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WorksheetsFinancial Management Quiz
Total questions: 122
Worksheet time: 1hrs 1mins
The goal of the firm should be:
Maximization of shareholder wealth.
Maximization of profits.
Maximization of consumer satisfaction.
Maximization of sales.
“Shareholder wealth” in a firm is represented by:
the market price per share of the firm’s common stock.
the number of people employed in the firm.
the book value of the firm’s assets less the book value of its liabilities.
the amount of salary paid to its employees.
The long-run objective of financial management is to:
maximize the value of the firm’s common stock.
maximize earnings per share.
maximize return on investment.
maximize market share.
Investment decisions are answers to questions:
What is the optimal firm size?
What is the best type of financing?
What is the best financing mix?
What is the best dividend policy?
Financing decisions are answers to questions:
What is the best dividend policy?
What is the optimal firm size?
What specific assets should be acquired?
What assets should be eliminated?
A market where new securities are bought and sold for the first time is:
Primary Market
Money Market
Capital Market
Secondary Market
A market for existing (used) securities rather than new issues is:
Secondary Market
Money Market
Capital Market
Primary Market
You are about to determine your corporation’s taxable income. Which of the below would not be included as a tax-deductible expense?
Dividend expense
Depreciation expense
Cost of goods sold
Marketing expenses
Which of the following is not the responsibility of financial management?
preparation of the firm’s accounting statements
allocation of funds to current and capital assets
obtaining the best mix of financing alternatives
development of an appropriate dividend policy
Which of the following items is NOT included in current assets?
Bonds.
Accounts receivable.
Inventory.
Cash.
Cost of capital is:
the average cost of the firm’s assets.
the coupon rate of debt.
a hurdle rate set by the board of directors.
the after-tax cost of debt.
Money markets are markets for
Short-term debt securities.
Foreign stocks.
Consumer automobile loans.
U.S. stocks.
The market price of a share of common stock is determined by:
individuals buying and selling the stock.
the board of directors of the firm.
the stock exchange on which the stock is listed.
the president of the company.
The focal point of financial management in a firm is:
the creation of value for shareholders.
the number and types of products or services provided by the firm.
the minimization of the amount of taxes paid by the firm.
the dollars profits earned by the firm.
Money market instruments include:
Bankers’ acceptances
Preferred stock
Corporate bonds
Common stock
Capital market instruments include:
Common stock
Negotiable certificates of deposit
Bankers’ acceptances
Commercial note
The current price at which the stock is currently trading is:
Market Value (per share)
Liquidating Value (per share)
Book Value (per share)
Par Value - The face value
Which of the following would NOT improve the current ratio?
Borrow short term to finance additional fixed assets.
Issue long-term debt to buy inventory.
Sell common stock to reduce current liabilities.
Sell fixed assets to reduce accounts payable.
The gross profit margin is unchanged, but the net profit margin declined over the same period. This could have happened if
Govt. increased the tax rate.
cost of goods sold increased relative to sales.
sales increased relative to expenses.
dividends were decreased.
The principal advantage of the sole proprietorship form of business organization is:
Single tax filing on individual form
Unlimited liability
Hard to raise additional capital
Transfer of ownership difficulties
The principal advantage of the corporate form of business organization is that:
Limited liability
Unlimited liability
Low setup cost
Personal tax on profits
Which of the following are not among the daily activities of financial management?
sale of shares and bonds
credit management
inventory control
the receipt and disbursement of funds
________ is the price at which the bond is traded in the stock exchange.
Market value
Redemption value
Face value
Maturity value
________ enhance the market value of shares and therefore equity capital is not free of cost.
Dividends
Face value
Redemption value
Book value
A(n) ________ would be an example of a principal, while a(n) ________ would be an example of an agent.
shareholder, manager
manager; owner
accountant; bondholder
shareholder; bondholder
________ and ________ are the two versions of goals of the financial management of the firm.
Profit maximisation, Wealth maximization
Production maximisation, Sales maximisation
Sales maximisati
_____ and ________ are the two versions of goals of the financial management of the firm.
Profit maximisation, Wealth maximization
Production maximisation, Sales maximisation
Sales maximisation, Profit maximization
Value maximisation, Wealth maximisation
How are earnings per share calculated?
