Exam 1 Reflection Questions Flashcards
Which of the following represents a significant disadvantage to the corporate form of organization
A: Difficulty in transferring ownership
B: Exposure to taxation of corporate earnings and stockholders
C: Degree of liability to which corporate owners and managers are exposed
D: Level of difficulty corporations face in obtaining large amounts of capital in financial markets
B
The primary and operating goal of a publicly owned firm interested in serving its stockholders should be
A: maximize the stock price per share over the long run, which is the intrinsic value
B: Maximize the firm’s expected EPS
C: Maximize the firms expected total income
D: Minimize the chances of loss
A
Money markets are markets for
A: Foreign stock
B: Consumer automobile loans
C: US stocks
D: Short-term debt securities
D
Suppose the US Treasury announces plans to issue $50 billion of new bonds. Assuming the announcement was not expected, what effect, other things held constant, would that have on bond prices and interest rates
A. Prices and interest rates would both rise
B. Prices would rise and interest rates would decline
C. Prices and interest rate would both decline
D. Prices would decline and interest rates would rise
D
Which of the following would be most likely to lead to higher interest rates on all debt securities in the economy?
A. Households start saving a larger % of their income
B. The economy moves from a boom to a recession
C. The level of inflation begins to decline
D. Corporations step up their expansion plans and thus increase their demand for capital
D
The board of directors performs all the following duties except:
A. Managing day-to-day operations
B. Selection and removal of officers
C. Adding or repealing bylaws
D. initiation of fundamental changes
A
Which of the following is NOT normally regarded as being a barrier to hostile takeovers?
A: Targeted share repurchases
B: Shareholder rights provisions
C: Restricted voting rights
D: Poison pill
E: Abnormally high executive compensation
E
Which of the following is NOT correct
A. Net Operating profit after taxes (NOPAT) is the amount of profit a company would generate if it had no debt and held no financial assets
B. N.I does not always reflect the true performance of a company’s operations
C. Net operating working capital is the working capital acquired with investor-supplied funds
D. AP, accruals and notes payables are classified as operating current liabilities
D
Which of the following is not a use of FCF
A. Pay off some of the debt
B. Pay dividends to shareholders
C. Investing in operating assets
D. Repurchase of stock
E. Pay interest
C
The operating CA needed even at the low points of the business cycle is defined as
A. Permanent CA
B. Temporary CA
D. Short term CA
C. Cyclical CA
D. Seasonal CA
A
Which of the following provides a spontaneous source of financing for a firm
AP and Accruals
Which of the following is an example of maturity matching approach?
A. Both the permanent and temporary CA are financed with short-term debt, and the fixed assets are financed with long-term
B. The temporary CA and part of permanent CA are financed with short-term debt, while the rest of the permanent CA and fixed assets are financed with long-term capital
C. All the Fixed and permanent assets are financed with long-term capital, and the temporary CA are financed with long term capital
D. Long-term capital is used to finance all permanent assets and also meet some seasonal needs
C
Which of the following will shorten a firms CCC c
A. Increase the payable deferral period
B. Increase the time it takes to sell inventory
C. Increase the length of time customers are given to pay for goods
D. Increase the average collection period
E. Decrease the time given by suppliers to pay for purchases
A
1 Cash needs can fluctuate substantially throughout the year
A consultant recommends that a company hold funds for the following two reasons:
This is an example of…
A. Speculative bal/speculative bal
B. Speculative bal/ Precautionary bal
C. Precautionary bal/Speculative bal
C
