FINANCE QUIZ
Date: 18.03.2013
45. At year-end 2525, Stockholder's Equity is $4,200 and there are 140 common shares outstanding. For 2526, sales should equal $20,160 , the net profit margin (= net income / sales) is 6.40%, the payout ratio (=dividends / net income) is 40%, and no shares are issued or repurchased. If the equity price-to-book ratio at year-end 2525 is 1.35, and it moves to 1.26 at year-end 2526, what is the shareholder's annual rate of return for 2526?
a. 19.7%
b. 23.8%
c. 26.2%
d. 28.8%
44. Which statement about a venture capitalist is most accurate?
a. venture financing represents more than half of all money borrowed by US companies
b. venture financing typically goes to established large companies with impressive histories
c. venture financing typically is like a loan with fixed interest payments and repayment of principal
d. generally they are extremely involved in managerial decision-making
43. The Company's financial statements for year 2525 show that year-end Total assets of $2,135 include Plant, property, & equipment (PP&E) of $1,700 . The assets are financed by Debt of $435 and Stockholders' equity of $1,700 . The annual Sales equal $8,300 , total costs equal $8,000 , Net income equals $300 , Dividends equal $100 , and New retained earnings equal $200 . For 2526 the asset turnover (sales/total assets), net profit margin (=net income / sales), payout ratio (=dividends/net income) and price-to-earnings ratio (now 20.5) will be constant. The number of shares outstanding is 90. The firm seeks maximum growth by relying exclusively on retained earnings; external financing will be zero. What is the sales growth rate?
a. 11.9%
b. 18.1%
c. 15.7%
e. 10.3%
---------------------------------------------------------------------------------------------
Date: 18.03.2013
42. Which statement about a venture capitalist is most accurate?
a. venture financing represents more than half of all money borrowed by US companies
b. venture financing typically goes to established large companies with impressive histories
c. venture financing typically is like a loan with fixed interest payments and repayment of
principal
d. generally they are extremely involved in managerial decision-making
41. At year-end 2525, Stockholder's Equity is $4,200 and there are 140 common shares outstanding. For 2526, sales should equal $20,160 , the net profit margin (= net income / sales) is 6.40%, the payout ratio (=dividends / net income) is 40%, and no shares are issued or repurchased. If the equity price-to-book ratio at year-end 2525 is 1.35, and it moves to 1.26 at year-end 2526, what is the shareholder's annual rate of return for 2526?
a. 19.7%
b. 23.8%
c. 26.2%
d. 28.8%
40. Last year's equity book value per share was $11.80 . This year's is $12.99 . The number of shares increased from 23,700 last year to 26,260 this year (but maybe there was a stock split; maybe not). This year the company has New retained earnings of $50,300 . Find the value of Net equity issues for the company this year.
a. Net repurchases equal $14.8 thousand
b. Net sales equal $12.9 thousand
c. Net repurchases equal $11.2 thousand
d. Net sales equal $11.2 thousand
----------------------------------------------------------------------------------------------
Date: 09.03.2013
39. Which of the following descriptions of the New York Stock Exchange is false?
a. companies must request and pay for their securities to be listed
b. daily volume averages $30-to-$50 billion and about 2,400-to-3,000 securities are listed
c. it has the second largest market capitalization of any stock exchange in the world
d. the NYSE is a profit-making shareholder-owned self-regulatory organization
38. The company computes that each unit of production incurs variable operating costs of $37 and
sells for $50. The company’s fixed costs are $29,750 per year. Find the number of units per
year the company must sell to earn $30,000 of operating income.
a. 4,596
b. 4,178
c. 5,561
d. 6,117
37. Which one statement about the legal form of business is most consistent?
a. An advantage of the corporation is that it has relatively low organizational costs.
b. An advantage of the sole proprietorship is that they do not generally offer easy transferability of
ownership.
c. An advantage of the corporation is that they raise capital more easily.
d. An advantage of the corporation is that they are subject to relatively fewer government regulations.
