Finance Quiz

Which of the following best describes systematic risk?

• Risk that can be eliminated through diversification

• Risk associated with individual assets

• Market risk affecting all investments

• Credit risk

What does the Capital Asset Pricing Model (CAPM) calculate?

• The expected return on an investment

• The intrinsic value of a stock

• The fair value of a bond

• The optimal capital structure

What is the primary goal of corporate finance?

• Maximizing profits

• Maximizing shareholder wealth

• Minimizing costs

• Maximizing market share

What is a bond's yield to maturity (YTM)?

• The annual coupon payment divided by the current market price

• The annual interest rate paid by the bond's issuer

• The total return anticipated if the bond is held until it matures

• The bond's coupon rate

Which financial statement provides a snapshot of a company's financial position at a specific point in time?

• Income statement

• Balance sheet

• Cash flow statement

• Statement of shareholders' equity

The Modigliani-Miller Theorem suggests that in the absence of taxes, bankruptcy costs, and asymmetric information:

• Capital structure is irrelevant

• Dividend policy affects firm value

• Debt financing is more advantageous than equity financing

• Companies should minimize debt

Which of the following is a measure of a company's liquidity?

• Debt-to-equity ratio

• Return on equity

• Current ratio

• Price-to-earnings ratio

Which of the following is a type of derivative?

• Stock

• Bond

• Option

• Mutual fund

The time value of money (TVM) concept is based on the idea that:

• Money has constant value over time

• Future money is worth more than present money

• Present money is worth more than future money

• Interest rates do not affect the value of money

What is the formula for calculating the current ratio?

• Current Assets / Current Liabilities

• Current Liabilities / Current Assets

• Total Assets / Total Liabilities

• Total Liabilities / Total Assets