FIN 3403
Business Finance
Finals Exam (Qns & Ans)
2025
General Instructions
1. Read All Questions Carefully: Make sure you understand each question.
2. Time Management: You have a specific amount of time to complete the exam.
Keep an eye on the clock and pace yourself.
3. Allowed Materials: Only use materials that are explicitly allowed. Unauthorized
materials can lead to disqualification.
4. ANS Format: Follow the required format for your ANS. For example, multiple-
choice questions might need you to select the best ANS, while essay questions
require detailed responses.
5. Academic Integrity: Adhere to the university's honor code. Any form of cheating or
plagiarism is strictly prohibited.
6. Technical Requirements: Ensure your computer and internet connection are
stable. For online exams, you might need a webcam and microphone for proctoring
purposes.
7. Submission: Submit your ANS before the time expires. Late submissions might
not be accepted.
©2024/2025
,1. Which of the following is considered a key element in the
Capital Asset Pricing Model (CAPM)?
A) Market Risk Premium
B) Earnings Before Interest and Taxes
C) Total Asset Turnover
D) Dividend Payout Ratio
Correct ANS: A
Rationale: The CAPM includes the market risk premium as a
key element in determining the expected return on an asset based
on its systematic risk.
2. In financial terms, which of the following best describes
'leverage'?
A) The ability to secure funding through equity
B) The ratio of debt to equity in a firm's capital structure
C) The relationship between current assets and current liabilities
D) The firm's ability to generate revenue
Correct ANS: B
Rationale: Leverage refers to the use of debt to increase the
potential return of an investment, often captured by ratios like
debt-to-equity.
©2024/2025
,3. Which of the following is the most relevant when calculating
the Net Present Value (NPV) of a project?
A) Historical Costs
B) Expected Future Cash Flows
C) Sunk Costs
D) Book Value
Correct ANS: B
Rationale: NPV assesses the profitability of an investment
project by discounting expected future cash flows to their present
value.
4. What does the term 'cost of equity' refer to?
A) The required return by shareholders
B) The actual dividends paid out
C) The tax rate applied to corporate earnings
D) The cost of issuing new equity
Correct ANS: A
Rationale: The cost of equity is the return that investors
expect on their investment in a company, typically estimated
using models like CAPM.
©2024/2025
, Fill-in-the-Blank Questions
5. The _____ ratio measures a company's ability to meet its
short-term obligations with its most liquid assets.
Correct ANS: Current
Rationale: The current ratio is a liquidity ratio that measures
a company's ability to cover its short-term liabilities with its
short-term assets.
6. In finance, the _____ premium compensates investors for the
risk associated with investing in stocks over risk-free government
bonds.
Correct ANS: equity
Rationale: The equity risk premium is the excess return that
investing in the stock market provides over a risk-free rate.
7. The _____ method is a commonly used technique to estimate
the future cash flows from a project or investment.
Correct ANS: Discounted cash flow
Rationale: The discounted cash flow (DCF) method values an
investment based on its expected future cash flows once they have
been adjusted for time value.
True/False Questions
©2024/2025
Business Finance
Finals Exam (Qns & Ans)
2025
General Instructions
1. Read All Questions Carefully: Make sure you understand each question.
2. Time Management: You have a specific amount of time to complete the exam.
Keep an eye on the clock and pace yourself.
3. Allowed Materials: Only use materials that are explicitly allowed. Unauthorized
materials can lead to disqualification.
4. ANS Format: Follow the required format for your ANS. For example, multiple-
choice questions might need you to select the best ANS, while essay questions
require detailed responses.
5. Academic Integrity: Adhere to the university's honor code. Any form of cheating or
plagiarism is strictly prohibited.
6. Technical Requirements: Ensure your computer and internet connection are
stable. For online exams, you might need a webcam and microphone for proctoring
purposes.
7. Submission: Submit your ANS before the time expires. Late submissions might
not be accepted.
©2024/2025
,1. Which of the following is considered a key element in the
Capital Asset Pricing Model (CAPM)?
A) Market Risk Premium
B) Earnings Before Interest and Taxes
C) Total Asset Turnover
D) Dividend Payout Ratio
Correct ANS: A
Rationale: The CAPM includes the market risk premium as a
key element in determining the expected return on an asset based
on its systematic risk.
2. In financial terms, which of the following best describes
'leverage'?
A) The ability to secure funding through equity
B) The ratio of debt to equity in a firm's capital structure
C) The relationship between current assets and current liabilities
D) The firm's ability to generate revenue
Correct ANS: B
Rationale: Leverage refers to the use of debt to increase the
potential return of an investment, often captured by ratios like
debt-to-equity.
©2024/2025
,3. Which of the following is the most relevant when calculating
the Net Present Value (NPV) of a project?
A) Historical Costs
B) Expected Future Cash Flows
C) Sunk Costs
D) Book Value
Correct ANS: B
Rationale: NPV assesses the profitability of an investment
project by discounting expected future cash flows to their present
value.
4. What does the term 'cost of equity' refer to?
A) The required return by shareholders
B) The actual dividends paid out
C) The tax rate applied to corporate earnings
D) The cost of issuing new equity
Correct ANS: A
Rationale: The cost of equity is the return that investors
expect on their investment in a company, typically estimated
using models like CAPM.
©2024/2025
, Fill-in-the-Blank Questions
5. The _____ ratio measures a company's ability to meet its
short-term obligations with its most liquid assets.
Correct ANS: Current
Rationale: The current ratio is a liquidity ratio that measures
a company's ability to cover its short-term liabilities with its
short-term assets.
6. In finance, the _____ premium compensates investors for the
risk associated with investing in stocks over risk-free government
bonds.
Correct ANS: equity
Rationale: The equity risk premium is the excess return that
investing in the stock market provides over a risk-free rate.
7. The _____ method is a commonly used technique to estimate
the future cash flows from a project or investment.
Correct ANS: Discounted cash flow
Rationale: The discounted cash flow (DCF) method values an
investment based on its expected future cash flows once they have
been adjusted for time value.
True/False Questions
©2024/2025
