高级财务管理双语选择题答案HomeworkMultiple Choice Questions1.docx

1、高级财务管理双语选择题答案HomeworkMultiple Choice Questions1HOMEWORKMultiple Choice QuestionsTopic 1 IntroductionsD1. Shareholder wealth in a firm is represented by:a) the number of people employed in the firm.b) the book value of the firms assets less the book value of its liabilities.c) the amount of salary pa

2、id to its employees.d) the market price per share of the firms common stock.B2. The long-run objective of financial management is to:a) maximize earnings per share.b) maximize the value of the firms common stock.c) maximize return on investment.d) maximize market share.C3. What are the earnings per

3、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?a) $100,000b) $6.00c) $0.50d) $6.50A4. A(n) would be an example of a principal, while a(n) would be an example of an agent.a) shar

4、eholder; managerb) manager; ownerc) accountant; bondholderd) shareholder; bondholderD5. The market price of a share of common stock is determined by:a) the board of directors of the firm.b) the stock exchange on which the stock is listed.c) the president of the company.d) individuals buying and sell

5、ing the stock.C6. The focal point of financial management in a firm is:a) the number and types of products or services provided by the firm.b) the minimization of the amount of taxes paid by the firm.c) the creation of value for shareholders.d) the dollars profits earned by the firm.B7. The decision

6、 function of financial management can be broken down into the decisions.a) financing and investmentb) investment, financing, and asset managementc) financing and dividendd) capital budgeting, cash management, and credit managementC8. The controllers responsibilities are primarily in nature, while th

7、e treasurers responsibilities are primarily related to .a) operational; financial managementb) financial management; accountingc) accounting; financial managementd) financial management; operationsC9. In the US, the has been given the power to adopt auditing, quality control, ethics, and disclosure

8、standards for public companies and their auditors as well as investigate and discipline those involved.a) American Institute of Certified Public Accountants (AICPA)b) Financial Accounting Standards Board (FASB)c) Public Company Accounting Oversight Board (PCAOB)d) Securities and Exchange Commission

9、(SEC)B10. A companys is (are) potentially the most effective instrument of good corporate governance.a) common stock shareholdersb) board of directorsc) top executive officersd) debtorsA11. The Sarbanes-Oxley Act of 2002 (SOX) was largely a response to:a) a series of corporate scandals involving Enr

10、on, WorldCom, Global Crossing, Tyco and numerous others.b) a dramatic rise in the US trade deficit.c) charges of excessive compensation to top corporate executives.d) rising complaints by investors and security analysts over the financial accounting for stock options.Topic 2 Capital StructureA1. The

11、 term capital structure refers to:a) long-term debt, preferred stock, and common stock equity.b) current assets and current liabilities.c) total assets minus liabilities.d) shareholders equity.C2. A critical assumption of the net operating income (NOI) approach to valuation is:a) that debt and equit

12、y levels remain unchanged.b) that dividends increase at a constant rate.c) that ko remains constant regardless of changes in leverage.d) that interest expense and taxes are included in the calculation.B3. The traditional approach towards the valuation of a company assumes:a) that the overall capital

13、ization rate holds constant with changes in financial leverage.b) that there is an optimum capital structure.c) that total risk is not altered by changes in the capital structure.d) that markets are perfect.D4. Two firms that are virtually identical except for their capital structure are selling in

14、the market at different values. According to M&Ma) one will be at greater risk of bankruptcy.b) the firm with greater financial leverage will have the higher value.c) this proves that markets cannot be efficient.d) this will not continue because arbitrage will eventually cause the firms to sell at t

15、he same value.C5. The cost of monitoring management is considered to be a (an):a) bankruptcy cost.b) transaction cost.c) agency cost.d) institutional cost.D6. What is the value of the tax shield if the value of the firm is $5 million, its value if unlevered would be $4.78 million, and the present va

16、lue of bankruptcy and agency costs is $360,000?a) $140,000b) $220,000c) $360,000d) $580,000A7. According to the concept of financial signaling, management behavior results in new debt issues being regarded as news by investors. a) goodb) badc) non-eventd) risk-neutralB8. The cost of capital for a fi

