Quizzes Flashcards
Mezzanine Debt
Frequently used for acquisitions and buyouts
Venture Capital
Equity investing
Private Equity
Combination of equity and debt investing, more strategic
T/F - Compounding refers to the earning of interest on interest
True
T/F - If a person buys a stock for $10 and sells it after 10 years for $20, the annual compound return is 10%
False
The Future Value of a dollar increases with lower interest rates increases with higher interest rates increases with longer periods of time decreases with longer periods of time
increases with higher interest rates
increases with longer periods of time
Discounting is…
The determination of future value and expressing the future in the present
SAAS
Software as a service
The time value of money suggests
individuals prefer a dollar in the present to a dollar in the future
If interest rates rise
the present value of an annuity falls
Which of the following is the largest if the interest rate is 12 percent annually?
- $100 compounded for three years
- $100 annuity compounded for three years
- the present value of $100 received after three years
$100 annuity compounded for three years
Which is smallest if the interest rate is 10%?
a. present value of $100 annuity for five years
b. future value of $100 annuity for five years
c. present value of $100 after five years d. $100 received right now
Present value of $100 after five years
T/F - The present value of an annuity is worth more if interest rates are 5% instead of 10%.
True
T/F - Realized returns frequently differ from expected returns.
True
t/f - Unsystematic risk is the tendency for stock prices to move together.
False
t/f - Systematic risk is reduced through portfolio diversification.
False
t/f - The return on a portfolio considers both the individual asset’s return and its weight in the portfolio.
True
t/f - Cross section analysis refers to comparing a firm to other firms in its industry.
True
t/f - The more rapidly receivables turn over, the more funds the firm has tied up in accounts receivable.
False
t/f - The return on equity represents what the firm is earning on stockholders’ investment in the firm.
True
t/f - Leverage ratios indicate the extent to which the firm uses debt financing.
True
t/f - The higher the ratio of debt to total assets, the smaller is the use of financial leverage.
False
t/f - The use of financial leverage may permit the firm to increase the return on equity.
True
Performance is measured by
Profitability Ratios
Leverage ratios measure
extent to which the firm uses debt financing
