Advanced Corporate Finance

19 Questions | Total Attempts: 343

SettingsSettingsSettings
Please wait...
Corporate Finance Quizzes & Trivia

Questions and Answers
  • 1. 
    Which of the following statements is false?
    • A. 

      Fundamentally, interest rates are determined by the Federal Reserve.

    • B. 

      The interest rates that are quoted by banks and other financial institutions are nominal interest rates.

    • C. 

      The Federal Reserve determines very short-term interest rates through its influence on the federal funds rate.

    • D. 

      The interest rates that banks offer on investment or charge on loans depends on the horizon of the investment or loan.

  • 2. 
    Which of the following statements is false?
    • A. 

      The relationship between the investment term and the interest rate is called the term structure of the interest rate.

    • B. 

      Real interest rates indicate the rate at which your money will grow if invested for a certain period.

    • C. 

      The yiesd curve is a potential leading indicator of future economic grow.

    • D. 

      The shape of the yield curve will be strongly influenced by interest rate expectations.

  • 3. 
    Which of the following statements is false?
    • A. 

      As firms mature, their earnings exeed their investment needs they begin to pay dividends.

    • B. 

      Total return = earnings * by the divident payout rate.

    • C. 

      Cutting the firm`s dividend to increase investment will raise the stock price if, and only if, the new investment have a positive NPV.

    • D. 

      We cannot use the constant dividend growth model to value the stock of a firm with rapid or changing growth.

  • 4. 
    The date on which the board authorizes the dividend is the:
    • A. 

      Declaration date.

    • B. 

      Distribution date.

    • C. 

      Record date.

    • D. 

      Ex-dividend date.

  • 5. 
    The firm will pay the divident to all shareholders who are registered owners on a specific dare, set by the board, called the:
    • A. 

      Record date.

    • B. 

      Declaration date.

    • C. 

      Distribution date.

    • D. 

      Ex-dividend date.

  • 6. 
    Anyone who purchases the stock on or after the______ date will not receive the devidend.
    • A. 

      Distribution.

    • B. 

      Ex-dividend.

    • C. 

      Record.

    • D. 

      Declaration.

  • 7. 
    Which of the following statements is false?
    • A. 

      Most companies that pay dividends pay them semiannually.

    • B. 

      From an accounting perspective, dividends generally reduce the firm`s current (or accumulated) retained earnings.

    • C. 

      The way a firm chooses between paying dividends and retaining earnings is referred to as its payout policy.

    • D. 

      Occasionally, a firm may pay a one-time, special dividend that is usually much large than a regular dividend.

  • 8. 
    A firm can repurchase shares through a(n)______ in which it offers to buy shares at a prespecified price during a short time period, generally within 20 days.
    • A. 

      Tender offer.

    • B. 

      Open market share repurchases.

    • C. 

      Target repurchase.

    • D. 

      Dutch auction share repurchase.

  • 9. 
    One of methods to repurchase shares is the__________, in which the firm lists different prices at which it is prepared to buy shares, and shareholders in turn indicate how many shares they are willing to sell at each price.
    • A. 

      Dutch auction share repurchase.

    • B. 

      Tender offer.

    • C. 

      Targeted repurchase.

    • D. 

      Open market share repurchases.

  • 10. 
    A(n)_________is the most common way that firms repurchase shares.
    • A. 

      Target repurchase

    • B. 

      Dutch auction share repurchse.

    • C. 

      Tender offer.

    • D. 

      Open market share repurchases.

  • 11. 
    Which of the following statements is false?
    • A. 

      Equity holders expect to receive dividends and the firm is legally obligated to pay them.

    • B. 

      A firm that fails to make the required interest or principal payment on the debt is in default.

    • C. 

      In the extreme case, the debt holders take legal ownership of firm`s assets through a process called bankruptcy.

    • D. 

      After a firm defaults, debt holders are given certain rights to the assets of the firm.

  • 12. 
    Which of the following statements is false?
    • A. 

      An important consequence of leverage is the risk of bankruptcy.

    • B. 

      Whether default occurs depends on the cash flow, not on the relative value of the firm`s assets and liabilities.

    • C. 

      Economic distress is a significant decline in the value of a firm`s assets, whether or not it experiences financial distress due to leverage.

    • D. 

      Modigliani and Miller`s results continue to hold in a perfect market even when debt is risky and the firm may default.

  • 13. 
    Which of the following statements regarding perpetuities is false?
    • A. 

      To find the value of a perpetuity one cash flow at a time would take forever.

    • B. 

      A perpetuity is a stream of equal cash flows that occur at regular intervals and last forever.

    • C. 

      PV of a perpetuity = r/C

    • D. 

      One example of a perpetuity is the British goverment bond called a consol.

  • 14. 
    Which of the following statements is regarding annuities is false?
    • A. 
    • B. 

      The difference between an annuity and perpetuity is that a perpetuity ends after some fixed number of payments.

    • C. 

      An annuity is a stream of N equal cash flows paid at regular intervals.

    • D. 

      Most car loans, mortgages, and some bonds are annuities.

  • 15. 
    Which of the followig statements is false?
    • A. 

      The interest rates that banks offer on investments or charge on loans depends on the horizon of the investment or loan.

    • B. 

      The Federal Reserve determines very short-term interest rates through its influence on the federal funds rate.

    • C. 

      Fundamentally, interest rates are determined by the Federal Reserve.

  • 16. 
    Which of the following statements is false?
    • A. 

      The relationship between the investment term and the interest rate is called the term structure of interest rates.

    • B. 

      Real interest rates indicate the rate at which your money will grow if invested for a certain period.

    • C. 

      The yield curve is a potential leading indicator of future economic grow.

  • 17. 
    P/E ratio?
    • A. 

      P/E ratio = Share Price/EPS

    • B. 

      P/E ratio = Profit/Number of Shares Outstanding

  • 18. 
    Share Price ?
    • A. 

      Equty = Share Price * Shares Outstanding

    • B. 

      SP = Equty / Shares Outstanding

  • 19. 
    A voluntary reorganization of debts whereby a firm`s debt obligations are still expected to be paid in full but at a later than originally scheduled date, is called?
    • A. 

      A composition.

    • B. 

      An extention.

    • C. 

      Creditor control

    • D. 

      None of the above