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Financial management.m

Financial management.m

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Вопросы и варианты

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Вопрос 1

The type or branch of accounting that generates reports for the use of external parties such as creditors, investors and government agencies is known as:

  1. Financial accounting
  2. Managerial accounting
  3. Tax accounting
  4. Forensic accounting
Вопрос 2

The branch of accounting that generates reports and information for the use of internal management is known as:

  1. Tax accounting
  2. Managerial accounting
  3. Auditing
  4. International accounting
Вопрос 3

A financial report is a set of documents that comprises:

  1. a balance sheet and income statement
  2. a cash flow statement
  3. a statement of changes inequity
  4. adjustments relating to the recoverability and classification of recorded asset amounts
  5. notes
  6. director’s declaration
Вопрос 4

Which one of the following statements is true?

  1. Corporate governance addresses the principal-agent relationship between management and directors on the one hand and the relationship between the company and suppliers on the other
  2. It is the responsibility of internal audit to design and monitor controls that reasonably assure that objectives are met
  3. Conflicts of interests between management and stakeholders can result in bankruptcies or major frauds
  4. The management board approves the mission, vision, objectives ad strategy of the entity
Вопрос 5

International Accounting Standards have been developed by:

  1. The Financial Reporting Council
  2. The International Organization of Securities Commission
  3. The International Accounting Standards Committee
  4. The European Commission
Вопрос 6

According to the IASB Framework, the main purpose of financial reporting is to:

  1. calculate prudently distributable profit
  2. calculate taxable income
  3. help managers to run the business
  4. enable investors to make economic decisions
Вопрос 7

To be recognized in a statement of profit and loss and other comprehensive income, an item must by nature be:

  1. either income, an expense or item of other comprehensive income
  2. both income and a liability
  3. either an asset or a liability
  4. both a liability and a direct adjustment to equity
Вопрос 8

The revenue recognition principle dictates that revenue should be recognized in the accounting records:

  1. when cash is received
  2. when the performance obligation is satisfied
  3. at the end of the month
  4. in the period when taxes are paid
Вопрос 9

Under the straight line method of providing depreciation it:

  1. increases every year
  2. remains constant every year
  3. decreases every year
Вопрос 10

Which one is the capital expenditure?

  1. Capital invested by the owner
  2. Selling expense for machine
  3. Machine purchased
  4. Daily expenses to operate business
Вопрос 11

Anything that is expected to be converted into cash or consumed by the business within one year from the date of the balance sheet is classified as a(n)

  1. long-term asset
  2. revenue
  3. current liability
  4. current asset
Вопрос 12

Which of the following items is a long-term liability?

  1. Mortgages payable
  2. Accrued expenses payable
  3. Unearned revenue
  4. Accounts payable
  5. Current portion of long-term debt
Вопрос 13

Goodwill is classified as which one of the following assets?

  1. Fixed
  2. Long-term
  3. Current
  4. Intangible
Вопрос 14

The statement of changes in equity includes reconciliation between:

  1. the carrying amount of retained earnings at the beginning and at the end of the period
  2. the carrying amount of total equity at the beginning and the end of the period
  3. the carrying amount of each component of equity at the beginning and the end of the period separately disclosing changes resulting from profit or loss, each item of comprehensive income, and the amounts of investments by, and dividends and other distributions to, owners
Вопрос 15

In the statement of changes in equity the effects of the retrospective application of a change in accounting policy is presented:

  1. separately for each component of equity only
  2. in aggregate for total equity only
  3. in aggregate for total equity and separately for the total amounts attributable to owners of the parent and to non-controlling interests
Вопрос 16

Under which depreciation method the amount of depreciation expenses remains throughout the useful life of a fixed asset?

  1. Straight line method
  2. Reducing balance method
  3. Number of units produced method
  4. Machine hours method
Вопрос 17

A financial statement that shows inflows and outflows of cash during a particular period of time is known as:

  1. Income statement
  2. Statement of retained earnings
  3. Balance sheet
  4. Statement of cash flows
Вопрос 18

A statement of cash flows has:

  1. 3 sections
  2. 4 sections
Вопрос 19

Cash flow is:

  1. not linked to the balance sheet or income statement
  2. linked only to the balance sheet
  3. linked only to the income statement
  4. linked to the balance sheet and income statement
Вопрос 20

Which one of the following is not a financial activity?

