Final Exam Fin 301 Concept Questions with Latest Update
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Module
FIN 301
Institution
FIN 301
The true owners of the corporation are the ________ - Answer-common stockholders
which of the following statements best represents what finance is about? - Answer-The study of how people and business make investment decisions and how to finance those decisions
The revenue recognition principl...
Final Exam Fin 301 Concept Questions
with Latest Update
The true owners of the corporation are the ________ - Answer-common stockholders
which of the following statements best represents what finance is about? - Answer-The
study of how people and business make investment decisions and how to finance those
decisions
The revenue recognition principle requires that ___________ - Answer-revenue be
recognized in the period when the firm becomes entitled to payment for goods or
services delivered.
Which of the following parties would be interested in an analysis of the firms's financial
statements? - Answer-Creditors, investors, the firm's managers
The principal participants in the markets are - Answer-borrowers, savers, financial
institutions
The market for short-term debt is known as - Answer-the money market
Which of the basic financial statements is best used to answer questions " where did the
company's money come from and how was it spent over the preceding year?" - Answer-
Cash Flow statement
Which of the basic financial statements is best used to answer the questions " what
does the company own and how is it financed?" - Answer-Balance sheet
Investors in common stock increase their wealth when the _______ - Answer-market
value of the stock goes up and when the stock pays a dividend
If managers are making decisions to maximize shareholder wealth, then they are
primarily concerned with making decisions that should_____ - Answer-Increase the
market value of the firms common stock
Evidence that agency costs exists_______ - Answer-because stock prices increase
when an underperforming CEO is unexpectedly replaced
Which of the following sequences is arranged in the correct order, from the highest long
term- returns to lowest? - Answer-International Equities, U.S. Government bonds,
treasury bills
, You are considering buying some stock in continental grain. Which of the following is an
example of non-diversifiable risk? - Answer-Risk resulting from a general decline in the
stock market
The capital asset pricing model _______ - Answer-provides a risk-return trade-off in
which risk is measured in terms of beta
When a company has an initial public offering _______ - Answer-The proceeds of the
sale will increase the company's equity
You are considering investing in U.S. Steel, Which of the following is NOT an example
of non-diversifiable risk? - Answer-Risk resulting from a strike against U.S. Steel
If a stock has a much higher than normal P/E ratio, investors probably expect________
- Answer-Rapid Growth in earnings
The yield to maturity on a bond_____ - Answer-is the required return on the bond
The interest on corporate bonds is typically paid _________ - Answer-semiannually
Jayden spends a lot of time studying charts of stocks past performance, but his
investment return are only average. This outcome supports _________ - Answer-semi-
strong
weak form
and strong form efficient market hypothesis
Which of the following is NOT one of the categories for a project's relevant after tax
cash flows? - Answer-Financing Flows
Webley Corp. is considering two expansion options, but does not have enough capital
to undertake both. Project W requires an investment of $100,000 and has an NPV of
$10,000. Project D requires an investment of $80,000 and has an
NPV of $8,200. If Webley uses the profitability index to decide, it would__________ -
Answer-Choose D because it has a higher profitability index
Which of the following best describes a firm's cost of capital? - Answer-The rate of
return that must be earned on its investments in order to satisfy the firms investors
Which of the following are typical consequences of good capital budgeting decisions? -
Answer-the firm increases value
gains knowledge
good capital budgeting decisions
The investorʹs required rate of return differs from the firmʹs cost of capital due to
the________ - Answer-Tax deductibility of interest
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