1. Under the percent of sales method, the relationship between sales and what type accounts are
assumed to maintain or constant relationship:
a) income statement
b) cash budget
c) balance sheet
d) cash flows.
2. A higher degree of financial leverage may be desirable for:
a) a stable firm, with positive growth, under favorable economic conditions
b) an unstable firm operating in an uncertain environment
c) a stable firm operating in an uncertain environment
d) neither the stable nor unstable firm under any circumstances
3. In designing working capital policy, the financial manager is concerned with yield curve and:
a) dividend policy
b) balance of trade figures
c) the relative volatility of short and long term rates
d) the term structure of interest rates
4. Treasury bills are:
a) government obligations with a maturity of 3-5 years
b) sold at a discount to face value
c) the only government security that pays cash dividends
d) extremely illiquid, although extremely safe
5. As the least liquid of the current assets, inventory:
a) could technically be classified as a capital asset and amortized
b) should be managed using level production
c) should be managed using seasonal production
d) should provide the highest yield to justify investment
6. All of the following are characteristics of the term loan, except:
a) credit is extended for one to seven years
b) the loan is repaid in one lump sum at maturity
c) only superior credit applicants qualify
d) interest rates may commonly change with market conditions
7. Future value of an amount allowed to grow at a given interest rate over a period of time is known as
the:
a) future value-single amount
b) present value-single amount
c) future value-annuity
d) present value-annuity
8. Canadian mortgages have interest compounded:
a) annually
b) semiannually
c) monthly
d) it depends on the payment period
9. Business risk relates to:
a) the ability of the firm to hold its competitive position
b) the ability of the firm to maintain growth in its earnings
c) the ability of the firm to maintain stability in the earnings
d) all of the above are correct
10. The required rate of return on an equity investment can be determined by:
a) the P/E yield plus the growth rate
b) the dividend yield plus the growth rate
c) the earnings yield
d) the revenue growth rate