-----------------------------------------------------------------------------------------------
Date: 08.03.2013
36. The company share price in the stock market is $54 . The equity book value per share
according to the balance sheet is $64 . There are 320 million shares outstanding. Find the
company market capitalization and equity price to book ratio.
a. Market cap equals $13,070 million and price-to-book is 0.84
b. Market cap equals $15,030 million and price-to-book is 0.73
c. Market cap equals $13,070 million and price-to-book is 0.73
d. Market cap equals $17,280 million and price-to-book is 0.84
35. Choose the most accurate statement about Initial Public Offerings (IPOs).
a. shareprices for IPOs during the first day of trading rise dramatically for some stocks, fall for others, but
on average follow the overall market
b. shareprices for IPO stocks generally overperform the overall market during the few years following the
IPO
c. information disclosure requirements increase after the company goes public d. Two choices, A and B,
are correct
34. The investor bought a share of company stock one year ago for $30 . Today the investor
receives the annual dividend of $1.20 and the stock’s current price is $20 . Find the
stockholder’s annual rate of return.
a. -35.5%
b. -32.3%
c. -29.3
d. -26.7%
according to the balance sheet is $64 . There are 320 million shares outstanding. Find the
company market capitalization and equity price to book ratio.
a. Market cap equals $13,070 million and price-to-book is 0.84
b. Market cap equals $15,030 million and price-to-book is 0.73
c. Market cap equals $13,070 million and price-to-book is 0.73
d. Market cap equals $17,280 million and price-to-book is 0.84
35. Choose the most accurate statement about Initial Public Offerings (IPOs).
a. shareprices for IPOs during the first day of trading rise dramatically for some stocks, fall for others, but
on average follow the overall market
b. shareprices for IPO stocks generally overperform the overall market during the few years following the
IPO
c. information disclosure requirements increase after the company goes public d. Two choices, A and B,
are correct
34. The investor bought a share of company stock one year ago for $30 . Today the investor
receives the annual dividend of $1.20 and the stock’s current price is $20 . Find the
stockholder’s annual rate of return.
a. -35.5%
b. -32.3%
c. -29.3
d. -26.7%
------------------------------------------------------------------------------------------------
Date: 07.03.2013
33. Which statement is most consistent with one or more of the principal-agent relationships that
exist in corporate finance?
a. Management is the principal, shareholders are the agents, and the contested wealth is equity
b. Management/shareholders are the principals, creditor/bondholders are the agents, and the contested
wealth is loans and debt
c. Employees are the principals, management/shareholders are the agents, and the contested wealth is
pension contributions
d. Two choices, B and C, are correct
32. Which of the following mechanisms does not provide managers with an incentive to act in
shareholders’ best interests?
a. Management contracts that link compensation to the shareprice
b. Concentration of equity ownership by institutional investors
c. Threat of corporate take-over by raiders
d. A leveraged buyout of shares by managers
31. According to the new view of corporate finance which statement provides the best description
for the proper goal of the company?
a. maximize wealth creation
b. maximize the stock price
c. maximize sales revenue
d. minimize tax payments
---------------------------------------------------------------------------------------------
Date: 06.03.2013
30. What are the three sources of financial
value?
a. Time
value, investments, and financial planning
b. Time
value, transformation value, and arbitrage
c. Arbitrage, hedging, and speculating
d. Investments,
corporate finance, and institutions
29. Which statement most accurately describe
the members on the Board of Directors?
a. They
usually are not employees of the company
b. They
usually are company insiders with very close personal relationships with senior
management
c. They
are elected to the Board by senior management
d. Two
choices, B and C, are correct
28. Choose the one statement that most
correctly describes categorization schemes of the financial markets.
a. The
credit market includes trade credit, notes, and bonds that stipulate specific
payments and/or interest
b. The
length of the financial contract is the distinguishing criterion when
categorizing markets as either
primary market or secondary market
c. The
length of the financial contract is the distinguishing criterion when
categorizing markets as either credit
market or equity market
d. The
capital market includes financial securities repayable within one year
-------------------------------------------------------------------------------------------
Date: 28.02.2013
27. Which of the following best describes the primary sources of income for most people aged 20-
35?
