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Permanent working capital financed with term liabilities.. Short-term assets financed with long-term liabilities.. All assets financed with 50 percent equity, 50 percent long-term debt m

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NGÂN H̀NG CÂU H I THI

H C PH N: FINANCIAL MANAGEMENT (FMGM0211)

(Dùng cho h đ i h c chính quy l p Ch t l ng cao)

B ng tr ng s trong m i thi tr c nghi m Financial management

Ph n C p đ 1 C p đ 2 C p đ 3 M c đ câu h i Phân b câu h i theo ph n Ghi ch́

- Th i gian thi: 60 ph́t làm bài

- Font ch s d ng cho Ngân hàng đ thi là Times New Roman; c ch 12

B ng l u ngân hàng câu h i cho m t h c ph n STT N i dung câu h i Ph ng ́n

1 The goal of the firm should be:

A.Maximization of shareholder wealth

B Maximization of profits

C Maximization of consumer satisfaction

D Maximization of sales

2 "Shareholder wealth" in a firm is represented by:

A the market price per share of the firm's common stock

B the number of people employed in the firm

C the book value of the firm's assets less the book value of its liabilities

D the amount of salary paid to its employees

3 The long-run objective of financial management is to:

A maximize the value of the firm's common stock

B maximize earnings per share

C maximize return on investment

D maximize market share

4 Investment decisions are answers to questions:

A What is the optimal firm size?

B What is the best type of financing?

C What is the best financing mix?

D What is the best dividend policy?

5 Financing decisions are answers to questions:

A What is the best dividend policy?

B What is the optimal firm size?

C What specific assets should be acquired?

D What assets should be eliminated?

6 A market where new securities are bought and A Primary Market B Money Market

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sold for the first time is: C Capital Market

D Secondary Market

7

A market for existing (used) securities rather than new issues is:

A preparation of the firm's accounting statements

B allocation of funds to current and capital assets

C obtaining the best mix of financing alternatives

D development of an appropriate dividend policy

10 Which of the following items is NOT included in

11 Cost of capital is:

A the average cost of the firm’s assets

B the coupon rate of debt

C a hurdle rate set by the board of directors

D the after-tax cost of debt

12 Money markets are markets for

A Short-term debt securities

A individuals buying and selling the stock

B the board of directors of the firm

C the stock exchange on which the stock is listed

D the president of the company

14 The focal point of financial management in a firm is:

A the creation of value for shareholders

B the number and types of products or services provided by the firm

C the minimization of the amount of taxes paid

by the firm

D the dollars profits earned by the firm

15 Money market instruments include:

A Market Value (per share)

B Liquidating Value (per share)

C Book Value (per share)

D Par Value – The face value

18

Which of the following would NOT improve the current ratio?

A Borrow short term to finance additional fixed assets

B Issue long-term debt to buy inventory

C Sell common stock to reduce current liabilities

D Sell fixed assets to reduce accounts payable

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19

The gross profit margin is unchanged, but the net profit margin declined over the same period This could have happened if

A Govt increased the tax rate

B cost of goods sold increased relative to sales

C sales increased relative to expenses

D dividends were decreased

20

The principal advantage of the sole proprietorship form

of business organization is:

A Single tax filing on individual form

B Unlimited liability

C Hard to raise additional capital

D Transfer of ownership difficulties

21

The principal advantage of the corporate form of business organization is that:

A Limited liability

B Unlimited liability

C Low setup cost

D Personal tax on profits

22

Which of the following are not among the daily

activities of financial management?

A sale of shares and bonds

B credit management

C inventory control

D the receipt and disbursement of funds

23 is the price at which the bond is traded

in the stock exchange

is not free of cost

A Profit maximisation, Wealth maximization

B Production maximisation, Sales maximisation

C Sales maximisation, Profit maximization

D Value maximisation, Wealth maximisation

27 How are earnings per share calculated?

A Use the income statement to determine earnings after taxes (net income) and divide by the number of common shares outstanding

B Use the income statement to determine earnings after taxes (net income) and divide by the previous period's earnings after taxes Then subtract 1 from the previously calculated value

C Use the income statement to determine earnings after taxes (net income) and divide by the number of common and preferred shares outstanding

D Use the income statement to determine earnings after taxes (net income) and divide by the forecasted period's earnings after taxes Then subtract 1 from the previously calculated value

28

You saved VND 100 million

in 3 years with the compound interest of 8% per year How much will you

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receive at the end of the third year?