17、rm - when we allow for taxes, bankruptcy, and agency costs -a) remains constant with increasing levels of financial leverage.b) first declines and then ultimately rises with increasing levels of financial leverage.c) increases with increasing levels of financial leverage.d) decreases with increasing

18、 levels of financial leverage.B9. When sequential long-term financing is involved, the choice of debt or equity influences the future financial of the firm.a) timingb) flexibilityc) liquidityd) instrument B10. The discount rate used to determine the present value of a stream of expected future cash

19、flows is referred to as the _. a) net operating income b) capitalization rate c) capital structure d) yield on the companys market value of common equity D11. The traditional approach towards the valuation of a company assumes that _. a) the cost of capital is independent of the capital structure of

20、 the firm b) the firm maintains constant risk regardless of the type of financing employed c) there exists no optimal capital structure d) that management can increase the total value of the firm through the judicious use of financial leverage D12. The presence of which one of the following costs is

21、 not used as a major argument against the M&M arbitrage process? a) Bankruptcy costs. b) Agency costs. c) Transactions costs. d) Insurance costs. C13. What is the present value of the net tax-shield of debt if the current market value of the firm is $10 million, its value if unlevered would be $8 mi

22、llion, and the present value of bankruptcy and agency costs is $500,000? a) $1,500,000 b) $2,000,000 c) $2,500,000 d) None of the above are correct. C14. What is the market value of common equity under the NOI approach? The firm has an expected net operating income of $5,000 with $4,000 of debt (mar

23、ket value). Assume that the overall capitalization rate is 20%. a) $5,000 b) $20,000 c) $21,000 d) $25,000 C15. Which of the following statements regarding the net operating income approach is incorrect? a) The overall capitalization rate, kO, is constant. b) The cost of debt funds, ki, is constant.

24、 c) The required return on equity, ke, is constant. d) The total value of the firm is unaffected by changes in financial leverage. A16. Which of the following statements regarding the total value principle is incorrect? a) The total value principle allows for corporate borrowing and excludes persona

25、l borrowings via arbitrage. b) The total value principle must hold or else arbitrage will take place and then its presence will cause the value to remain constant regardless of the capital structure. c) The total value does not change because the underlying profit and risk of the firm are with its o

26、perations, which do not change when the financing changes. d) Modigliani and Miller, in their original position, advocate that the total value of the firm is identical regardless of the financing mix. C17. Two identical firms exist except that Firm A uses no debt and Firm B uses some debt. The total

27、 value of Firm A is less than the total value of Firm B, but you own 2% of Firm B. Based on the arguments by Modigliani and Miller regarding the total value principle, what should you do? a) Buy 2% of Firm A with funds from shorting your shares in Firm B. Submit a press release that the two firms sh

28、ould be worth identical values. This will cause Firm A to rise in value and leave you extra funds for investment. b) You should borrow enough funds to equal the difference in firm value, purchase shares of Firm A with these funds, and sell your shares in Firm B. This will leave extra funds for an in

29、vestment of your choice. c) Sell your shares, personally borrow 2% of the quantity of firm debt, and purchase 2% of Firm A. This will leave extra funds for an investment of your choice. d) Sell enough of your shares (Firm B) to purchase 2% of Firm A. This will leave extra funds for an investment of

30、your choice. D18.Allowing for bankruptcy costs and an increasing probability of bankruptcy with increasing financial leverage, we should expect _ than would be the case without bankruptcy costs. a) the premium for business risk to be higher b) the premium for business risk to be lower c) the premium

31、 for financial risk should rise by less d) the premium for financial risk should rise by more B19. The existence of _ on the balance sheet generates tax advantages that directly influence the capital structure of the firm. a) a large proportion of fixed assets b) long-term debt c) retained earnings d) All of the above answers are A20. As the amount of _ increases the present value of _. a) debt; net tax-shield benefits of debt increases b) common equity; bankruptcy and agency costs increase c) debt; net tax-shield benefits of debt decrease d) common equity; net tax-shield ben