  1. Issuance of bonds payable
  2. Sale of investment
  3. Purchase of treasury stock
  4. Issuance of common stock
Вопрос 21

Financial statement analysis may be undertaken to study liquidity, turnover, profitability, and other measures. Which type of ratio is the return on equity ratio?

  1. Liquidity
  2. Turnover
  3. Profitability
Вопрос 22

Which of the following represent the main step(s) of accounting cycle?

  1. Recording the transactions
  2. Classifying the transactions
  3. Ordering, summarizing, counting the transactions
  4. Recoding, classifying, summarizing transactions
Вопрос 23

An example of a liquidity ratio is:

  1. fixed asset turnover
  2. current ratio
  3. acid test or quick ratio
  4. fixed asset turnover and acid test or quick ratio
  5. current ratio and acid test or quick ratio
Вопрос 24

Which of the following statements is correct in regard to earnings management?

  1. It occurs only when profit is low
  2. It is the result of professional judgment
  3. It is the practice of maximizing earnings
  4. It represents the manipulation of reported earnings
Вопрос 25

A firm’s current ratio is above the industry average, however, the firm’s quick ratio is below the industry average. These ratios suggest that the firm:

  1. has relative more total current assets and even more inventory than other firms in the industry
  2. is very efficient in managing inventories
  3. has liquidity that is superior to the average firm in the industry
  4. is near technical insolvency
Вопрос 26

The cash conversion cycle equals:

  1. inventory period plus collection period minus payables period
  2. payables period minus inventory period minus collection period
  3. payables period plus inventory period minus collection period
  4. inventory period minus collection period plus payables period
Вопрос 27

The DuPont ratio separates ROE intro three components. Using the DuPont method and assuming turnover and profit margin are held constant, increasing the leverage (amount of debt) of the firm would affect the ROE in which way?

  1. Decrease ROE
  2. Increase ROE
  3. Remain unchanged
  4. The DuPont ratio does not consider leverage
Вопрос 28

Which of the following factors does Tobin’s q ratio not reflect?

  1. Marginal rate of intertemporal substitution
  2. The «animal spirits» of entrepreneurs
  3. The linkt between anticipated future productivity increases and current share prices
  4. The interest rate
Вопрос 29

The dividend payout ratio is calculated by dividing total dividends by:

  1. Operating income
  2. Net income
  3. Income before interest and taxes
  4. Income before taxes
Вопрос 30

The profit margin ratio measures the …earned from each dollar of sales.

  1. Operating income
  2. Net income
  3. Income before interest and taxes
  4. Income before taxes
Вопрос 31

Which is not the treasurer’s responsibility for managing the firm’s cash and marketable securities?

  1. Planning its capital structure
  2. Overseeing the corporate pension fund
  3. Buying stocks and bonds to raise capital
  4. Cash management
Вопрос 32

The role of management accounting does not normally include the function of:

  1. decision-making
  2. planning and control
  3. product costing
  4. cash management
Вопрос 33

The role of financial management does not usually include responsibility for:

  1. corporate finance
  2. treasury management
  3. compliance with accounting standards
  4. risk management
Вопрос 34

What are the three interrelated areas of finance?

  1. Financial markets, options and forwards
  2. Banking, financial institutions and swap currency
  3. Investment, financial management and financial markets and institutions
Вопрос 35

The share of profit a shareholder will receive is called:

  1. dividend
  2. surplus
  3. net profit
  4. retained profit
Вопрос 36

The cost of equity capital is all of the following except:

  1. the minimum rate that a firm should earn of the equity-financed part of an investment
  2. a return on the equity-financed portion of an investment that, at worst, leaves the market price of the stock unchanged
  3. by far the most difficult component cost to estimate
  4. generally lower than the before-tax cost of debt
Вопрос 37

Retained earnings are occasionally restricted:

  1. if preferred dividends are in arrears
  2. to set aside cash for dividends
  3. to keep the legal capital associated with paid-in capital intact
  4. due to contractual loan restrictions
Вопрос 38

