C214 Financial Management Objective Assessment Review Questions With 100% Correct Answers

C214 Financial Management Objective Assessment Review Questions With 100% Correct Answers If accounts receivable increases, what is impact on CFO? CFO decreases What is the "required return" of a stock or bond? The minimum yield necessary to induce investors to buy the security Are actual taxes paid the same as shown on GAAP income statement? No. Actual taxes based on IRS rules while income statement based on GAAP Which decisions require using subjective estimates? Economic life of a new asset and depreciation of asset If there is a 30% chance of a recession, what is the probability of expansion? 70% - - the sum of the probabilities must equal 100% How much interest is paid on a 6% bond over 2 years and 3 months? (Simple Interest) 6% x 1000 = $60 per year $60 x 2.25 = $135 How does a "prudent investor" select investments? Seeks the highest return for "appropriate" amount of risk What do points on the Efficient Frontier measure? The maximum return for a given level of risk; maximum Return-to-risk ratio What is Beta? Measure of volatility of a stock's risk relative to the market Why are accurate forecasts important? Plan for resources to support production and financing Which ratio is used in valuing a private company? PE ratio in the Comparable Multiples method What are the 4 costs associated with holding inventory? Product, storage, holding, and opportunity What risk is eliminated by a diversified portfolio? Idiosyncratic risk - risk affecting a single firm