29

in 3 years with the compound interest of 8% per year How much will you receive at the end of the third year?

What is the ratio of equity to total assets?

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interest expense of

$750,000 What is the amount of the firm’s earnings before taxes?

38

What are the earnings per share (EPS) for a company that earned $100,000 last year in after-tax profits, has 200,000 common shares outstanding and $1.2 million

in retained earning at the year end?

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of $600,000, and net income

of $ 150,000, ROE ratio is:

of $ 230,000, ROE ratio is:

of $200,000, ROE ratio is:

4-Calculate the annual effective rate of interest:

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54

Mr X takes a loan of $1,000 million from HSBC Bank

The rate of interest is 7% per annum The first instalment will be paid at the end of year 15 Determine the amount of equal annual instalments if Mr X wishes

to repay the amount in 15 instalments

Y accepts a loan with interest rate of 9% per year and deposits rate at 12%

What is the annual effective rate of interest?

Y accepts a loan with interest rate of 8% per year and deposits rateat 15%

Y accepts a loan with interest rate of 8% per year and deposits rate at 18%

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60

To receive $250,000 from the bank after 2 years, what

is your initial investment if the interest rate is 3%?

Mr Nam plans to save VND

10 million every year in 20 year to a pension fund with interest rate of 10% per year (compound interest) After

20 years; how much he will receive?

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69

Company X has a total asset

of $ 2,130,000 short-term debt of $ 430,000 long-term debt of $ 750,000, net income of $ 210,000 What

The present value is VND

800 million After 4 years with an annum interest rate

A Gross working capital

B Temporary working capital

C Net working capital

D Permanent working capital

76

is the length of time between the firm’s actual cash

expenditure and its own cash receipt

A Net operating cycle

B Cash conversion cycle

C Working capital cycle

D Gross operating cycle

77 Net Working Capital is:

A Current Assets - Current Liabilities

B Current Assets + Current Liabilities

C Current Assets / Current Liabilities

D Current Liabilities - Current Assets

78

The amount of current assets that varies with seasonal requirements is:

A Temporary current assets

B Permanent current assets

C Temporary fixed assets

D Permanent fixed assets

79 The amount of current assets required to meet a firm’s

long-term minimum needs

A Permanent current assets

B Temporary current assets

C Temporary fixed assets

D Permanent fixed assets

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80

_ refers to the length of time allowed

by a firm for its customers to make payment for their purchases

A Credit period

B Holding period

C Pay-back period

D Average collection period

81 is NOT a part of Current Assets

83 Permanent working capital

A is the amount of current assets required to meet

a firm's long-term minimum needs

B varies with seasonal needs

C includes fixed assets

D includes accounts payable

84 A firm's operating cycle is equal to its inventory

turnover in days (ITD)

A plus its receivable turnover in days (RTD)

A Permanent working capital financed with term liabilities

long-B Short-term assets financed with long-term liabilities

C Short-term assets financed with equity

D All assets financed with 50 percent equity, 50 percent long-term debt mixture

87

In deciding the appropriate level of current assets for the firm, management is

confronted with

A a trade-off between profitability and risk

B a trade-off between liquidity and marketability

C a trade-off between equity and debt

D a trade-off between short-term versus term borrowing

long-88

Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be a(an) _current operating asset financing strategy because of the inherent risks of using short-term financing

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more aggressive approach tofinancing working capital?

B Financing short-term needs with short-term funds

C Financing permanent inventory buildup with long-term debt

D Financing seasonal needs with short-term funds

90

Which of the following working capital strategies is the most aggressive?