The long-run objective of financial management is to:

  1. maximize earnings per share
  2. maximize the value of the firm’s common stock
  3. maximize return on investment
  4. maximize market share
Вопрос 39

«Shareholder wealth» in a firm is represented by:

  1. the number of people employed in the firm
  2. the book value of the firm’s assets less the book value of its liabilities
  3. the amount of salary paid to its employees
  4. the market price per share of the firm’s common stock
Вопрос 40

A company’s … is (are) potentially the most effective instrument of good corporate governance

  1. common stock shareholders
  2. board of directors
  3. top executive officers
Вопрос 41

A market which deals with long-term corporate stocks are classified as:

  1. liquid markets
  2. short-term markets
  3. capital markets
  4. money markets
Вопрос 42

Which three of the following are key elements within the financial system?

  1. lenders and borrowers
  2. public limited companies
  3. brokers and asset transformers
  4. money markets and capital markets
  5. multinational enterprises
Вопрос 43

According to the efficient market hypothesis, financial markets fluctuate daily because they:

  1. are inefficient
  2. slowly react to new information
  3. are continually reacting to new information
  4. offer tremendous arbitrage opportunities
Вопрос 44

If a market is inefficient, as new information is received about a security:

  1. nothing will happen
  2. the stock price will fall at first and then later rise
  3. there will be a lag in the adjustment of the stock price
  4. there will be negative demand for the stock
Вопрос 45

According to the weak form of the EMH

  1. successive price changes are biased
  2. successive price changes are dependent
  3. specified trading rules can prove to be extremely useful in generating excess returns
  4. successive price changes are independent
Вопрос 46

The weak form of the efficient market hypothesis asserts that

  1. stock prices do not rapidly adjust to new information contained in past prices or past data
  2. future changes in stock prices cannot be predicted from past prices
  3. stock prices do not rapidly adjust to new information contained in past prices or past data and future changes in stock prices cannot be predicted from past prices
  4. future changes in stock prices cannot be predicted from past prices and technicians cannot expect to outperform the market
Вопрос 47

The weak form of the efficient market hypothesis contradicts

  1. technical analysis, but supports fundamental analysis as valid
  2. both fundamental analysis and technical analysis
  3. technical analysis, but is silent on the possibility of successful fundamental analysis
Вопрос 48

If the capital market is semi-strong efficient

  1. investors will be able to make consistent gains by studying and making use of past share price movements
  2. investors will be able to make consistent gains by studying and making use of all available public information about the shares
  3. investors will be able to make consistent gains by studying and making use of information which is not available to the public
  4. investors will not be able to make consistent gains
Вопрос 49

According to the semi-strong form of the EMH, investors who invest in a stock after a highly positive announcement concerning the stock can expect to earn a(n)

  1. normal return because the stock will be fairly priced when purchased
  2. extraordinary return because the new information will not affect the price until later
  3. loss because things often are not what they seem
  4. zero return because the next price is expected to be the same as the last price
Вопрос 50

A finding that …would provide evidence against the semi-strong form of the efficient market theory.

  1. low P/E stocks tend to have positive abnormal returns
  2. one can consistently outperform the market by adopting the contrarian approach exemplified by the reversals phenomenon
  3. low P/E stocks tend to have positive abnormal returns and trend analysis is worthless in determining stock prices
  4. low P/E stocks tend to have positive abnormal returns and once can consistently outperform the market by adopting the contrarian approach exemplified by the reversals phenomenon
Вопрос 51

Capital investment appraisal refers to:

  1. making sure that assets pay for themselves as soon as possible
  2. evaluating the costs and benefits of proposed investments in operating assets
  3. making sure that there are enough assets to operate
  4. making sure that there is enough money to buy assets
Вопрос 52

Which of the following will not be a relevant factor when using the payback method of capital investment appraisal?

  1. The cost of the asset
  2. The timing of the first cash inflow
  3. The total cash flows generated by the asset
  4. The cash flows generated by the asset up to the payback period
Вопрос 53

What are the two drawbacks associated with the payback period?

