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Course # 171008
Financial Concepts and Tools for Managers
based on the electronic .pdf file(s):

Financial Concepts and Tools for Managers
by: Dr. Jae K. Shim, Ph.D., 2009, 140 pages

9 CPE Credit Hours

A P E X C P E . C O M  . . . . .  1.877.317.9047  . . . . .  support@apexcpe.com

Chapter 1 - Financial Institutions And Markets

1.    Tax planning for a company can not include:   7
Personal business
2.    Financial managers influence all except:   9
Present and future earnings per share
Timing, duration, and risk of earnings
Dividend policy
3.    The controller is not concerned with internal matters that include:   9
Financial and cost accounting
Market strategies
4.    Which one of the following is not a depreciation method?   13
Accelerated cost recovery
Sum-of-the-year’s digit
5.    ________ is not one of tax deductions:   14
Pension expense
Capital gains or losses
Actual bad debts

Chapter 2 - Solvency And Debt Service Ratios

6.    ________ is not a balance sheets item:   16
Stockholder’s equity
7.    Stockholder’s equity section does not show:   17
Capital stock
Portfolio diversification
Retained earnings
Treasury stock
8.    Cash outflows fro investing activities include:   17
Repurchasing of stock
Payments to buy fixed assets
Payment of dividends
Cash paid for inventory or on accounts payable
9.    Some questions answered by the statement of cash flows include all except:   18
Where did the earnings go
How was prime rate secured
How was debt retired
What became of the proceeds of a bond
10.    _______________ is not a liquidity ratio:   19
Quick ratio
Net working capital
Cash coverage ratio
Current ratio
11.    Net working capital is the difference between:   19
Current assets and current liabilities
Fixed assets and fixed liabilities
Total assets and total liabilities
Shareholders’ investment and cash
12.    Free cash flow (FCF) is cash flow from operations minus cash used to purchase fixed assets minus ____________________.   21
Stock dividends
Share repurchase
Cash dividends
Debt payment
13.    The following information pertains to Como Co. for the year ended December 31, 20x7: Sales $600,000 Operating income 100,000 Operating assets 400,000 Which of the following equations should be used to compute Como's return on investment?   24
(4/6) x (6/1) = ROI
(4/6) x (1/6) = ROI
(6/4) x (1/6) = ROI
(6/4) x (6/1) = ROI
14.    Market value added (MVA) is ___________________ minus equity capital supplied by shareholders.   25
Economic value added
Price-earnings ratio (multiple)
Market value
Book value per share

Chapter 3 - Cash Budgeting

15.    Steps in the budgeting process include all except:   29
Prepare a sales forecast
Determine expected production volume
Estimate manufacturing costs and operating expenses
Ignore external data
16.    Which one of the following is not a type of budget?   29
Short-fall budgets
Sales budget
Direct labor budget
Factory overhead budget
17.    Basic steps in projecting external financial needs do not include:   31
Project the firm’s sales
Project competition’s market share
Estimate level of investment
Calculate the firm’s financial needs.

Chapter 4 - Market Index Models

18.    The most direct way to prepare a cash budget is to include:   31
Projected sales, credit terms, and net income
Sales projections and credit terms, collection percentages, estimated purchases and payment terms, and other cash receipts and disbursements
Projected purchases, percentages of purchases paid, and net income
Projected sales and percentages of collections
19.    A popular cash management model is:   36
Baumol model
Miller-Miller model
Analog model
Discount model

Chapter 5 - Capital Budgeting

20.    The relative risk is measured by ___________________:   42
Risk premium.
Coefficient of variation.
Standard deviation.
Beta coefficient.
21.    A measure that describes the risk of an investment project relative to other investments in general is the:   48
Coefficient of variation
Standard deviation
Beta coefficient
Expected return
22.    Bond prices and interest rates are:   51
Inversely related
Directly related
Forces in bond valuation
23.    the term structure of interest rates is also known as:   55
Learning curve
Risk-return tradeoff curve
Market curve
Yield curve