35?
a. Profits from business
b. Dividends and interest
c. Rents
d. Salaries, wages, and tips
d. Salaries, wages, and tips
26. Heather and Alexis are employed by the same company and earn the same pay. Heather
spends her free time taking work-related classes to improve her computers skills, while Alexis
spends her free time socializing with friends and working out at a fitness center. After five
years, what is likely to be true?
spends her free time taking work-related classes to improve her computers skills, while Alexis
spends her free time socializing with friends and working out at a fitness center. After five
years, what is likely to be true?
a. Alexis will make more because she is more social
b. Heather and Alexis will continue to make the same money
c. Heather will make more money because she is more valuable to her company
d. Alexis will make more because Heather is likely to be laid off
25. If each of the following persons had the same amount of take-home pay, who would need the
greatest amount of life insurance?
greatest amount of life insurance?
a. A young single woman without children
b. An elderly retired man with a wife who is also retired
c. A young married man without children
d. A young single woman with two young children
-------------------------------------------------------------------------------------------------
Date: 06.02.2013
24. Retirement income paid by a company is called:
a. Social security
b. Rents and profits
c. Pension
d. 401(k)
23. Wendy worked her way through college earning $15,000 per year. After graduation her first
job pays$30,000. The total dollar amount Wendy will have to pay in Federal income taxes in
her new job will:
a. Be lower than when she was in college
b. Stay the same as when she was in college
c. Go up a little from when she was in college
d. Double, at least, from when she was in college
22. Which of the following statements is true?
a. Your bad loan payment record with one bank will not be considered if you apply to another bank for a
loan
b. People have so many loans it is very unlikely that one bank will know your history with another bank
c. Banks and other lenders share the credit history of their borrowers with each other and are likely to
know of any loan payments that you have missed
d. If you missed a payment more than two years ago, it cannot be considered in a loan decision
..................................................................................................................................................
Date: 05.02.2013
21. Inflation can cause difficulty in many ways. Which group would have the greatest problem
during periods of inflation?
during periods of inflation?
a. Young couples with no children who both work
b. Young working couples with children
c. Older working couples saving for retirement
d. Older people living on fixed retirement income
20. Which of the following statements is not correct about most ATM cards?
a. You must have a bank account to have an ATM card
b. You can generally get cash 24 hours a day
c. You can generally obtain information concerning your bank balance at an ATM machine
d. You can get cash anywhere in the world with no fee
19. If your credit card is stolen and the thief runs up a total of $1,000 but you notify the issuer of
the card as soon as you discover it is missing, how much will you be responsible to pay?
the card as soon as you discover it is missing, how much will you be responsible to pay?
a. None
b. $50
c. $1,000
d. $500
....................................................................................................................................................
Date: 21-12-2012
18.
Your take-home pay from your job is less than the total amount you earn. Which
of the
following best describes what is taken out of your total pay?
following best describes what is taken out of your total pay?
a. Federal income tax, sales tax and social
security contribution
b. Federal income tax, property tax, Medicare
and social security contributions
c. Federal income tax, social security, and
Medicare contributions
d. Social security and Medicare contributions
17.
Which of the following types of investments would best protect the purchasing
power of a
family's savings in the event of a sudden increase in inflation?
family's savings in the event of a sudden increase in inflation?
a. U.S. Government Savings bond
b. Certificate of deposit
c. 25-year corporate bond
d. House financed with a fixed rate
mortgage
16.
If you went to college and earned a four-year degree, how much more money could
you expect
to earn than if you only had a high school diploma?
to earn than if you only had a high school diploma?
a.
About 10 times as much
b. A lot more, about 70% more
c. A little more, about 20% more
d. No
more, I would make about the same either way
--------------------------------------------------------------------------------------------------------
Date: 20-12-2012
15.
Jim found a job with a take-home pay of $950 per month. He must pay $400 for
rent and $100
for groceries each month. He also spends $100 per month on transportation. If he budgets $50
each month for clothing, $100 for restaurants and $50 for everything else, how long will it take
him to accumulate savings of $750?
for groceries each month. He also spends $100 per month on transportation. If he budgets $50
each month for clothing, $100 for restaurants and $50 for everything else, how long will it take
him to accumulate savings of $750?
a. 5 months (96%)
b. 10 months
c. 12 months
d. 15 months
14.
Mike has saved $6,000 for his college expenses by working part-time. He plans
to start
college next year and needs all of the money he saved. Which of the following is the safest
place for his college money?
college next year and needs all of the money he saved. Which of the following is the safest
place for his college money?
a. Locked in his closet at home
b. Stocks
c. Bank savings account
d. Corporate bonds
13.
Many savings programs are protected by the Federal government against loss.
Which of the
following is not?
following is not?
a. Bond issued by one of the 50 states
b. Certificate of deposit at the bank
c. U.S. Treasury bond
d. U.S.
Savings bond
---------------------------------------------------------------------------------------------------
Date: 13-12-2012
12.