Use the income statement to determine earnings after taxes (net income) and divide by the number of common shares outstanding.
Use the income statement to determine earnings after taxes (net income) and divide by the previous period’s earnings after taxes. Then subtract 1 from the previously calculated value.
Use the income statement to determine earnings after taxes (net income) and divide by the number of common and preferred shares outstanding.
Use the income statement to determine earnings after taxes (net income) and divide by the forecasted period’s earnings after taxes. Then subtract 1 from the previously calculated value
You saved VND 100 million in 3 years with the compound interest of 8% per year. How much will you receive at the end of the third year?
VND 125.97 million
VND 124.00 million
VND 356.01 million
VND 257.71 million
You saved VND 130 million in 3 years with the compound interest of 8% per year. How much will you receive at the end of the third year?
VND 163.76 million
VND 159.00 million
VND 346.01 million
VND 247.74 million
You saved VND 150 million in 3 years with the compound interest of 8% per year. How much will you receive at the end of the third year?
VND 188.96 million
VND 224.00 million
VND 376.61 million
VND 297.71 million
The future value is $115 after one year at annum interest rate of 10%, the present value will be
$104.55
$127.78
$126.5
$103.5
The future value is $82.5 after 2 years at annum interest rate of 8%, the present value will be
$70.73
$65.5
$70
$69.23
The future value is $500 after 5 year at annum interest rate of 15%, the present value will be
$248.59
$250
$267.63
$321.15
An enterprise has total assets of VND 254,000 million, short-term debt is VND 58,000 million, long-term debt is VND 23,000 million. What is the ratio of equity to total assets?
68.11%
31.89%
77.16%
22.84%
An enterprise has total assets of VND 508,000 million, short-term debt is VND 110,000 million, long-term debt is VND 40,000 million. What is the ratio of equity to total assets?
70.47%
51.79%
67.86%
28.64%
An enterprise has total assets of VND 635.000 million, short-term debt is VND 150.000 million; long-term debt is VND 70.000 million. What is the ratio of equity to total assets?
65.35%
41.89%
78.16%
52.83%
Your firm has the following income statement items: sales of $50,250,000; income tax of $1,744,000; operating expenses of $10,115,000; cost of goods sold of $35,025,000; and interest expense of $750,000. What is the amount of the firm’s earnings before taxes?
$4,360,000
$15,552,000
$58,000,000
$5,110,000
What are the earnings per share (EPS) for a company that earned $100,000 last year in after-tax profits, has 200,000 common shares outstanding and $1.2 million in retained earning at the year end?
