put

Call

Question 4. Question
:

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

7,143

10,000

14,000

Question 5. Question
:

Estimate the required rate of return on a company’s stock
given the firm’s beta of 1.5, a market return of 10%, and a risk-free rate of
4%.

13 percent

14 percent

15 percent

16 percent

Question 6. Question
:

Estimate the required rate of return on a company’s stock
given a stock price of $20 per share, an expected dividend of $2 per share at
the end of the year, and a 3% dividend growth rate.

3 percent

7 percent

10 percent

13 percent

Question 7. Question
:

The beta of the market portfolio is:

0.

1.

greater than 1.

changes yearly.

Question 8. Question
:

Foreign exchange risk is primarily the risk that:

transactions and assets using foreign
currencies will lose value because of changes in currency exchange rates.

foreign governments will limit economic
exchanges.

exchanges made in foreign countries will
create losses in the foreign currency.

overseas assets will be nationalized.

Question 9. Question
:

The just-in-time inventory system:

reduces reliance on suppliers.

increases inventory.

decreases safety stock.

is usually used with lower quality inputs.

Question 10. Question
:

2/10 net 30 means:

2% payment due in 10 days and balance in 30
days.

10% payment due in 2 days and balance in 30
days.

2% discount if paid in 10 days; otherwise, pay
in 30 days..

10% discount if paid in 2 days; otherwise, pay
in 30 days.

Question 11. Question
:

If a firm’s degree of operating leverage (DOL) is 2, how
will a 6% increase in sales affect its earnings before interest and taxes
(EBIT)?

EBIT will rise 4%.

EBIT will rise 8%.

EBIT will rise 12%.

DOL does not affect this relationship.

Question 12. Question
:

According to the DuPont analysis, return on assets (ROA)
consists of:

gross profits x equity margin.

ROE x debt ratio.

profit margin x asset turnover.

ROE / (1 – Debt/Assets).

Question 13. Question
:

DuPont analysis shows us that an increase in financial
leverage for a profitable company will lead to:

an increase in ROE.

a decrease in ROE.

an increase in ROA.

a decrease in ROA.

Question 14. Question
:

The rate of interest actually paid or earned that includes
compounded interest is called the ____________ rate.

effective

internal

external

nominal

Question 15. Question
:

Which of the following is not a commonly used method to
expand a business internationally?

Licensing

Foreign
exchange

Exporting

Joint venture

Question 16. Question
:

What entities are typically net demanders of funds in the
U.S. economy?

Individuals, government, and businesses

Individuals and businesses

Individuals and government

Businesses and government

Question 17. Question
:

What is the term used to describe today’s currency exchange
rate?

The ex-poste rate

The option rate

The spot rate

The forward rate

Question 18. Question
:

A previously incurred cost that cannot be recovered is a(n):

opportunity cost.

current liability.

operating lease.

sunk cost.

Question 19. Question
:

A compensating balance:

raises the nominal interest rate.

lowers the nominal interest rate.

raises
the effective interest rate.

lowers the effective interest rate.

Question 20. Question
:

What is the real rate of return if the risk-free rate is 3%
and expected inflation is 2%?

-1%

1%

3%

5%