A Making greater use of short term finance and minimizing net short term asset

B Making greater use of short term finance and maximizing net short term asset

C Making greater use of long term finance and minimizing net short term asset

D Making greater use of long term finance and maximizing net short term asset

91

Firms generally choose to finance temporary current operating assets with short-term debt because

A matching the maturities of assets and liabilities reduces risk under some circumstances, and also because short-term debt is often less expensive than long-term capital

B short-term interest rates have traditionally been more stable than long-term interest rates

C a firm that borrows heavily on a long-term basis is more apt to be unable to repay the debt than a firm that borrows short term

D short-term debt has a higher cost than equity capital

92

Other things held constant, which of the following will cause an increase in net working capital?

A Merchandise is sold at a profit, but the sale is

on credit

B Cash is used to buy marketable securities

C A cash dividend is declared and paid

D Long-term bonds are retired with the proceeds

of a preferred stock issue

93

The principal advantage of Maturity matching approach

in financing strategy is that:

A Reduces liquidity risk

B Easy to implement in practice

C Hard to implement in practice

D High proportion of short term debt

94

The principal advantage of Conservative approach in financing strategy is that: A Less worry in refinancing short-term

obligations

B Borrowing at a higher overall cost

C Uncertain regarding future interest costs

D Borrowing more than what is necessary

95

The principal advantage of Aggressive approach in financing strategy is that:

A Borrowing only what is necessary

B Less uncertainty regarding future interest costs

C Uncertain future interest costs

D Refinancing short-term obligations in the future

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96

The mix between short-term and long-term debt must consider:

A Variability of cash flows

A Reducing current assets, increasing current liabilities, and reducing long-term debt

B Increasing current assets while lowering current liabilities

C Increasing current assets while incurring more current liabilities

D Replacing short-term debt with equity

100 varies inversely with profitability

A Net Working Capital

B Gross Working Capital

C Temporary Working Capital

D Temporary Current Assets

102 Which of the following would NOT be financed

from working capital?

A A new personal computer for the office

B Cash float

C Accounts receivable

D Credit sales

103 Which of the following statements is CORRECT?

A Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be

an aggressive strategy because of the inherent risks associated with using short-term financing

B Net working capital is defined as current assets minus the sum of payables and accruals, and any increase in the current ratio automatically

indicates that net working capital has increased

C If a company follows a policy of "matching maturities," this means that it matches its use of common stock with its use of long-term debt as opposed to short-term debt

D Net working capital is defined as current assets minus the sum of payables and accruals, and any decrease in the current ratio automatically indicates that net working capital has decreased

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104

Your firm has the following balance sheet statement items: total current liabilities

of $805,000; total assets of

$2,655,000; fixed and other assets of $1,770,000; and long-term debt of $200,000

What is the amount of the firm’s total current assets?

A Too little cash increases risk; too much cash reduces return

B Too little cash reduce risk; too much cash reduces return

C Too little cash increases risk; too much cash increases return

D Too little cash reduces risk; too much cash increases return

107 The first priority item in choosing marketable

C Longer maturities and higher rate of return

D Higher rate of return

108 Marketable securities are primarily

A short-term debt instruments

B short-term equity securities

C long-term debt instruments

D long-term equity securities

109

Which would be an appropriate investment for temporarily idle corporate cash that will be used to pay quarterly dividends three months from now?

A Ninety-day commercial paper with a current annual yield of 6.2 percent

B A long-term AAA-rated corporate bond with a current annual yield of 9.4 percent

C A 30-year Treasury bond with a current annual yield of 8.7 percent

D Common stock that has been appreciating in price 8 percent annually, on average, and paying a quarterly dividend that is the equivalent of a 5 percent annual yield

110

Which of the following marketable securities is the obligation of a commercial bank?

A Negotiable certificate of deposit

A Take steps to reduce the Days sales outstanding – DSO

B Increase average inventory without increasing sales

C Start paying its bills sooner, which would reduce the average accounts payable but not affect sales

D Sell common stock to retire long-term bonds

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112

Other things held constant, which of the following would tend to reduce the cash conversion cycle?