  1. The time value of money is ignored. It ignores cash flows beyond the payback period
  2. The time value of money is considered. It ignores cash flows beyond the payback period
  3. The time value of money is considered. It includes cash flows beyond the payback period
  4. The time value of money is ignored. It includes cash flows beyond the payback period
Вопрос 54

The accounting rate of return is measured as follows:

  1. Average annual profit expressed as a percentage of the total funds invested in the project
  2. Average annual profit expressed as a percentage of the average funds invested in the project
  3. Total profits expressed as a percentage of the average funds invested in the project
  4. Total profits expressed as a percentage of the total funds invested in the project
Вопрос 55

Which of the following is not an advantage of the accounting rate of return method of investment appraisal?

  1. The ratio takes account of the overall profit that is generated by the investment
  2. It is easy to understand
  3. There is comparability between the ARR and the ROCE ratio used in financial accounting
  4. It takes into account the time value of money by allowing for depreciation in the equation
Вопрос 56

The difference between an investment’s market value and its cost is the:

  1. net present value
  2. internal rate of return
  3. payback period
  4. profitability index
  5. discounted payback period
Вопрос 57

A project is acceptable when the net present value:

  1. is negative
  2. is positive
  3. is negative provided the only cash outflow occurs at time zero
  4. is positive provided the internal rate of return is less than the required return
Вопрос 58

The internal rate of return for a project will increase if.

  1. the initial cost of a project is increased
  2. the total amount of the cash inflows is reduced
  3. each cash inflow is moved such that it occurs one year later than originally projected
  4. the salvage value of the assets utilized by the project is increased
Вопрос 59

The present value of an investment’s future cash flows divided by the initial cost of the investment is called the:

  1. net present value
  2. internal rate of return
  3. payback period
  4. profitability index
  5. discounted payback period
Вопрос 60

In cases where capital must be rationed, a firm should rank projects according to their:

  1. net present values
  2. internal rates of return
  3. profitability indexes
  4. external rates of return
Вопрос 61

The three important sources of long-term finance are:

  1. loan capital, ordinary shares and preference shares
  2. loan capital, dividends, ordinary shares
  3. dividends, ordinary and preference shares
  4. leasing, loan capital and ordinary shares
Вопрос 62

Ordinary shares in limited companies have:

  1. a limited life, and voting rights and receive dividends
  2. have an unlimited life, and voting rights and receive dividends
  3. have a limited life, with no voting rights but receive dividends
  4. have an unlimited life, and voting rights but receive no dividends
Вопрос 63

Preference shares:

  1. are not allowable for corporation tax
  2. are not part of a company’s share capital
  3. receive dividends
  4. have no voting rights
Вопрос 64

The theoretical ex-rights price is equal to the:

  1. weighted average cost per share of existing shares and the new right shares issued
  2. average share price of existing shares and the new right shares issued
  3. weighted average cost per share of ordinary and preference shares issued
Вопрос 65

Which of the following is a characteristic of a debenture?

  1. Debentures entitle their owners to receive a fixed rate of dividend
  2. Debentures are long-term loans
  3. Debentures holders are never provided with security for their loan
  4. Debenture holders are owners of the company
Вопрос 66

Debentures secured by … are the most secure form of investment.

  1. fixed charges
  2. floating charges
  3. deep-discount bonds
  4. zero-coupon bonds
Вопрос 67

Which of the following statements is not true of zero coupon bonds?

  1. Zero coupon bonds have no coupon payments over its life and only offer a single payment at maturity
  2. Zero coupon bonds do not sell well below their face value (at a deep discount) because they offer no coupons
  3. The most frequent and regular issuer of zero coupon securities is the U.S. Treasury Department
Вопрос 68

In a fixed-interest bond, the variable which changes to determine market rate of return is:

  1. Price
  2. Coupon rate
  3. Coupon amount
  4. Face value
Вопрос 69

Under the terms of a finance lease:

  1. it is cancellable
  2. the lessor is responsible for service and maintenance of the asset
  3. the asset is capitalized in the balance sheet of the lessee
  4. legal tittle to the asset is with the lessee
Вопрос 70

A way to analyze whether debt or lease financing would be preferable is to:

  1. compare the net present values under each alternative, using the cost of capital as the discount rate
  2. compare the net present value under each alternative, using the after-tax cost of borrowing as the discount rate
  3. compare the payback periods for each alternative
  4. compare the effective interest costs involved for each alternative. internal physical interaction
Вопрос 71

Some investors will accept high risk investments and some investors prefer low risk investments. What term best describes that situation?

