Financial Management 9th Set

Which two ratios are used to evaluate a company's working capital management?

• A. Receivable turnover

• B. Earnings per share

• C. Return on equity

• D. Cash ratio

• E Profit Margin         

Why should a company carry cash

• A. The opportunity cost of holding cash is low

• B. The shortage cost of holding cash is high

• C. Cash is needed for day to day operations

• D. Cash is needed to meet the customers demands   

What is commonly used method that limits the time it takes between payment and the receipt of cash?

• A. Automated data processing

• B. Payment by mail processing

• C. Disbursement float processing

• D. Electronic check processing         

Some companies offer discounts to customers in order to give incentive for paying earlier than the due date. What two terms incentivize customers to accept trade discounts?

• A. Cash cycle

• B. Length of the credit period

• C. Sales commission

• D. Amount of discount

• E. Days sales in receivables  

Which three costs are associated with holding inventory?

• A. Variable costs

• B. Opportunity costs

• C. Storage costs

• D. Product costs

• E. Fixed costs

Which ratio is used in the comparable multiples method?

• A. Quick ratio

• B. Current ratio

• C. Price earnings ratio

• D. Debt to equity ratio           

Investors will often sell a stock that has gains rather than a stock that is suffering losses in their portfolio, despite subsidized tax relief when selling at a loss. What the logic-defying behavioral implications of such a decision.

• A. Selling a stock at a gain results in dollar cost average benefits

• B. Maintaining winning positions in the portfolio enhances future portfolio growth rate

• C. Investors hate taking a loss, especially when they can realize a gain

• D. Selling an equity position at any point results in a favorable tax benefit        

How are the Security and Exchange Commissions' Regulation S and Rule 144A similar?

• A. Both use incentives and penalties to ensure fair dealings between large financial institutions and small investors.

• B. Both allow firms to raise capital without registering with the SEC if certain conditions are met

• C. Both are intended to increase transparency of financial markets

• D. Both encourage specialized training by individuals designated to sell securities

What is the primary intent of the Sarbanes-Oxley Act?

• A. To impose requirements on stockholders of public companies

• B. To reduce the fees associated with financial transactions

• C. To control the rise in the rate of executive compensation

• D. To ensure honest audit and accounting procedures          

Which element is a required disclosure in the prospectus, according to the Securities Act of 1933?

• A. Internal control reports

• B. Tax returns

• C. Audited financial statements

• D. Budgets