D076 OA ACTUAL TEST PAPER COMPLETE
QUESTIONS AND ANSWERS FULL
SOLUTION
●● What does high inventory turnover relative to the industry and
competitors indicate?
Models are required by the SEC when a firm plans to issue additional
stock on the public market.
The firm holds too much inventory and its successful selling its good
and services.
Models allow users to see the complex relationships between sales and
other aspects of the business.
The firm does not hold enough inventory and is making its customers
wait longer to receive their purchased goods.
Answer: The firm does not hold enough inventory and is making its
customers wait longer to receive their purchased goods.
●● What is the ratio that tells you on average how long it takes for a
firm to collect accounts receivable.
Average Benchmarking
Opportunity cost
,Average collection period
Leading indicator
Answer: Average collection period
●● Three different names are used for interest rate for different purposes
and perspectives:
Discount rate, required rate, and cost of capital.
Required rate, correlated indicator, opportunity cost
Cost of capital, interest rate, and renew rate
required rate, discount method, cost of interest
Answer: Discount rate, required rate, and cost of capital.
●● What is the main purpose of charging interest?
interest can be a good tool because it summarizes the required return, but
it is a detriment because it requires a larger cost of capital.
The higher risk an investor takes, the higher return the investor expects
to receive.
Compounding interest can be a good tool to understand the time value of
money, but it is a detriment because it does not take inflation into
account.
It allows borrowers to pay to use the assets of another entity to
accomplish their own goals.
,Answer: It allows borrowers to pay to use the assets of another entity to
accomplish their own goals.
●● The required rate of return is also known as the BLANK in the
context of corporate finance.
Inflation
Hurdle rate
Opportunity cost
Risk
Answer: Hurdle rate
●● The BLANK is the rate of return or compensation that an investor or
lender will accept for investments such as stocks, bonds, or loans.
Hurdle rate
Inflation
Opportunity cost
Required rate of return
Answer: Required rate of return
●● BLANK Is the possibility that the realized or actual return will differ
from the expected return?
, Hurdle rate.
Inflation
Opportunity cost
Risk
Answer: Risk
●● Which components of an interest rate is an indicator of inflation and
opportunity cost?
Capital growth rate
Risk-free rate
Sustainable growth rate
Sales growth rate
Answer: Risk-free rate
●● What is the name for the interest rate expressed on an annual basis?
Sustainable growth rate
Historical regression
Annual percentage rate
Annual Percent of sales
QUESTIONS AND ANSWERS FULL
SOLUTION
●● What does high inventory turnover relative to the industry and
competitors indicate?
Models are required by the SEC when a firm plans to issue additional
stock on the public market.
The firm holds too much inventory and its successful selling its good
and services.
Models allow users to see the complex relationships between sales and
other aspects of the business.
The firm does not hold enough inventory and is making its customers
wait longer to receive their purchased goods.
Answer: The firm does not hold enough inventory and is making its
customers wait longer to receive their purchased goods.
●● What is the ratio that tells you on average how long it takes for a
firm to collect accounts receivable.
Average Benchmarking
Opportunity cost
,Average collection period
Leading indicator
Answer: Average collection period
●● Three different names are used for interest rate for different purposes
and perspectives:
Discount rate, required rate, and cost of capital.
Required rate, correlated indicator, opportunity cost
Cost of capital, interest rate, and renew rate
required rate, discount method, cost of interest
Answer: Discount rate, required rate, and cost of capital.
●● What is the main purpose of charging interest?
interest can be a good tool because it summarizes the required return, but
it is a detriment because it requires a larger cost of capital.
The higher risk an investor takes, the higher return the investor expects
to receive.
Compounding interest can be a good tool to understand the time value of
money, but it is a detriment because it does not take inflation into
account.
It allows borrowers to pay to use the assets of another entity to
accomplish their own goals.
,Answer: It allows borrowers to pay to use the assets of another entity to
accomplish their own goals.
●● The required rate of return is also known as the BLANK in the
context of corporate finance.
Inflation
Hurdle rate
Opportunity cost
Risk
Answer: Hurdle rate
●● The BLANK is the rate of return or compensation that an investor or
lender will accept for investments such as stocks, bonds, or loans.
Hurdle rate
Inflation
Opportunity cost
Required rate of return
Answer: Required rate of return
●● BLANK Is the possibility that the realized or actual return will differ
from the expected return?
, Hurdle rate.
Inflation
Opportunity cost
Risk
Answer: Risk
●● Which components of an interest rate is an indicator of inflation and
opportunity cost?
Capital growth rate
Risk-free rate
Sustainable growth rate
Sales growth rate
Answer: Risk-free rate
●● What is the name for the interest rate expressed on an annual basis?
Sustainable growth rate
Historical regression
Annual percentage rate
Annual Percent of sales
