Docsity
Docsity
Prepare for your exams
Prepare for your exams

Study with the several resources on Docsity

Earn points to download
Earn points to download

Earn points by helping other students or get them with a premium plan

Guidelines and tips
Guidelines and tips
Sell on Docsity
Sell on Docsity
Docsity AI
Docsity AI
Log inSign up

Prepare for your exams

Study with the several resources on Docsity

Find documents

Prepare for your exams with the study notes shared by other students like you on Docsity

Search for your university

Find the specific documents for your university's exams

Docsity AINEW

Summarize your documents, ask them questions, convert them into quizzes and concept maps

Explore questions

Clear up your doubts by reading the answers to questions asked by your fellow students

Earn points to download

Earn points by helping other students or get them with a premium plan

Share documents
download point icon20 Points

For each uploaded document

Answer questions
download point icon5 Points

For each given answer (max 1 per day)

All the ways to get free points
Get points immediately

Choose a premium plan with all the points you need

Study Opportunities

Choose your next study program

Get in touch with the best universities in the world. Search through thousands of universities and official partners

Community

Ask the community

Ask the community for help and clear up your study doubts

Free resources

Our save-the-student-ebooks!

Download our free guides on studying techniques, anxiety management strategies, and thesis advice from Docsity tutors

Financial Concepts and Principles, Exams of Advanced Education

Catholic University of Eastern AfricaAdvanced Education

A wide range of financial concepts and principles, including topics such as the relationship between risk and required return, the purpose of sec 10-k filings, the components of working capital, the calculation of net margin, the factors affecting required return on a security, the differences between common and preferred stock, the concept of beta and its impact on stock returns, the weighted average cost of capital (wacc), the factors affecting a firm's leverage and profitability, and the regulation of financial markets by the sec. A comprehensive overview of these fundamental financial topics, which are essential for understanding corporate finance, investment analysis, and financial management.

Typology: Exams

2024/2025

Available from 10/16/2024

Qualityexam
Qualityexam 🇰🇪

2.5

(4)

6.4K documents

1 / 11

Toggle sidebar

This page cannot be seen from the preview

Don't miss anything!

bg1
C214 Overview Concept Exam With
100% Correct And Verified Answers
The goal of the corporation is to:
a. Maximize profits
b. Maximize the stock price
c. Maximize market share
d. Minimize risk - Correct Answer-Maximize stock price
Which of the following is not a requirement for an efficient market?
a. Competitive market
b. Well-managed firms
c. Transparency
d. Liquidity - Correct Answer-Liquidity
What is the relationship between risk and required return?
a. The two are independent
b. Higher required return causes lower risk
c. Higher risk causes higher required return
d. None of the above - Correct Answer-Higher risk causes higher required return
The value of money depends upon:
a. The timing of the receipt
b. The certainty of receipt
c. Riskiness of receipt
d. All of the above - Correct Answer-All of the above
What is the purpose of the SEC 10-K filing requirement?
a. Prevent insider training
b. Promote transparency and market efficiency
c. Regulate securities sales practices
d. Prevent monopolies - Correct Answer-Promote transparency and market efficiency
Which line item is not part of networking capital?
a. Inventory
b. Bonds
c. Accounts Payable
d. Accrued expenses - Correct Answer-Bonds
Which action causes a cash outflow?
a. Increase in accounts payable
b. Decrease in accounts receivable
pf3
pf4
pf5
pf8
pf9
pfa

Partial preview of the text

Download Financial Concepts and Principles and more Exams Advanced Education in PDF only on Docsity!

C214 Overview Concept Exam With

100% Correct And Verified Answers

The goal of the corporation is to: a. Maximize profits b. Maximize the stock price c. Maximize market share d. Minimize risk - Correct Answer-Maximize stock price Which of the following is not a requirement for an efficient market? a. Competitive market b. Well-managed firms c. Transparency d. Liquidity - Correct Answer-Liquidity What is the relationship between risk and required return? a. The two are independent b. Higher required return causes lower risk c. Higher risk causes higher required return d. None of the above - Correct Answer-Higher risk causes higher required return The value of money depends upon: a. The timing of the receipt b. The certainty of receipt c. Riskiness of receipt d. All of the above - Correct Answer-All of the above What is the purpose of the SEC 10-K filing requirement? a. Prevent insider training b. Promote transparency and market efficiency c. Regulate securities sales practices d. Prevent monopolies - Correct Answer-Promote transparency and market efficiency Which line item is not part of networking capital? a. Inventory b. Bonds c. Accounts Payable d. Accrued expenses - Correct Answer-Bonds Which action causes a cash outflow? a. Increase in accounts payable b. Decrease in accounts receivable