$0.50
$100,000
$6.00
$6.50
Loan present value is $500 and future value is $600 after 2 years; value of ‘I = interest rate’ will be
9.54%
8.54%
20.00%
10.00%
Loan present value is $100 and future value is $300 after 10 years; value of ‘I = interest rate’ will be
11.61%
9.54%
15.00%
13.25%
Loan present value is $500 and future value is $750 after 5 years; value of ‘I = interest rate’ will be
14.47%
13.54%
15.00%
12.25%
SL Co. is looking for a 3-month term source of $500 million to supplement working capital. Viettinbank accepts loans at annual nominal rate of interest of 14% a year. Calculate the annual effective rate of interest:
14,75%
12,12%
13,41%
11,78%
SL Co. is looking for a 6-month term source of $550 million to supplement working capital. Viettinbank accepts loans at annual nominal rate of interest of 15% a year. Calculate the annual effective rate of interest:
15,56%
14,12%
13,41%
12,78%
SL Co. is looking for a 6-month term source of $650 million to supplement working capital. Viettinbank accepts loans at annual nominal rate of interest of 12% a year. Calculate the annual effective rate of interest:
12,36%
12,12%
13,15%
14,78%
OY has a total asset of $3,600,000, short-term debt of $300,000, long-term debt of $600,000, and net income of $150,000, ROE ratio is:
21,4%
24,5%
17,4%
20%
OY has a total asset of $2,500,000, short-term debt of $350,000, long-term debt of $600,000, and net income of $230,000, ROE ratio is:
23%
24,5%
18,4%
20%
OY has a total asset of $1,900,000, short-term debt of $250,000, long-term debt of $450,000, and net income of $200,000, ROE ratio is:
16.67%
20,5%
18,4%
17.04%
l asset of $1,900,000, short-term debt of $250,000, long-term debt of $450,000, and net income of $200,000, ROE ratio is:
16.67%
20,5%
18,4%
17.04%
AB has a total asset of $ 3,600,000, short-term debt of $600,000, long-term debt of $1,300,000, and net income of $550,000, ROA ratio is:
15.28%
17.32%
21.47%
18.74%
AB has a total asset of $ 4,500,000, short-term debt of $900,000, long-term debt of $1,300,000, and net income of $850,000, ROA ratio is:
18.89%
18.32%
21.47%
17.74%
AB has a total asset of $ 2,400,000, short-term debt of $500,000, long-term debt of $1,200,000, and net income of $500,000, ROA ratio is:
20.83%
19.32%
21.47%
18.74%
SL Co. is looking for a 4-month term source of $600 million to supplement working capital. Viettinbank accepts loans at discount interest rate of 11% a year. Calculate the annual effective rate of interest:
11.86%
10.83%
12.11%
13.21%
SL Co. is looking for a 6-month term source of $550 million to supplement working capital. Viettinbank accepts loans at discount interest rate of 11.2% a year. Calculate the annual effective rate of interest:
12.22%
11.83%
12.10%
13.21%
SL Co. is looking for a 3-month term source of $650 million to supplement working capital. Viettinbank accepts loans at discount interest rate of 12% a year. Calculate the annual effective rate of interest:
12.96%
13.83%
11.52%
10.21%
Mr. X takes a loan of $1,000 million from HSBC Bank. The rate of interest is 7% per annum. The first instalment will be paid at the end of year 15. Determine the amount of equal annual instalments if Mr. X wishes to repay the amount in 15 instalments.
$109.79 million
$121.89 million
$122.89 million
$123.23 million
Mr. X takes a loan of $320 million from HSBC Bank. The rate of interest is 8% per annum. The first instalment will be paid at the end of year 10. Determine the amount of equal annual instalments if Mr. X wishes to repay the amount in 10 instalments.
$47.69 million
$52.33 million
$49.65 million
$45.23 million
Mr. X takes a loan of $1,000 million from HSBC Bank. The rate of interest is 7% per annum. The first instalment will be paid at the end of year 15. Determine the amount of equal annual instalments if Mr. X wishes to repay the amount in 15 instalments.
$144.4 million
$121.3 million
$100 million
$135.2 million
Company X is looking for a 4-month term source of VND 700 million. The bank Y accepts a loan with interest rate of 9% per year and deposits rate at 12%. What is the annual effective rate of interest?
10.58%
11.58%
12.89%
8.58%
Company X is looking for a 3-month term source of VND 600 million. The bank Y accepts a loan with interest rate of 8% per year and deposits rate at 15%. What is the annual effective rate of interest?
13.15%
14.55%
11.69%
8.58%
Company X is looking for a 4-month term source of VND 500 million. The bank Y accepts a loan with interest rate of 8% per year and deposits rate at 18%. What is the annual effective rate of interest?
