FIN380 FINAL CERTIFICATION SCRIPT
2026 QUESTIONS WITH SOLUTIONS
GRADED A+
• discounted payback period.
Answer: The time required to break even after discounting future cash flows
to account for the time value of money
• The semi-strong form of the efficient market hypothesis implies
that___________ gernate abnormal returns and ___________ gererate
abnormal returns..
Answer: technical analysis cannot; fundamental analysis cannot
• What stock is likely to have the lowest R-squared in a regression estimate of
the single index model? A ____________..
Answer: low-beta stock with high firm-specific risk.
• Common-Size Statements.
Answer: Standardized reports that present all items in percentage terms
rather than dollars to facilitate comparisons between companies of different
sizes
• liquidity ratios.
Answer: ratios that measure a firm's ability to pay its bills over the short run
without undue stress
• Common-Size Balance Sheet.
Answer: Expresses each item as a percentage of total assets
• independent projects.
Answer: projects where the acceptance or rejection of the one does not
affect the cash flows of the other
• The term random walk is used in investments to refer to ___________..
Answer: stock price changes that are random and unpredictable
, • Statement of Cash Flows.
Answer: A financial statement that summarizes a firm's sources and uses of
cash over a specified period, grouped into operating, investment, and
financing activities
• According to the semi-strong form of the efficient markets hypothesis,
___________..
Answer: future changes in stock prices cannot be predicted from any
information that is publicly available
• In a simple CAPM world, which of the following statements is (are)
correct?.
Answer: I. All investors will choose to hold the market portfolio, which
includes all risky assets in the world. II. Investors' complete portfolio will
vary depending on their risk aversion. III. The return per unit of risk (Beta)
will be identical for all individual assets. IV. The market portfolio will be on
the efficient frontier, and it will be the optimal risky portfolio.
• cash flow to creditors.
Answer: A firm's interest payments to creditors minus any net new
borrowing
• noncash items.
Answer: Expenses charged against revenues that do not directly affect cash
flow, such as depreciation
• goal of capital budgeting.
Answer: To make informed decisions on allocating limited resources to
enhance shareholder value and maximize wealth
• free cash flow.
Answer: Another term for cash flow from assets, referring to cash that is
"free" to be distributed to creditors and stockholders because it is not needed
for working capital or fixed asset investments
• According to the CAPM, a security with a ___________..
2026 QUESTIONS WITH SOLUTIONS
GRADED A+
• discounted payback period.
Answer: The time required to break even after discounting future cash flows
to account for the time value of money
• The semi-strong form of the efficient market hypothesis implies
that___________ gernate abnormal returns and ___________ gererate
abnormal returns..
Answer: technical analysis cannot; fundamental analysis cannot
• What stock is likely to have the lowest R-squared in a regression estimate of
the single index model? A ____________..
Answer: low-beta stock with high firm-specific risk.
• Common-Size Statements.
Answer: Standardized reports that present all items in percentage terms
rather than dollars to facilitate comparisons between companies of different
sizes
• liquidity ratios.
Answer: ratios that measure a firm's ability to pay its bills over the short run
without undue stress
• Common-Size Balance Sheet.
Answer: Expresses each item as a percentage of total assets
• independent projects.
Answer: projects where the acceptance or rejection of the one does not
affect the cash flows of the other
• The term random walk is used in investments to refer to ___________..
Answer: stock price changes that are random and unpredictable
, • Statement of Cash Flows.
Answer: A financial statement that summarizes a firm's sources and uses of
cash over a specified period, grouped into operating, investment, and
financing activities
• According to the semi-strong form of the efficient markets hypothesis,
___________..
Answer: future changes in stock prices cannot be predicted from any
information that is publicly available
• In a simple CAPM world, which of the following statements is (are)
correct?.
Answer: I. All investors will choose to hold the market portfolio, which
includes all risky assets in the world. II. Investors' complete portfolio will
vary depending on their risk aversion. III. The return per unit of risk (Beta)
will be identical for all individual assets. IV. The market portfolio will be on
the efficient frontier, and it will be the optimal risky portfolio.
• cash flow to creditors.
Answer: A firm's interest payments to creditors minus any net new
borrowing
• noncash items.
Answer: Expenses charged against revenues that do not directly affect cash
flow, such as depreciation
• goal of capital budgeting.
Answer: To make informed decisions on allocating limited resources to
enhance shareholder value and maximize wealth
• free cash flow.
Answer: Another term for cash flow from assets, referring to cash that is
"free" to be distributed to creditors and stockholders because it is not needed
for working capital or fixed asset investments
• According to the CAPM, a security with a ___________..