c. Increase in inventory d. None of the above - Correct Answer-Increase in inventory Which of the following is correct? a. Gross PPE equals Net PPE plus depreciation expense b. Gross PPE equals Net PPE plus accumulated depreciation c. Net PPE equals Gross PPE plus depreciation expense d. None of the above - Correct Answer-Gross PPE equals Net PPE plus accumulated depreciation Net Margin is defined as: a. EBIT divided by sales b. Net income divided by sales c. Dividends divided by net income d. Retained earnings divided by sales - Correct Answer-Net income divided by sales Which item is transferred from the income statement to the balance sheet? a. Depreciation expense b. Dividends paid c. Addition to retained earnings d. Both A and C - Correct Answer-Both A and C What item is added to net income to calculate net cash flow? a. Taxes b. Depreciation expense c. Dividends paid d. None of the above - Correct Answer-Depreciation expense Which cash flow statement represents cash earned by producing and selling the product? a. Cash flow operations b. Cash flow financing c. Cash flow investing d. None of the above - Correct Answer-Cash flow operations Which ratio reflects a firm's reliance on debt financing? a. Quick ratio b. Net Margin c. Financial leverage d. Asset turnover - Correct Answer-Financial leverage If two firms use different inventory valuation methods, it is called: a. Timing issue b. Seasonal effect c. Accounting difference d. Cross industry effect - Correct Answer-Accounting difference

b. Present value c. Payments d. Insufficient information to determine - Correct Answer-Future value If you wanted to create an annuity with annual adjustments for inflation, you would use: a. Annuity Due b. Ordinary Annuity c. Perpetual Annuity d. Perpetual Growth Annuity - Correct Answer-Perpetual Growth Annuity Which ratio will always be smaller? a. Gross margin b. Operating margin c. Net margin d. Insufficient information to determine - Correct Answer-Net margin If net working capital increases, it causes: a. A cash inflow b. A cash outflow c. Does not affect cash flow d. Depends upon accrual accounting - Correct Answer-A cash outflow What feature distinguishes stock from bonds? a. Requires a prospectus for issuance b. Periodic cash payments must be made to investors c. Capital gains can be realized by investors d. Both b & c - Correct Answer-Periodic cash payments must be made to investors Which bond feature is not a legal obligation cited in the Indenture? a. Face value b. Coupon Rate c. Maturity Date d. Price - Correct Answer-Price Yield on a bond can best be described as: a. Interest received by the investor b. The coupon rate c. Rate of increase in value of investment d. Cash return to the investor - Correct Answer-Rate of increase in value of investment When is the bond yield equal to the coupon rate? a. At premium price b. At par price c. At discount price d. Never - Correct Answer-At par price

For a semi-annual pay bond, which inputs must be adjusted? a. N and I/Y b. N and PMT c. N, I/Y, and PMT d. PV and FV - Correct Answer-N, I/Y, and PMT Which describes the relationship between price and yield? a. Both change in the same direction b. Price increases cause yield decreases c. The two are independent d. Indenture sets yield; trading sets price - Correct Answer-Price increases cause yield decreases Which does not affect a bond's required yield? a. Treasury yields b. Firm riskiness c. Term to maturity d. Expected growth rate - Correct Answer-Expected growth rate A bond's duration causes: a. Default risk b. Credit risk c. Market risk d. Event risk - Correct Answer-Market risk If a bond's price is at a discount, then a. Bond yield is less that coupon rate b. Bond yield is equal to the coupon rate c. Bond yield is more than the coupon rate d. Insufficient information - Correct Answer-Bond yield is more than the coupon rate What is the difference between common and preferred stock? a. Preferred stock has a maturity date b. Preferred stock dividends are fixed c. Common stock has priority of claims in bankruptcy d. Preferred stock cannot be bought back - Correct Answer-Preferred stock dividends are fixed If rating agencies downgrade a bond from AAA to BBB, what happens? a. The bond's price decreases b. Corporation must re-purchase the bond c. The corporation reduces the bond value on it's balance sheet d. Both a and c - Correct Answer-The bond's price decreases What are the two sources of profit to a stock investor? a. Dividends and redemption at maturity