If you have caused an accident, which type of automobile insurance would cover
damage to
your own car?
your own car?
A. Collision
B. Comprehensive
C. Term
D. Liability
11.
Walter must borrow $10,000 to complete his college education. Which of the
following would
not be likely to reduce the finance charges rate?
not be likely to reduce the finance charges rate?
A. If his parents co-signed the loan
B. If his parents took out an additional
mortgage on their house for the loan
C. If the loan was insured by the Federal
government
D. If he went to a state college rather than
a private college
10.
Tim and Rebecca just had a baby. They received money as baby gifts and want to
put it away
for the baby's education. Which of the following is likely to have the highest growth over the
next 18 years?
for the baby's education. Which of the following is likely to have the highest growth over the
next 18 years?
A. U.S. government bond
B. Checking account
C. Savings account
D. Stocks
------------------------------------------------------------------------------------------------
Date: 12-12-2012
9.
Which of the following instruments is not typically associated with spending?
(A) ATM card
(B) Cash
(C) Certificate of deposit
(D) Credit card
8.
Jerry has a good job on the production line of a factory in his hometown.
During the past year or
two, the state in which Jerry lives has been raising taxes on its businesses to the point where
they are much higher than in neighboring states. What effect is this likely to have on Jerry's job?
two, the state in which Jerry lives has been raising taxes on its businesses to the point where
they are much higher than in neighboring states. What effect is this likely to have on Jerry's job?
(A) He is likely to get a large raise to
offset the effect of the higher taxes
(B) Higher business taxes can't have any
effect on Jerry's job
(C) Higher business taxes will cause more
businesses to move into Jerry's state, raising wages
(D) Jerry's company may consider moving to a
lower-tax state, threatening Jerry's job
7.
Under which of the following circumstances would it be financially beneficial
for you to borrow
money to buy something now and repay it with future income
money to buy something now and repay it with future income
(A) When you really need a two-week vacation
(B) When some new clothes you like go on sale
(C) When the interest on the loan is greater
than the interest you get on your savings
(D) When you need to buy a car to get a much
better paying job
------------------------------------------------------------------------------------------------
Date: 11-12-2012
6. Which of the following statements best describes your right to check your
credit history for
accuracy?
accuracy?
(A) You can't see your credit record
(B) Your credit record can be checked at any
time for free
(C) If you are turned down for credit based on
a credit report, the record can be checked for free
(D) All credit records are the property of the U.S. government and access is only available to the FBI and lenders
5. Which of the following is true about sales taxes?
(A) The federal government will deduct it from
your paycheck
(B) It makes things more expensive for you to
buy
(C) You don't have to pay the tax if your
income is very low
(D) The
national sales tax percentage rate is 6%
4. If you had a savings account at a bank, which of the following would be correct
concerning the
interest you would earn on this account?
interest you would earn on this account?
(A) Earnings from savings account interest
may not be taxed
(B) Sales tax may be charged on the interest that you earn
(C) Income tax may be charged on the interest
if your income is high enough
(D) You cannot earn interest until you pass
your 18th birthday --------------------------------------------------------------------------------------------------
Date: 09-12-2012
reduce interest rates any time soon, despite the slowdown in growth and easing of inflation....
Which among the following rates he was most probably referring do?
(A) Repo or reverse Repo rate
(B) Prime lending rate
(C) Base rate
(D) Savings bank account interest rate
Ans: (A) Repo or reverse Repo rate
-------------------------------------------------------------------------------------------------
Date: 08-12-2012
2. which among the following activities are conducted by RBI during the open market operations
(OMOs)?
(A) sale of gilt bonds
(B) purchase of gilt bonds
(C) sales / purchase of gilt bonds
(D) sales / purchase of foreign currency
Ans: (C) sales / purchase of gilt bonds
------------------------------------------------------------------------------------------------
Date: 07-12-2012
1. One of the leading financial newspapers recently wrote: "there is a lot of dollar demand due to
import of oil, gold and defense equipment. the euro is also volatile due to persisting concerns in
the Eurozone."
which among the following is the correct conclusion derived from the above information:
(A) The factors will keep the rupee weak against the dollar
(B) The factors will keep the dollar weak against rupee
(C) The factors will reduce the supply of Euro
(D) The RBI would print more money
Ans. (A) The factors will keep the rupee weak against the dollar
