Financial Management

141. Under the percent of sales method, the relationship between sales and what type accounts are assumed to maintain or constant relationship:

  1. income statement
  2. cash budget
  3. balance sheet
  4. cash flows.
Correct answer: (C)
balance sheet

142. A higher degree of financial leverage may be desirable for:

  1. a stable firm, with positive growth, under favorable economic conditions
  2. an unstable firm operating in an uncertain environment
  3. a stable firm operating in an uncertain environment
  4. neither the stable nor unstable firm under any circumstances
Correct answer: (A)
a stable firm, with positive growth, under favorable economic conditions

143. In designing working capital policy, the financial manager is concerned with yield curve and:

  1. dividend policy
  2. balance of trade figures
  3. the relative volatility of short and long term rates
  4. the term structure of interest rates
Correct answer: (C)
the relative volatility of short and long term rates

144. Treasury bills are:

  1. government obligations with a maturity of 3-5 years
  2. sold at a discount to face value
  3. the only government security that pays cash dividends
  4. extremely illiquid, although extremely safe
Correct answer: (B)
sold at a discount to face value

145. As the least liquid of the current assets, inventory:

  1. could technically be classified as a capital asset and amortized
  2. should be managed using level production
  3. should be managed using seasonal production
  4. should provide the highest yield to justify investment
Correct answer: (D)
should provide the highest yield to justify investment

146. All of the following are characteristics of the term loan, except:

  1. credit is extended for one to seven years
  2. the loan is repaid in one lump sum at maturity
  3. only superior credit applicants qualify
  4. interest rates may commonly change with market conditions
Correct answer: (B)
the loan is repaid in one lump sum at maturity

147. Future value of an amount allowed to grow at a given interest rate over a period of time is known as the:

  1. future value-single amount
  2. present value-single amount
  3. future value-annuity
  4. present value-annuity
Correct answer: (A)
future value-single amount

148. Canadian mortgages have interest compounded:

  1. annually
  2. semiannually
  3. monthly
  4. it depends on the payment period
Correct answer: (B)
semiannually

149. Business risk relates to:

  1. the ability of the firm to hold its competitive position
  2. the ability of the firm to maintain growth in its earnings
  3. the ability of the firm to maintain stability in the earnings
  4. all of the above are correct
Correct answer: (D)
all of the above are correct

150. The required rate of return on an equity investment can be determined by:

  1. the P/E yield plus the growth rate
  2. the dividend yield plus the growth rate
  3. the earnings yield
  4. the revenue growth rate
Correct answer: (B)
the dividend yield plus the growth rate
Previous
Page 15 of 78
Next