D775 D775 - Assessment Study Guide PART 2 UPDATED
ACTUAL Questions and CORRECT Answers
What is the time orientation of financial decision- Future projections and planning
making in business finance? 3 multiple choice options
What are corporate bonds used for? Financing operations and expansions
3 multiple choice options
What are financial derivatives based on? Performance of underlying assets, indexes, or rates
3 multiple choice options
What is a future as a type of financial derivative? A standardized contract to buy or sell an asset at a specified future date and price
3 multiple choice options
What do speculative bonds, or junk bonds, typically Lower risk and lower returns
offer compared to investment-grade bonds? 1 multiple choice option
Which market is an example of a dealer market? National Association of Securities Dealers Automated Quotations (NASDAQ)
3 multiple choice options
What is the primary focus of the Commodity Futures Overseeing futures and options markets
Trading Commission (CFTC)? 3 multiple choice options
What does legal compliance ensure in finance? It ensures adherence to laws and regulations.
3 multiple choice options
What is corporate social responsibility (CSR)? The obligation to contribute positively to society
3 multiple choice options
What do market ratios evaluate? Stock performance
3 multiple choice options
What does a low quick ratio indicate about a company’s Reliance on inventory
liquidity? 3 multiple choice options
What is the focus of the times interest earned (TIE) Earnings covering debt payments
ratio? 3 multiple choice options
Which ratio might the company look at when evaluating Profit margin
its efficacy of the cost-cutting program? 3 multiple choice options
, Which condition would cause a company to have a low Efficient credit policies
average collection period? 3 multiple choice options
Why might the quick ratio be preferred over the current The quick ratio is a more stringent liquidity test.
ratio? 2 multiple choice options
A financial analyst working in the headquarters of a Increases in food costs
large national restaurant chain notices that operating 3 multiple choice options
margins have decreased in one region of the country.
What should the analyst look for in the impacted
locations?
A paint manufacturer recently purchased new Fixed asset turnover ratio
computerized blending equipment for its US 2 multiple choice options
manufacturing operations. The new blending machine
has 4 times the capacity of the older machines it is
replacing but costs about the same to purchase and
operate. Which ratio will the manufacture expect to
increase?
A large electronics producer is looking to invest in new The fixed asset turnover ratio to determine whether current fixed assets are
manufacturing equipment to improve efficiency in generating sufficient revenue
production. What should the company assess when 2 multiple choice options
making this capital allocation decision?
A specialty outdoor retailer with one location is look to Debt-to-equity ratio
add 3 additional stores. Which leverage ratio will the 3 multiple choice options
retailer’s lender analyze before approving debt for the
expansion?
How does the price-earnings (P/E) ratio guide enable It allows comparison of similar firms within an industry.
investors to make investment decisions? 3 multiple choice options
A mid-sized electronics manufacturer is concerned Increase its cash ratio to ensure it can meet short-term obligations
about the possibility of an economic recession. Which
3 multiple choice options
financial strategy should the company adopt to prepare
for the prospect of a financial downturn?
Why do entrepreneurs often decide to maintain very Equity is less risky than debt for the start-up than debt.
low debt-to-equity (D/E) ratios in start-up companies? 3 multiple choice options
A bank is evaluating whether to provide a loan to a The debt-to-assets ratio
large real estate developer. As part of the bank’s 3 multiple choice options
analysis, it reviews the developer’s financial ratios.
Which ratio would the bank most closely evaluate in this
process?
ACTUAL Questions and CORRECT Answers
What is the time orientation of financial decision- Future projections and planning
making in business finance? 3 multiple choice options
What are corporate bonds used for? Financing operations and expansions
3 multiple choice options
What are financial derivatives based on? Performance of underlying assets, indexes, or rates
3 multiple choice options
What is a future as a type of financial derivative? A standardized contract to buy or sell an asset at a specified future date and price
3 multiple choice options
What do speculative bonds, or junk bonds, typically Lower risk and lower returns
offer compared to investment-grade bonds? 1 multiple choice option
Which market is an example of a dealer market? National Association of Securities Dealers Automated Quotations (NASDAQ)
3 multiple choice options
What is the primary focus of the Commodity Futures Overseeing futures and options markets
Trading Commission (CFTC)? 3 multiple choice options
What does legal compliance ensure in finance? It ensures adherence to laws and regulations.
3 multiple choice options
What is corporate social responsibility (CSR)? The obligation to contribute positively to society
3 multiple choice options
What do market ratios evaluate? Stock performance
3 multiple choice options
What does a low quick ratio indicate about a company’s Reliance on inventory
liquidity? 3 multiple choice options
What is the focus of the times interest earned (TIE) Earnings covering debt payments
ratio? 3 multiple choice options
Which ratio might the company look at when evaluating Profit margin
its efficacy of the cost-cutting program? 3 multiple choice options
, Which condition would cause a company to have a low Efficient credit policies
average collection period? 3 multiple choice options
Why might the quick ratio be preferred over the current The quick ratio is a more stringent liquidity test.
ratio? 2 multiple choice options
A financial analyst working in the headquarters of a Increases in food costs
large national restaurant chain notices that operating 3 multiple choice options
margins have decreased in one region of the country.
What should the analyst look for in the impacted
locations?
A paint manufacturer recently purchased new Fixed asset turnover ratio
computerized blending equipment for its US 2 multiple choice options
manufacturing operations. The new blending machine
has 4 times the capacity of the older machines it is
replacing but costs about the same to purchase and
operate. Which ratio will the manufacture expect to
increase?
A large electronics producer is looking to invest in new The fixed asset turnover ratio to determine whether current fixed assets are
manufacturing equipment to improve efficiency in generating sufficient revenue
production. What should the company assess when 2 multiple choice options
making this capital allocation decision?
A specialty outdoor retailer with one location is look to Debt-to-equity ratio
add 3 additional stores. Which leverage ratio will the 3 multiple choice options
retailer’s lender analyze before approving debt for the
expansion?
How does the price-earnings (P/E) ratio guide enable It allows comparison of similar firms within an industry.
investors to make investment decisions? 3 multiple choice options
A mid-sized electronics manufacturer is concerned Increase its cash ratio to ensure it can meet short-term obligations
about the possibility of an economic recession. Which
3 multiple choice options
financial strategy should the company adopt to prepare
for the prospect of a financial downturn?
Why do entrepreneurs often decide to maintain very Equity is less risky than debt for the start-up than debt.
low debt-to-equity (D/E) ratios in start-up companies? 3 multiple choice options
A bank is evaluating whether to provide a loan to a The debt-to-assets ratio
large real estate developer. As part of the bank’s 3 multiple choice options
analysis, it reviews the developer’s financial ratios.
Which ratio would the bank most closely evaluate in this
process?