d. Tax rate - Correct Answer-Efficiency ratio Which factor does not impact a stock's price? a. Risk free rate b. Expected dividend growth rate c. Beta d. Maturity Date - Correct Answer-Maturity Date If a firm believes that the market under-values its stock, it should a. Hold a press conference to express their view b. Buy back stock c. Issue more stock d. State that opinion in the Annual Report - Correct Answer-Buy back stock A firm is a good investment if a. Its PE is low b. Its price is less than intrinsic value c. Its ROE is high d. It has a great product - Correct Answer-Its price is less than intrinsic value Why does a firm calculate WACC? a. It is needed to calculate net income b. It is the cost of financing the firm Required input on SEC 10-K report d. Required by GAAP - Correct Answer-It is the cost of financing the firm Which is a difference between stocks and bonds? a. Price is determined by PV calculation b. Price is determined in market trading c. Increased required return always reduces price d. Required return reflect investor perception of risk - Correct Answer-Increased required return always reduce price Which is the correct order in terms of lowest to highest required return? a. Bonds, Common Stock, Preferred Stock b. Secured bonds, preferred stock, Common stock c. Subordinated bonds, bonds, common stock d. Preferred stock, AAA bonds, common stock - Correct Answer-Secured bonds, preferred stock, common stock Which measures sales growth that can be financed internally? a. DFN b. SGR c. CFO d. DFN - Correct Answer-SGR

Why are accurate sales forecast desirable? a. To plan resource acquisition b. To calculate price c. To reduce working capital d. Requirement for 10-K report - Correct Answer-To plan resource acquisition What components of ICF are included in Gross PPE a. Cost of asset b. Shipping & installation expense c. Increase in Net Working Capitial d. Both a and b - Correct Answer-Both a and b If an equipment salvage value is greater than book value a. There is a tax cash outflow b. There is a tax cash refund c. Taxes are not affected d. Depends on the NWC recapture - Correct Answer-There is a tax cash outflow A potential project should be adopted if a. IRR is less than WACC b. NPV is positive using the required return on bonds as the discount rate c. IRR is greater than WACC d. IRR equals WACC and NPV is positive - Correct Answer-IRR is greater than WACC A firm will have volatile profits if a. It has high operating leverage b. It has high financial leverage It has high combined lerage d. All of the above - Correct Answer-All of the above Which firm is more likely to use high financial leverage? a. Firm with volatile sales and automated production line b. Firm with stable sales and manual production c. Firm with volatile sales and manual production d. Firm with stable sales and automated production - Correct Answer-Firm with stable sales and manual production Excessive leverage will likely result in a. Increased WACC b. Reduced stock price c. Reduced profits d. Both a and b - Correct Answer-....... Why might a firm buy back stock? a. Increase leverage b. Reduce leverage

a. Increases international trade b. Increases exports c. Increases imports d. Increases interest rates - Correct Answer-Increases imports Relatively high interest rates in the U.S. has what effect? a. Strong dollar b. Weak dollar c. Bolsters export d. None of the above - Correct Answer-Strong dollar If a firm's combined leverage is high, what is the implication? a. High equity ratio b. Profits are more volatile as sales fluctuate c. The firm is less profitable d. The two leverages offset each other--neutral impact - Correct Answer-Profits are ore volatile as sales fluctuate Why would a company buy back outstanding stock? a. To boost the price of the stock b. To increase financial leverage c. Lack of investment opportunities d. All of the above - Correct Answer-All of the above Which can best be described as a present value problem? a. Valuation of bonds b. Valuation of stock c. Evaluation of potential investment d. All of the above - Correct Answer-All of the above What attributes of cash should be considered in evaluating investments? a. Size of cash flow b. Timing of the cash flow c. Risk of cash flows d. All of the above - Correct Answer-All of the above Firms use "sensitivity analysis" because: a. Required by the SEC b. To anticipate impact of erroneous forecasts c. To detect computer code errors d. To double check analyst calculations - Correct Answer-To anticipate impact of erroneous forecasts If IRR is greater than WACC, an adopted project a. Decreases shareholder value b. Reduces Beta

c. Increases shareholder value d. Increases leverage - Correct Answer-Increases shareholder value If a firm increases leverage a. Increases stock price b. Decreases stock price c. Stock price is not affected by leverage d. Indeterminant impact on price - Correct Answer-Indeterminant impact on price Why is an annuity due more valuable than an ordinary annuity? a. payments are received earlier b. Interest is compounded c. It is not more valuable; they are the same d. Use different interest rates - Correct Answer-