Question 1

If the dividend of a stock is $20 and its dividend yield is $5,then the price of the stock is:

Accepted Answer

A)  $2
B)  $8
C)  $4
D)  $1
E)  $3F) B) and E)
G) A) and E)

Question 2

If the offering price of a stock is $2 and its capital in excess of par is $3,the par value of the stock is:

Accepted Answer

A)  $10.00.
B)  $3.50.
C)  $7.00.
D)  $2.00.
E)  $5.00.F) A) and B)
G) B) and D)

Question 3

The process of analyzing the needs of a business and selecting the assets that will maximize its value is called _____.

Accepted Answer

A)  working capital management
B)  factoring
C)  risk assessment
D)  capital budgeting
E)  investment bankingF) B) and E)
G) B) and C)

Question 4

In the context of managing cash in an organization,which of the following is true?

Accepted Answer

A)  Business organizations make money from idle cash.
B)  Corporate checking accounts typically earn interest.
C)  Money managers try to keep as much cash in their hands as possible.
D)  To manage a firm's cash,companies try to speed up cash collections from customers.
E)  Managers measure cash flow as the amount of cash the firm spends in a period of one year.F) A) and B)
G) A) and C)

Question 5

Dan bought three new trucks with a loan obtained from the First National Bank.If he fails to repay the loan,the bank will repossess the trucks.The trucks typically represent:

Accepted Answer

A)  a line of credit.
B)  a lockbox.
C)  collateral.
D)  accounts payable.
E)  retained earning.F) B) and E)
G) A) and B)

Question 6

Which of the following is a short-term cancelable lease that does not show up on a balance sheet?

Accepted Answer

A)  A capital lease
B)  A serial bond
C)  A transaction balance
D)  A line of credit
E)  An operating leaseF) None of the above
G) A) and D)

Question 7

Which of the following statements is true of dividend yield?

Accepted Answer

A)  When the dividend of a stock is subtracted from the par value,the result is the dividend yield.
B)  When the market value of a stock is subtracted from the dividend,the result is the dividend yield.
C)  When the dividend of a stock is divided by the price,the result is the dividend yield.
D)  When the dividend of a stock is divided by the market cap,the result is the dividend yield.
E)  When the capital of a stock is added to the dividend,the result is the dividend yield.F) A) and B)
G) None of the above

Question 8

Zainab borrows $20,000 from a bank to pay for her education.The bank charges her five percent of the amount she borrowed,that is,$1,000.In this scenario,the five percent represents the:

Accepted Answer

A)  principal.
B)  collateral.
C)  trade credit.
D)  discount.
E)  interest.F) A) and D)
G) None of the above

Question 9

_____ are also called debentures and are not backed by specific collateral.

Accepted Answer

A)  Dividends
B)  Treasury bills
C)  Unsecured bonds
D)  Trade credits
E)  Commercial certificates of depositF) A) and B)
G) A) and C)

Question 10

The primary advantage of owning preferred stock is that:

Accepted Answer

A)  it offers more voting rights than common stock.
B)  it yields higher profits than common stock.
C)  it offers more business control than common stock.
D)  it is a cheaper investment than common stock.
E)  it is a safer investment than common stock.F) All of the above
G) C) and D)

Question 11

_____ is the price at which a particular common stock is currently trading.

Accepted Answer

A)  Beta score
B)  Alpha score
C)  Par value
D)  Market value
E)  Capital valueF) C) and D)
G) None of the above

Question 12

The principal is the amount of money a business pays to use a bank's funds.

Accepted Answer

A) True 
 B)False

Question 13

Of the following potential investment projects,the project that poses the least risk is:

Accepted Answer

A)  adding to a product line.
B)  introducing a new product in a foreign market.
C)  expanding into a new market.
D)  buying new equipment for an established market.
E)  repairing old equipment.F) A) and B)
G) C) and D)

Question 14

Long-term liabilities are:

Accepted Answer

A)  marketable securities.
B)  debts that will be repaid over a number of years.
C)  frequently traded in the eurodollar market.
D)  trade credits.
E)  generated internally,like retained earnings.F) C) and D)
G) A) and D)

Question 15

A marketable security is a temporary investment of cash.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following types of bonds offer relatively high rates of interest because they have higher inherent risks?

Accepted Answer

A)  Secured bonds
B)  Serial bonds
C)  Unsecured bonds
D)  Junk bonds
E)  Floating-rate bondsF) B) and C)
G) A) and B)

Question 17

New issues of stocks and bonds are sold directly to the public and to institutions in what is known as the primary market.

Accepted Answer

A) True 
 B)False

Question 18

Stock exchanges and over-the-counter markets where investors can trade their securities with others are known as:

Accepted Answer

A)  prediction markets.
B)  secondary markets.
C)  primary markets.
D)  futures markets.
E)  foreign exchange markets.F) A) and B)
G) C) and D)

Question 19

The amount of money budgeted for the purchase of long-term assets is called the:

Accepted Answer

A)  master budget.
B)  commercial budget.
C)  current budget.
D)  fixed budget.
E)  capital budget.F) A) and B)
G) None of the above

Question 20

Which of the following is an example of a long-term liability?

Accepted Answer

A)  Commercial paper
B)  A serial bond
C)  A Treasury bill
D)  A certificate of deposit
E)  Trade creditF) C) and D)
G) A) and B)

Exam 16: Financial Management and Securities Markets

The principal is the amount of money a business pays to use a bank's funds.

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New issues of stocks and bonds are sold directly to the public and to institutions in what is known as the primary market.

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Dan bought three new trucks with a loan obtained from the First National Bank.If he fails to repay the loan,the bank will repossess the trucks.The trucks typically represent:

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Long-term liabilities are:

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_____ is the price at which a particular common stock is currently trading.

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The amount of money budgeted for the purchase of long-term assets is called the:

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Which of the following is an example of a long-term liability?

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If the dividend of a stock is $20 and its dividend yield is $5,then the price of the stock is:

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_____ are also called debentures and are not backed by specific collateral.

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Which of the following statements is true of dividend yield?

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The primary advantage of owning preferred stock is that:

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A marketable security is a temporary investment of cash.

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Zainab borrows $20,000 from a bank to pay for her education.The bank charges her five percent of the amount she borrowed,that is,$1,000.In this scenario,the five percent represents the:

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Stock exchanges and over-the-counter markets where investors can trade their securities with others are known as:

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If the offering price of a stock is $2 and its capital in excess of par is $3,the par value of the stock is:

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In the context of managing cash in an organization,which of the following is true?

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The process of analyzing the needs of a business and selecting the assets that will maximize its value is called _____.

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Of the following potential investment projects,the project that poses the least risk is:

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Which of the following is a short-term cancelable lease that does not show up on a balance sheet?

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Which of the following types of bonds offer relatively high rates of interest because they have higher inherent risks?

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