Solutions
Which of the following gives the largest effective rate (APY)
a. 18.6% compounded monthly
b. 18.6% compounded daily
c. 18.6% compounded weekly
d. 18.6% compounded yearly b
What does the beta coefficient represent?
a. It is a statistically-derived measure of volatility
b. It is the Expected Return minus the Growth Rate
c. It is the volatility of the Risk Free Return
d. It is the expected return for a basket of preferred stocks a
Why is depreciation expense taken out of the net income calculation, yet added back at the end?
a. Because fixed assets should remain on the balance sheet
b. Because depreciation is not a current asset
,c. Because depreciation is a non-cash liability
d. Because depreciation expense is tax deductible d
Why is the NPV preferred over the IRR? Pick Two
a. It has a higher dollar value
b. It measures the dollar value
c. It is more reliable
d. It is harder to calculate b, c
What does the Degree of Financial Leverage indicate?
a. The firms cash balance
b. The cost of financed assets
c. The reliance on debt
d. The reliance on assets c
If a company has a high degree of financial leverage, what does that tell us about the firm's risk
profile?
a. Low Risk
,b. Appropriate Risk
c. Higher ability to pay debt
d. Higher profits to shareholders d
What is the cash cycle?
a. The speed of collecting cash from customers
b. The amount of cash kept in banks
c. The comparison of debt to cash
d.The amount of time to regenerate cash d
Why is float important to understand?
a. To know how to keep the company profitable
b. To know why the company needs cash
c. To determine when to buy fixed assets
d. To time cash expenditures
e. None of the above d
What should a company do to manage its working capital?
, a. Collect quickly and pay slowly
b. Keep a large cash balance
c. Maximize the use of long term investment
d. Depreciate assets more slowly a
What would be a source of information to determine Replacement Cost?
a. Building Appraisal
b. Accumulated Depreciation Expense
c. Stock price
d. Statement of Cash Flows a
What does the Sarbanes-Oxley Act require companies to do?
a. Have a board of directors
b. Register all foreign sales
c. Make estimated tax payments
d. Have internal control audits d
FINRA (Financial Industry Regulatory Authority) does the following: (pick one)