10.08%
11.38%
12.45%
8.55%
To receive $250,000 from the bank after 2 years, what is your initial investment if the interest rate is 3%? (compound interest)
$235,649
$225,000
$205,225
$215,000
To receive $200,000 from the bank after 2 years, what is your initial investment if the interest rate is 3%? (compound interest)
$188,519
$175,050
$165,225
$185,402
To receive $300,000 from the bank after 2 years, what is your initial investment if the interest rate is 3%? (compound interest)
$282,779
$279,500
$265,225
$275,000
Company X has a total asset of $4,650,000; short-term debt of $800,000; long-term debt of $2,300,000 and net income of $750,000. What is the ROA?
16.1%
17.3%
20.4%
19.7%
Company X has a total asset of $2,325,000; short-term debt of $400,000; long-term debt of $1,150,000 and net income of $350,000. What is the ROA?
15.1%
17.2%
25.4%
14.7%
Company X has a total asset of $5,580,000; short-term debt of $960,000; long-term debt of $2,760,000 and net income of $350,000. What is the ROA?
14.7%
15.3%
16.4%
13.4%
Mr. Nam plans to save VND 10 million every year in 20 year to a pension fund with interest rate of 10% per year (compound interest). After 20 years; how much he will receive?
VND 572.75 million
VND 675.62 million
VND 67.27 million
VND 76.27 million
Mr. Nam plans to save VND 15 million every year in 20 year to a pension fund with interest rate of 10% per year (compound interest). After 20 years; how much he will receive?
VND 859.12 million
VND 805.62 million
VND 457.27 million
VND 777.27 million
Mr. Nam plans to save VND 20 million every year in 20 year to a pension fund with interest rate of 10% per year (compound interest). After 20 years; how much he will receive?
VND 1145.50 million
VND 965.62 million
VND 1067.27 million
VND 776.27 mill
A pension fund with interest rate of 10% per year (compound interest). After 20 years; how much he will receive?
VND 1145.50 million
VND 965.62 million
VND 1067.27 million
VND 776.27 million
Company X has a total asset of $2,130,000, short-term debt of $430,000, long-term debt of $750,000, net income of $210,000. What is company X’s ROE?
22.1%
24.5%
19.4%
17.5%
Company X has a total asset of $1,065,000, short-term debt of $215,000, long-term debt of $375,000, net income of $100,000. What is company X’s ROE?
21.1%
24.9%
19.2%
13.7%
Company X has a total asset of $3,195,000, short-term debt of $645,000, long-term debt of $1,125,000, net income of $350,000. What is company X’s ROE?
24.6%
23.5%
18.4%
16.5%
The present value is VND 800 million. After 4 years with an annum interest rate of 14% (compound interest), the future value will be:
VND 1,351.17 million
VND 1,248.05 million
VND 4,488.08 million
VND 2,330.96 million
The present value is VND 700 million. After 4 years with an annum interest rate of 14% (compound interest), the future value will be:
VND 1,182.27 million
VND 1,548.09 million
VND 1,288.06 million
VND 2,630.93 million
The present value is VND 600 million. After 4 years with an annum interest rate of 14% (compound interest), the future value will be:
VND 1,013.38 million
VND 1,148.02 million
VND 1,488.02 million
VND 1,330.98 million
________ refers to the amount invested in various components of current assets.
Gross working capital
Temporary working capital
Net working capital
Permanent working capital
________ is the length of time between the firm’s actual cash expenditure and its own cash receipt.
Net operating cycle
Cash conversion cycle
Working capital cycle
Gross operating cycle
Net Working Capital is:
Current Assets - Current Liabilities
Current Assets + Current Liabilities
Current Assets / Current Liabilities
Current Liabilities - Current Assets
The amount of current assets that varies with seasonal requirements is:
Temporary current assets
Permanent current assets
Temporary fixed assets
Permanent fixed assets
The amount of current assets required to meet a firm’s long-term minimum needs is:
Permanent current assets
Temporary current assets
Temporary fixed assets
Permanent fixed assets
________ the length of time allowed by a firm for its customers to make payment for their purchases.
Credit period
Holding period
Pay-back period
Average collection period
________ is NOT a part of Current Assets
Accounts Payable
Cash
Accounts Receivable
Inventory
________ is a part
Accounts Payable
Cash
Accounts Receivable
Inventory
Permanent working capital
is the amount of current assets required to meet a firm’s long-term minimum needs.
varies with seasonal needs.
includes fixed assets.
includes accounts payable.