  1. Risk aversion
  2. Risk return tradeoff
  3. Risk tolerance
  4. Rate of return
Вопрос 72

A rational investor will invest in a risky stock if:

  1. They think they will earn a large return on the investment
  2. They have a high risk tolerance
  3. They have a low rate of return
  4. They have an unsystematic risk
Вопрос 73

The standard deviation of a portfolio:

  1. measures only the unsystematic risk of that portfolio
  2. considers the current value of the investments within that portfolio
  3. is equal to the weighted arithmetic average of the standard deviations of the individual securities included in the portfolio
  4. measures only the systematic risk of that portfolio
Вопрос 74

Risk of two securities having different expected return can be compared with:

  1. standard deviation of securities
  2. variance of securities
  3. coefficient of variation
Вопрос 75

To achieve maximum diversification in a two-asset portfolio, investors should choose stocks with correlation of:

  1. 0
  2. 0.5
  3. +0.5
  4. 1.0
  5. +1.0
Вопрос 76

This type of risk is avoidable through proper diversification:

  1. Portfolio risk
  2. Systematic risk
  3. Unsystematic risk
  4. Total risk
Вопрос 77

Which one of the following is considered an example of systematic risk?

  1. A higher inflation rate that predicted
  2. Higher company profits than those forecasted
  3. An increase in overseas sales for a conglomerate
  4. Lower company sales than predicted
  5. Resignation of a firm’s chief financial officer
Вопрос 78

Beta is a measure of security responsiveness to...

  1. firm-specific risk
  2. diversifiable risk
  3. market risk
  4. unique risk
Вопрос 79

The risk-free security has a beta equal to …, while the market portfolio’s beta is equal to…

  1. one; less than one
  2. zero; one
  3. less than zero; more than zero
Вопрос 80

According to the Capital Asset Pricing Model, a security’s expected (required return) is equal to the risk free rate plus a premium

  1. equal to the security’s beta
  2. based on the unsystematic risk of the security
  3. based on the total risk if the security
  4. based on the systematic risk of the security
Вопрос 81

A firm’s overall cost of capital:

  1. varies inversely with its cost of deb
  2. is unaffected by changes in in the tax rate
  3. is another term for the firm’s internal rate of return
  4. is the same as the firm’s return on equity
  5. is the required return on the total assets of a firm
Вопрос 82

A single, overall cost of capital is often used to evaluate projects because:

  1. It avoids the problem of computing the required rate of return for each investment proposal
  2. It is the only way to measure a firm’s required return
  3. It acknowledges that most new investment projects have about the same degree of risk
  4. It acknowledges that most new investment projects offer about the same expected return
Вопрос 83

Which of the following is not a recognized approach for determining the cost of equity?

  1. Dividend discount model approach
  2. Before-tax cost of preferred stock plus risk premium approach
  3. Capital-asset pricing model approach
  4. Before-tax cost of debt plus risk premium approach
Вопрос 84

Company Q is all equity financed. For each £1 of earnings, it consistently pays 30p in dividends and retains 70p for reinvestment. It expects to earn a rate of return of 14% on capital employed. According to the Gordon Growth Model, what would the rate of earnings growth be in the future? Ignore tax.

