BFIN 300 EXAM LATEST QUESTIONS
WITH CORRECT ANSWERS
The slope of an asset's security market line is the: - Answer-B) market risk premium.
When the expected future cash flows of an investment project increase, the net present
value of the project: - Answer-C) increases.
A PE is based on: - Answer-C) historical earnings.
The time value of money concept can be defined as: - Answer-C) the relationship
between a dollar to be received in the future and a dollar today.
Ratios that measure how efficiently a firm's management manages its current asset and
current liability accounts are known as _____________ ratios. - Answer-liquidity
Cash flow to stockholders must be positive when: - Answer-C) the dividends paid
exceed the net new equity raised.
The ________________ breaks down return on equity into three component parts. -
Answer-B) Du Pont identity
To convince investors to accept greater volatility, you must: - Answer-C) increase the
risk premium.
Incremental cash flows include any cost that: - Answer-A) will change if a project is
undertaken.
The default risk premium is the: - Answer-B) compensation investors demand for
accepting credit risk.
Using a payback period of three years for projects is: - Answer-B) an arbitrary decision
by management.
The cash flow tax savings generated as a result of a firm's tax-deductible depreciation
expense is called the: - Answer-C) depreciation tax shield.
One of the reasons why cash flow analysis is popular is because: - Answer-B) it is
difficult to manipulate, or spin the cash flows.
, Which one of the following statements best defines the efficient market hypothesis? -
Answer-A) All securities in an efficient market are zero net present value investments.
An increase in current assets: - Answer-B) is a cash flow out.
A bond has a market price that exceeds its face value. Therefore, the: - Answer-A) yield
to maturity is less than the coupon rate.
The financial ratio measured as net income divided by total assets is known as the
firm's: - Answer-A) return on assets
It is easier to evaluate a firm using its financial statements when the firm: - Answer-B)
uses the same accounting procedures as other firms in its industry.
The cash flow tax savings generated as a result of a firm's tax-deductible depreciation
expense is called the: - Answer-A) depreciation tax shield.
An increase in total assets: - Answer-A) must be offset by an equal increase in liabilities
and shareholders' equity.
Dividends per share are equal to dividends paid: - Answer-) divided by the total number
of shares outstanding.
The secondary market is best defined by which one of the following? - Answer-Market
where outstanding shares of stock are resold.
. Net working capital is: - Answer-current assets minus current liabilities.
The two-stage dividend growth model evaluates the current price of a stock based on
the assumption a stock will: - Answer-grow at a fixed rate for a period of time after which
it will grow at a different rate indefinitely.
The interest rate risk premium is the: - Answer-compensation investors demand for
accepting interest rate risk.
Standard deviation measures: - Answer-total risk.
Ratios that measure how efficiently a firm's management uses its assets and equity to
generate bottom line net income are known as _____________ ratios. - Answer-
profitability
When a company introduces a product that competes with one of its own existing
products, this is called: - Answer-B) cannibalism.
WITH CORRECT ANSWERS
The slope of an asset's security market line is the: - Answer-B) market risk premium.
When the expected future cash flows of an investment project increase, the net present
value of the project: - Answer-C) increases.
A PE is based on: - Answer-C) historical earnings.
The time value of money concept can be defined as: - Answer-C) the relationship
between a dollar to be received in the future and a dollar today.
Ratios that measure how efficiently a firm's management manages its current asset and
current liability accounts are known as _____________ ratios. - Answer-liquidity
Cash flow to stockholders must be positive when: - Answer-C) the dividends paid
exceed the net new equity raised.
The ________________ breaks down return on equity into three component parts. -
Answer-B) Du Pont identity
To convince investors to accept greater volatility, you must: - Answer-C) increase the
risk premium.
Incremental cash flows include any cost that: - Answer-A) will change if a project is
undertaken.
The default risk premium is the: - Answer-B) compensation investors demand for
accepting credit risk.
Using a payback period of three years for projects is: - Answer-B) an arbitrary decision
by management.
The cash flow tax savings generated as a result of a firm's tax-deductible depreciation
expense is called the: - Answer-C) depreciation tax shield.
One of the reasons why cash flow analysis is popular is because: - Answer-B) it is
difficult to manipulate, or spin the cash flows.
, Which one of the following statements best defines the efficient market hypothesis? -
Answer-A) All securities in an efficient market are zero net present value investments.
An increase in current assets: - Answer-B) is a cash flow out.
A bond has a market price that exceeds its face value. Therefore, the: - Answer-A) yield
to maturity is less than the coupon rate.
The financial ratio measured as net income divided by total assets is known as the
firm's: - Answer-A) return on assets
It is easier to evaluate a firm using its financial statements when the firm: - Answer-B)
uses the same accounting procedures as other firms in its industry.
The cash flow tax savings generated as a result of a firm's tax-deductible depreciation
expense is called the: - Answer-A) depreciation tax shield.
An increase in total assets: - Answer-A) must be offset by an equal increase in liabilities
and shareholders' equity.
Dividends per share are equal to dividends paid: - Answer-) divided by the total number
of shares outstanding.
The secondary market is best defined by which one of the following? - Answer-Market
where outstanding shares of stock are resold.
. Net working capital is: - Answer-current assets minus current liabilities.
The two-stage dividend growth model evaluates the current price of a stock based on
the assumption a stock will: - Answer-grow at a fixed rate for a period of time after which
it will grow at a different rate indefinitely.
The interest rate risk premium is the: - Answer-compensation investors demand for
accepting interest rate risk.
Standard deviation measures: - Answer-total risk.
Ratios that measure how efficiently a firm's management uses its assets and equity to
generate bottom line net income are known as _____________ ratios. - Answer-
profitability
When a company introduces a product that competes with one of its own existing
products, this is called: - Answer-B) cannibalism.