A firm’s operating cycle is equal to its inventory turnover in days (ITD)
plus its receivable turnover in days (RTD).
minus its RTD.
plus its RTD minus its payable turnover in days (PTD).
minus its RTD minus its PTD.
A (n) ________ current operating asset financing approach will result in permanent current assets and some seasonal current assets being financed using long-term securities.
conservative
aggressive
maturity matching
wrong
Which of the following illustrates the use of a hedging (or matching) approach to financing?
Permanent working capital financed with long-term liabilities.
Short-term assets financed with long-term liabilities.
Short-term assets financed with equity.
All assets financed with 50 percent equity, 50 percent long-term debt mixture.
In deciding the appropriate level of current assets for the firm, management is confronted with
a trade-off between profitability and risk.
a trade-off between liquidity and marketability.
a trade-off between equity and debt.
a trade-off between short-term versus long-term borrowing.
Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be a(an) ________ operating asset financing strategy because of the inherent risks of using short-term financing.
aggressive
conservative
maturity matching
wrong
Which of the following would be consistent with a more aggressive approach to financing working capital?
Financing some long-term needs with short-term funds.
Financing short-term needs with short-term funds.
Financing permanent inventory buildup with long-term debt.
Financing seasonal needs with short-term funds.
Which of the following working capital strategies is the most aggressive?
Making greater use of short term finance and minimizing net short term asset.
Making greater use of short term finance and maximizing net short term asset.
Making greater use of long term finance
Firms generally choose to finance temporary current operating assets with short-term debt because
matching the maturities of assets and liabilities reduces risk under some circumstances, and also because short-term debt is often less expensive than long-term capital.
short-term interest rates have traditionally been more stable than long-term interest rates.
a firm that borrows heavily on a long-term basis is more apt to be unable to repay the debt than a firm that borrows short term.
short-term debt has a higher cost than equity capital.
Other things held constant, which of the following will cause an increase in net working capital?
Merchandise is sold at a profit, but the sale is on credit.
Cash is used to buy marketable securities.
A cash dividend is declared and paid.
Long-term bonds are retired with the proceeds of a preferred stock issue.
The principal advantage of Maturity matching approach in financing strategy is that:
Reduces liquidity risk
Easy to implement in practice
Hard to implement in practice
High preparation of short term debt
The principal advantage of Conservative approach in financing strategy is that:
Less worry in refinancing short-term obligations
Borrowing at a higher overall cost
Uncertain regarding future interest costs
Borrowing more than what is necessary
The principal advantage of Aggressive approach in financing strategy is that:
Borrowing only what is necessary
Less uncertainty regarding future interest costs
Uncertain future interest costs
Refinancing short-term obligations in the future
The goal of cash management is to:
Pay suppliers early to get discount
Maintain a zero cash balance
Pay suppliers as late as possible without incurring penalties
Maintain a high cash balance to cover emergency
The difference between the cash balance the firm actually holds and the amount necessary to meet its obligations is called:
