Chapter 1 & 2 Corporate Finance

20 Questions | Total Attempts: 16

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Chapter 1 & 2 Corporate Finance

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Questions and Answers
  • 1. 
    Depreciation is a noncash expense. Select one:
    • A. 

      True

    • B. 

      False

  • 2. 
    Matching refers to including all expenses incurred to realize the revenues reported. Select one:
    • A. 

      True

    • B. 

      False

  • 3. 
    Which of the following ratios measure liquidity? Select one:
    • A. 

      A. debt to equity

    • B. 

      B. current

    • C. 

      C. quick

    • D. 

      D. B & C

    • E. 

      E. None of the above

  • 4. 
    Which of the following statements fulfills a firm's requirement to disclose its earnings for a period? Select one:
    • A. 

      A. Statement of Financial Position

    • B. 

      B. Income Statement

    • C. 

      C. Inventory Statement

    • D. 

      D. Cash Flow Statement

  • 5. 
    Which of the following ratios is not used in the duPont formula? Select one:
    • A. 

      A. debt /equity

    • B. 

      B. net income / sales

    • C. 

      C. sales / assets

    • D. 

      D. assets / equity

  • 6. 
    Depreciation is a part of Select one:
    • A. 

      A. Cash flow from financing activities

    • B. 

      B. Cash flow from operating activities

    • C. 

      C. Cash flow from debt activities

    • D. 

      D. None of the above

  • 7. 
    The ratio which many observers use to quantify the stock market's opinion of a firm is the current ratio. Select one:
    • A. 

      True

    • B. 

      False

  • 8. 
    Which of the following measures a firms's profitability and asset usage skill? Select one:
    • A. 

      A. Liquidity ratios

    • B. 

      B. Operating performance ratios

    • C. 

      C. Financial strength ratios

    • D. 

      D. None of the above

  • 9. 
    Which ratio shows the average percentage by which sales price exceeds the cost of goods sold? Select one:
    • A. 

      A. profit margin

    • B. 

      B. asset turnover

    • C. 

      C. gross margin

    • D. 

      D. receivables turnover

    • E. 

      E. return on assets

  • 10. 
    Depreciation expense is a good example of which of the following generally accepted accounting principles? Select one:
    • A. 

      A. Relevance

    • B. 

      B. Matching

    • C. 

      C. Reliability

    • D. 

      D. Understandability

  • 11. 
    There are three distinct steps in developing pro forma statements. Which of the following is not one of those steps? Select one:
    • A. 

      A. qualitative analysis

    • B. 

      B. quantitative analysis

    • C. 

      C. corporate analysis

    • D. 

      D. testing critical assumptions

  • 12. 
    If projected assets exceed liabilities and owners' equity, it is assumed that the difference is funded through stock issuance. Select one:
    • A. 

      True

    • B. 

      False

  • 13. 
    Which of the following is a qualitative factor of the industry? Select one:
    • A. 

      A. General economic conditions

    • B. 

      B. Fixed costs

    • C. 

      C. Variable costs

    • D. 

      D. All of the above

  • 14. 
    Qualitative analysis is the first step in the development of pro forma statements. Select one:
    • A. 

      True

    • B. 

      False

  • 15. 
    Precise forecasts which may be supported by great detail are useless if they do not approximate reality. Select one:
    • A. 

      True

    • B. 

      False

  • 16. 
    Ordinarily, which of the following is decided upon first in projecting income statements? Select one:
    • A. 

      A. fixed costs

    • B. 

      B. variable costs

    • C. 

      C. sales growth rate

    • D. 

      D. none of the above

  • 17. 
    The most significant portions of your projection are, no matter how carefully contrived, still little more than educated guesses. Select one:
    • A. 

      True

    • B. 

      False

  • 18. 
    The single most significant item in a financial projection is Select one:
    • A. 

      A. inventory.

    • B. 

      B. accounts receivable

    • C. 

      C. sales

    • D. 

      D. accounts payable

    • E. 

      E. none of the above

  • 19. 
    Some of the qualitative factors that are company specific include Select one:
    • A. 

      A. current management.

    • B. 

      B. age of facilities.

    • C. 

      C. A and B

    • D. 

      D. None of the above

  • 20. 
    In projecting statements, the analyst makes judgments about the firm's? Select one:
    • A. 

      A. working capital policies

    • B. 

      B. cash reserves

    • C. 

      C. capital expenditures

    • D. 

      D. all of the above

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