A Continue to take all discounts that are offered and pay on the net date

B Carry a constant amount of receivables as sales decline

C Place larger orders for raw materials to take advantage of price breaks

D Offer longer payment terms to customers

113

Which of the following is NOT directly reflected in the cash budget of a firm that is

in the zero tax bracket?

A Depreciation

B Payments lags

C Repurchases of common stock

D Payment for plant construction

114

Which of the following actions would be likely to shorten the cash conversion cycle?

A a new manufacturing process that speeds up the conversion of raw materials to finished goods from 20 days to 10 days

B Change the credit terms offered to customers from 3/10 net 30 to 1/10 net 50

C Begin to take discounts on inventory purchases; we buy on terms of 2/10 net 30

D Adopt a new manufacturing process that saves some labor costs but slows down the conversion

of raw materials to finished goods from 10 days to

20 days

115

AT Co., Ltd has total demand for money is $3 billion The cost of transferring securities in cash is $250,000, the return

on securities is 15% a year

According to the Allais-Tobin (BAT) optimal reserve model, the optimal reserve amount is

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sold on credit are called _

of $762,000 and the average accounts receivable of

$95,250 the average collection period (360-day year) is:

$428,000 and average collection period (360-day year) is 45 days, the average accounts receivable is:

A large dollar value items but comprise a relatively small percentage of the total number of items held in inventory

B low dollar value items but comprise a large percentage of the total items held in inventory

C low dollar value items but comprise a relatively small percentage of the total number of items held in inventory

D large dollar value items but comprise a large percentage of the total items held in inventory

123

Sears sells mattresses at all stores located in the Toronto area The mattresses are stored in a central warehouse Annual demand

is 2,400 mattresses, spread evenly throughout the year

The cost of placing and receiving an order is $32

The annual carrying cost is

$10/unit What is the size of the order Sears should place with its supplier to minimize its inventory cost?

$800,000 If the IT is improved to 8 times while the COGS remains the same,

a substantial amount of funds is released from or additionally invested in

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inventory In fact,

125

Ninety-percent of X company'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,

competitors, would likely result in:

A an increase in the average collection period

B a decrease in bad debt losses

What would receivables be

if all customers took the cash discount?

A Lower than the present level

B No change from the present level

C Higher than the present level

D Unable to determine without more information

128

An increase in the firm's receivable turnover ratio means that:

A it is collecting credit sales more quickly than before

B cash sales have decreased

C it has initiated more liberal credit terms

D inventories have increased

129 Costs of not carrying enough inventory include:

A lost sales; customer disappointment; possible worker layoffs

a

A low incidence of production schedule disruptions

B below average inventory turnover ratio

C below average total assets turnover ratio

D relatively high current ratio

132

Vogel Bird Seed's total sales

of $1,320 million is on credit The company has an average accounts receivable balance for the year of $165 million The average

collection period would be (Assume a 360-day year)

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133

Vogel Bird Seed's total sales

of $1,800 million is on credit The company has an average accounts receivable balance for the year of $250 million The average

collection period would be (Assume a 360-day year)

an order is VND150,000

The annual carrying cost is 12% per unit price What is the size of the order should place with its supplier to minimize its inventory cost?

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VND 350.000/unit The cost

of placing and receiving an order is VND 230.000 The annual carrying cost is 10%

of the price According to EOQ model what is the company's re-ordering point?

(suppose that a year has 360 days the time of purchase is

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delivery; what is the commercial credit cost?

144

Company X has the total demand of materials is 5,500 units a year The price is VND 260,000 per unit The cost of placing and receiving

of the orderto minimize the inventory cost?

to prevent risk of bankruptcy

A Liquidity decision

B Investment decision

C Dividend decision

D Finance decision

149 Which of the following statements is CORRECT?

A Under normal conditions, a firm's expected ROE would probably be higher if it financed with short-term rather than with long-term debt, but using short-term debt would probably increase the firm's risk

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