  1. 4,2%
  2. 7%
  3. 9,8%
  4. 14%
Вопрос 85

The dividend growth model:

  1. is only as reliable as the estimated rate of growth
  2. can only be used if historical dividend information is available
  3. considers the risk that future dividends may vary from their estimated values
  4. applies only when a firm is currently paying dividends
  5. uses beta to measure the systematic risk of a firm
Вопрос 86

If the CAPM is used to estimate the cost of equity capital, the expected excess market return is equal to the:

  1. return on the stock minus the risk-free rate
  2. difference between the return on the market and the risk-free rate
  3. beta times the market risk premium
  4. beta time the risk-free rate
  5. market rate of return
Вопрос 87

To compute the required rate of return for equity in a company using the CAPM, it is necessary to know all of the following except:

  1. the risk-free rate
  2. the beta for the firm
  3. the earnings for the next time period
  4. the market return expected for the time period
Вопрос 88

Plaid Pants, Inc. common stock hat a beta of 0.90, while Acme

  1. Dynamite Company common stock has a beta of 1.80. The expected return on the market is 10 percent, and the risk-free rate is 6 percent. According to CAPM and making use of the information above, the required return on Plain Pants’ common stock should be …, and the required return on Acme’s common stock should be...
  2. 3.6% and 7.2%
  3. 9.6%, 13.2%
  4. 9.0%, 18.0%
  5. 14.0%, 23.0%
Вопрос 89

The weighted average cost of capital for a firm is the:

  1. discount rate which the firm should apply to all of the projects it undertakes
  2. overall rate which the firm must earn on its existing assets to maintain the value of its stock
  3. rate the firm should expect to pay on its next bond issue
  4. maximum rate which the firm should require on any projects it undertakes
Вопрос 90

The capital structure weights used in computing the weighted average cost of capital:

  1. are based on the book values of total debt and total equity
  2. are based on the market value of the firm's debt and equity securities
  3. are computed using the book value of the long-term debt and the book value of equity
  4. remain constant over time unless the firm issues new securities
Вопрос 91

A payment made out of a firm’s earnings to its owners in the form of either cash or stock is called a:

  1. dividend
  2. distribution
  3. repurchase
  4. payment-in-kind
  5. stock split
Вопрос 92

The market’s reaction to a change in a firm’s dividend payout is referred to as the:

  1. information content effect
  2. clientele effect
  3. efficient markets hypothesis
  4. distribution effect
  5. dividend fallout
Вопрос 93

A cash payment generally paid quarterly by a firm to its owners in the normal course of business is called a:

  1. repurchase
  2. liquidating dividend
  3. regular cash dividend
  4. special dividend
  5. extra cash dividend
Вопрос 94

The target payout ratio is:

  1. a firm’s preferred rate of dividend growth
  2. the amount of dividend required to maintain a constant debt-equity ratio
  3. the inverse of a firm’s equity multiplier
  4. the preferred number of dividend payments per year divided by 12
  5. a firm’s long-term desired dividend-to earnings ratio
Вопрос 95

The information content of a dividend increase generally signals that:

  1. the firm has a one-time surplus of cash
  2. the firm has few, if any, net present value projects to pursue
  3. management believes that the future earnings of the firm will be strong
  4. the firm has more cash than it needs due to sales declines
  5. future dividends will be lower
Вопрос 96

A payment made by a firm to its owners in the form of new shares is called a… dividend.

  1. stock
  2. normal
  3. special
  4. extra
  5. liquidating
Вопрос 97

An investor is more likely to prefer a high dividend payout if a firm:

  1. has a high flotation costs
  2. has few, if any, positive net present value projects
  3. has lower tax rates than the investor
  4. has a stock price that is increasing rapidly
  5. offers high capital gains which are taxed at a favorable rate
Вопрос 98

Of the following factors, which one is considered to be the primary factor affecting a firm’s dividend decision?

  1. Personal taxes of company shareholders
  2. The avoidance of reducing dividends
  3. Attracting retail investors
  4. Attracting institutional investors
  5. Sustainable changes in earnings
Вопрос 99

A stock repurchase program:

  1. requires all shareholders to sell a portion of their shares
  2. is utilized only by firms that do not pay dividends
  3. decreases both the number of shares outstanding and the market price per share
  4. is essentially the same as a cash dividend program provided there are no taxes or other imperfections
Вопрос 100

Martel stock is currently trading at £63 a share. The firm feels their primary clientele can afford to spend between £3,000 and £ 3,500 to purchase a round lot of 100 shares. The firm consider a:

  1. reverse stock split
  2. liquidating dividend
  3. stock dividend
  4. stock split
  5. special dividend