Precautionary cash balance
Transaction cash balance
Speculative cash balance
Compensating cash balance
________ is the minimum cash balance that a firm keeps to meet its daily cash requirements for ordinary transactions.
Transaction cash balance
Precautionary cash balance
Speculative cash balance
Compensating cash balance
Float refers to:
The difference between the firm’s cash balance in its own record and the balance reported by the bank
The firm’s cash balance in its own record
The cash balance reported by the bank
The firm’s total cash balance
The Baumol model is a cash management model that aims to:
Minimize the total cost associated with holding and converting cash
Maximize the total cost associated with holding and converting cash
Minimize the firm’s cash balance
Maximize the firm’s cash balance
The Baumol model is a cash management model that aims to:
Maximize the total cost associated with holding and converting cash
Minimize the total cost associated with holding and converting cash
Minimize the firm’s cash balance
Maximize the firm’s cash balance
The Baumol model is a cash management model that aims to:
Maximize the total cost associated with holding and converting cash
Minimize the firm’s cash balance
Minimize the total cost associated with holding and converting cash
Maximize the firm’s cash balance
The Miller-Orr model is a cash management model that aims to:
Set the upper and lower limit of cash balance
Minimize the total cost associated with holding and converting cash
Maximize the total cost associated with holding and converting cash
Minimize the firm’s cash balance
The Miller-Orr model is a cash management model that aims to:
Minimize the total cost associated with holding and converting cash
Set the upper and lower limit of cash balance
Maximize the total cost associated with holding and converting cash
Minimize the firm’s cash balance
The Miller-Orr model is a cash management model that aims to:
Minimize the total cost associated with holding and converting cash
Maximize the total cost associated with holding and converting cash
Set the upper and lower limit of cash balance
Minimize the firm’s cash balance
A firm has annual sales of $10,000 million, all on credit. Average collection period is 45 days. What is the firm’s average accounts receivable balance?
$1250 million
$222.22 million
$1232.22 million
$1222.22 million
A firm has annual sales of $12,000 million, all on credit. Average collection period is 45 days. What is the firm’s average accounts receivable balance?
$1500 million
$1222.22 million
$1472.22 million
$1462.22 million
A firm has annual sales of $15,000 million, all on credit. Average collection period is 45 days. What is the firm’s average accounts receivable balance?
$1875 million
$1222.22 million
$1472.22 million
$1462.22 million
Average collection period of a firm is 60 days, annual sales are $10,000 million, all on credit. What is the firm’s average accounts receivable balance?
$1643.84 million
$1623.84 million
$1673.84 million
$1613.84 million
Average collection period of a firm is 60 days, annual sales are $12,000 million, all on credit. What is the firm’s average accounts receivable balance?
$1972.60 million
$1623.84 million
$1673.84 million
$1613.84 million
Average collection period of a firm is 60 days, annual sales are $15,000 million, all on credit. What is the firm’s average accounts receivable balance?
$2465.75 million
$1623.84 million
$1673.84 million
$1613.84 million
A firm has annual sales of $10,000 million, all on credit. Average accounts receivable balance is $1,500 million. What is the firm’s average collection period?
54.75 days
53.75 days
55.75 days
52.75 days
A firm has annual sales of $12,000 million, all on credit. Average accounts receivable balance is $1,800 million. What is the firm’s average collection period?
54.75 days
53.75 days
55.75 days
52.75 days
A firm has annual sales of $15,000 million, all on credit. Average accounts receivable balance is $2,250 million. What is the firm’s average collection period?
54.75 days
53.75 days
55.75 days
52.75 days
The inventory conversion period of a firm is 72 days, average payment period is 30 days, average collection period is 45 days. What is the length of the firm’s cash conversion cycle?
87 days
147 days
75 days
93 days
The inventory conversion period of a firm is 72 days, average payment period is 30 days, average collection period is 60 days. What is the length of the firm’s cash conversion cycle?
102 days
147 days
75 days
93 days
The inventory conversion period of a firm is 72 days, average payment period is 45 days, average collection period is 45 days. What is the length of the firm’s cash conversion cycle?
72 days
147 days
75 days
93 days
A firm’s inventory turnover is 5 times, the average payment period is 30 days, average collection period is 45 days. What is the length of the firm’s cash conversion cycle?
87 days
72 days
75 days
93 days
A firm’s inventory turnover is 5 times, the average payment period is 30 days, average collection period is 60 days. What is the length of the firm’s cash conversion cycle?
87 days
72 days
75 days
10
