Test On Corporate Finance For CFA Level 1
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There are 19 questions in this test from the Corporate Finance section of the CFA Level 1 syllabus. You will get 28 minutes to complete the test.
- 1.Stockholders' equity is:
- A.
The fair market value of a company
- B.
Liabilities minus assets
- C.
Contributed capital plus retained earnings
- 2.
- A.
$16,775
- B.
$19,090
- C.
$25,000
- 3.
- A.
If the NPV of a project is greater than 0, its PI will equal 0
- B.
If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0
- C.
If the PI of a project is less than 1, its NPV should be less than 0
- 4.
- A.
Net profit margin = 37.32%
- B.
Asset turnover = 11.81%
- C.
Leverage = 1.87
- 5.
- A.
6%
- B.
10%
- C.
10.4%
- 6.
- A.
Becomes less profitable
- B.
Increases its investment in working capital
- C.
Reduces its accounts payable period
- 7.
- A.
3.2 years
- B.
3.5 years
- C.
4 years
- 8.A (n) ______ would be an example of a principal, while a (n) _____ would be an example of an agent.
- A.
Shareholder; manager
- B.
Manager; owner
- C.
Accountant; bondholder
- 9.The company cost of capital for a firm with a 60/40 debt/equity split, 8% cost of debt, 15% cost of equity, and a 35% tax rate would be:
- A.
7.02%
- B.
9.12%
- C.
13.80%
- 10.A company's _______ is (are) potentially the most effective instrument of good corporate governance.
- A.
Common stock shareholders
- B.
Board of directors
- C.
Top executive officers
- 11.Ninety-percent of Vogel Bird Seed's total sales of $600,000 is on credit. If its year-end receivables turnover is 5, the average collection period (based on a 365-day year) and the year-end receivables are, respectively:
- A.
365 days and $108,000
- B.
73 days and $120,000
- C.
73 days and $108,000
- 12.Woatich Windmill Company is considering a project that calls for an initial cash outlay of $50,000. The expected net cash inflows from the project are $7,791 for each of 10 years. What is the IRR of the project?
- A.
6%
- B.
8%
- C.
9%
- 13.
![The Pan American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The net cost of this machine is $45,000. The annual cash flows have the following projections:
What is the net present value of selecting the new machine, assuming cost of capital of 10%? - ProProfs]( "The Pan American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The net cost of this machine is $45,000. The annual cash flows have the following projections:
What is the net present value of selecting the new machine, assuming cost of capital of 10%?")
- A.
$11,883
- B.
$13,883
- C.
$15,883
- 14.As a firm's cash conversion cycle increases, the firm:
- A.
Becomes less profitable
- B.
Increases its investment in working capital
- C.
Reduces its accounts payable period
- 15.
- A.
10.73%
- B.
16.00%
- C.
19.00%
- 16.
- A.
$23.32
- B.
$29.14
- C.
$41.18
- 17.What will be the category of company, whose stock could most suitably be valued using The constant-growth dividend discount model:
- A.
"Mature" company
- B.
Rapidly growing company
- C.
A Start up
- 18.
- A.
Profit margins are normally consistent across firms within an industry
- B.
Sales are relatively stable and might not change, thus giving stability to stock price, even though earnings might change significantly
- C.
P/S multiple provides a framework to evaluate the effects of corporate policy decisions and price changes
- 19.
- A.
-10.44, Reject
- B.
-13.81, Reject
- C.
-13.81, Accept
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