BFIN 300 Exam 2- 70 Questions with Correct
Verified Answers
When a company introduces a product that competes with one of its own existing products,
this is called:
B) cannibalism.
4. The primary function of a business is to:
C) enhance shareholder wealth over the long term.
5. An investor wishing to decrease volatility should purchase securities with
B) lower risk premiums.
8. A disadvantage of the internal rate of return method of valuing capital budgets is it:
C) assumes all cash flows are reinvested at the IRR.
12. The rate of return required by investors in the market for owning a bond is called the:
C) yield to maturity.
15. The terms of a bond issue are spelled out in the bond:
B) indenture.
16. A cost that has already been paid, or the liability to pay has already been incurred is
a(n):
B) sunk cost.
, 19. The ratio that measures how much an investor is willing to pay for a dollar of earnings
is known as a _____________ ratio.
A) market value
21. Which of the following is not a disadvantage of the discounted payback period method?
It ignores the time value of money.
22. Management may be hesitant to initiate regular dividends because:
A) dividends are sticky.
27. A security's beta is described as:
C) a measure of how the returns of that security co-vary with the returns of the market.
28. To determine cash flows for a capital budget, we must consider:
B) changes in net working capital.
29. The capital budgeting decision tool most commonly used by chief financial officers in
business today is:
C) net present value.
32. Because stocks represent ownership in the underlying company, they are considered to
be:
C) riskier than bonds of the same company.
35. The underlying assumption of the dividend growth model is that a stock is worth:
A) the present value of the future income which the stock generates.
Verified Answers
When a company introduces a product that competes with one of its own existing products,
this is called:
B) cannibalism.
4. The primary function of a business is to:
C) enhance shareholder wealth over the long term.
5. An investor wishing to decrease volatility should purchase securities with
B) lower risk premiums.
8. A disadvantage of the internal rate of return method of valuing capital budgets is it:
C) assumes all cash flows are reinvested at the IRR.
12. The rate of return required by investors in the market for owning a bond is called the:
C) yield to maturity.
15. The terms of a bond issue are spelled out in the bond:
B) indenture.
16. A cost that has already been paid, or the liability to pay has already been incurred is
a(n):
B) sunk cost.
, 19. The ratio that measures how much an investor is willing to pay for a dollar of earnings
is known as a _____________ ratio.
A) market value
21. Which of the following is not a disadvantage of the discounted payback period method?
It ignores the time value of money.
22. Management may be hesitant to initiate regular dividends because:
A) dividends are sticky.
27. A security's beta is described as:
C) a measure of how the returns of that security co-vary with the returns of the market.
28. To determine cash flows for a capital budget, we must consider:
B) changes in net working capital.
29. The capital budgeting decision tool most commonly used by chief financial officers in
business today is:
C) net present value.
32. Because stocks represent ownership in the underlying company, they are considered to
be:
C) riskier than bonds of the same company.
35. The underlying assumption of the dividend growth model is that a stock is worth:
A) the present value of the future income which the stock generates.