Chapter 6 - Theory Of Capital Structure

24.    When making an investment one should consider:   59
The time value of money
The current value of money
The future value of money
The intrinsic value of money
25.    Capital budgeting techniques do not include:   62
Internal rate of return
Net present value
Adjusted rate of return
Payback period
26.    The payback period is:   64
Time required to recoup the initial investment
Time to recover average capital investment
Time to develop market strategies
Time to make initial investment payments
27.    Profitability index (PI) is used to:   66
Rank investments
Rank assets
Rank competition
Rank risks
28.    Which of the following is not an example of mutually exclusive proposal:   68
Selecting one geographic location over another
Projects involved in capital rationing situations
Deciding which machine to buy
Deciding whether to produce product x or y
29.    Steps to take when considering a purchase (rather than a lease) do not include:   69
Find the annual loan amortization
Calculate interest
Calculate the loss ratio
Find the cash outflows

Chapter 7 - Financing Strategy

30.    Which of the following is directly applied in determining the value of a stock when using the dividend growth model?   77
The firm’s capital structure
The firm’s cash flows
The firm’s liquidity
The investor’s required rate of return on the firm’s stock
31.    When calculating the cost of capital, the cost assigned to retained earnings should be   76
Lower than the cost of external common equity
Equal to the cost of external common equity
Higher than the cost of external common equity

Chapter 8 - Public Versus Private Placement Of Securities

32.    In dividend policy the dividends should fulfill the objectives of:   91
The company
The stockholders and company
The employees
The investors

Chapter 9 - Mergers And Acquisitions

33.    Using a 360-day year, what is the opportunity cost to a buyer of not accepting terms 3/15, net 60?   94
34.    Commercial paper:   97
Has a maturity date greater than 1 year
Is usually sold only through investment banking dealers
Ordinarily does not have an active secondary market
Has an interest rate lower than Treasury bills

Chapter 10 - Bankruptcy And Reorganization

35.    Intermediate-term bank loans have a maturity of:   101
One month
Over one year
Under two months
Over five years

Chapter 11 - Long Term Debt

36.    From the viewpoint of the investor, which of the following securities provides the least risk?   106
Mortgage bond
Subordinated debenture
Income bond
37.    Zero-coupon bonds   106
Sell for a small fraction of their face value because their yield is much lower than the market rate.
Increase in value each year as they approach maturity, providing the owner with the total payoff at maturity.
Are redeemable in measures of a commodity such as barrels of oil, tons of coal, or ounces of rare metal (e.g., silver).
Are high-interest-rate, high-risk, unsecured bonds that have been used extensively to finance leveraged buyouts.

Chapter 12 - Stock, Convertibles, and Warrants

38.    ” Short selling” is the   119
Buying securities on credit.
Selling of all your shares in anticipation that the price will decline.
A security that is not owned by the seller.
Betting that a stock will increase by a certain amount.

Chapter 13 - Mergers and acquisitions

39.    The merger of United and Delta would be categorized as a   127
Horizontal merger
Conglomerate merger
White knight
Vertical merger
40.    A candy manufacturing company merging with a sugar processing company would be an example of a   127
Horizontal merger.
Vertical merger.
Diagonal merger.
Conglomerate merger.
41.    The merger of General Motors and Ford would be categorized as a   127
Diversifying merger.
Conglomerate merger.
Horizontal merger.
Vertical merger.
42.    What benefit(s) might a merger bring?   127
Reduction of risk.
Growth and reduction of risk.
Anti-trust action.
43.    The advantage of a tender offer in a corporate takeover is that   129
Target shareholders have less time to evaluate the offer.
Stockholders are induced to sell when the tender price significantly exceeds the current market price of the target common stock.
The failing company doctrine might otherwise prohibit the combination.
It is exempt from the Clayton Act.

Chapter 14 - Options and Option pricing, Derivatives and Risk Management

44.    A foreign exchange rate is:   168
The ratio of one country's cost-of-living index to that of another country
The price of one country's currency in units of another country's currency
The ratio of one country's imports to its exports
The difference obtained by subtracting a country's exports from its imports
45.    An investor has calculated Altman's Z-Score for each of four possible investment alternatives. Each firm is a public industrial firm. The calculated scores for the four investments were as follows: Firm W = 3.89 Firm X = 2.48 Firm Y = 2.00 Firm Z = 1.10 Which statement is true?   133
Z is least risky and W is most risky.
W is least risky and Z is most risky.
Y is least risky and W is most risky.
X is least risky and W is most risky.