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

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

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高级财务管理双语选择题答案HomeworkMultipleChoiceQuestions1

HOMEWORK

MultipleChoiceQuestions

Topic1Introductions

D1."Shareholderwealth"inafirmisrepresentedby:

a）thenumberofpeopleemployedinthefirm.

b）thebookvalueofthefirm'sassetslessthebookvalueofitsliabilities.

c）theamountofsalarypaidtoitsemployees.

d）themarketpricepershareofthefirm'scommonstock.

B2.Thelong-runobjectiveoffinancialmanagementisto:

a）maximizeearningspershare.

b）maximizethevalueofthefirm'scommonstock.

c）maximizereturnoninvestment.

d）maximizemarketshare.

C3.Whataretheearningspershare（EPS）foracompanythatearned$100,000lastyearinafter-taxprofits,has200,000commonsharesoutstandingand$1.2millioninretainedearningattheyearend?

a）$100,000

b）$6.00

c）$0.50

d）$6.50

A4.A（n）wouldbeanexampleofaprincipal,whilea（n）wouldbeanexampleofanagent.

a）shareholder;manager

b）manager;owner

c）accountant;bondholder

d）shareholder;bondholder

D5.Themarketpriceofashareofcommonstockisdeterminedby:

a）theboardofdirectorsofthefirm.

b）thestockexchangeonwhichthestockislisted.

c）thepresidentofthecompany.

d）individualsbuyingandsellingthestock.

C6.Thefocalpointoffinancialmanagementinafirmis:

a）thenumberandtypesofproductsorservicesprovidedbythefirm.

b）theminimizationoftheamountoftaxespaidbythefirm.

c）thecreationofvalueforshareholders.

d）thedollarsprofitsearnedbythefirm.

B7.Thedecisionfunctionoffinancialmanagementcanbebrokendownintothedecisions.

a）financingandinvestment

b）investment,financing,andassetmanagement

c）financinganddividend

d）capitalbudgeting,cashmanagement,andcreditmanagement

C8.Thecontroller'sresponsibilitiesareprimarilyinnature,whilethetreasurer'sresponsibilitiesareprimarilyrelatedto.

a）operational;financialmanagement

b）financialmanagement;accounting

c）accounting;financialmanagement

d）financialmanagement;operations

C9.IntheUS,thehasbeengiventhepowertoadoptauditing,qualitycontrol,ethics,anddisclosurestandardsforpubliccompaniesandtheirauditorsaswellasinvestigateanddisciplinethoseinvolved.

a）AmericanInstituteofCertifiedPublicAccountants（AICPA）

b）FinancialAccountingStandardsBoard（FASB）

c）PublicCompanyAccountingOversightBoard（PCAOB）

d）SecuritiesandExchangeCommission（SEC）

B10.Acompany'sis（are）potentiallythemosteffectiveinstrumentofgoodcorporategovernance.

a）commonstockshareholders

b）boardofdirectors

c）topexecutiveofficers

d）debtors

A11.TheSarbanes-OxleyActof2002（SOX）waslargelyaresponseto:

a）aseriesofcorporatescandalsinvolvingEnron,WorldCom,GlobalCrossing,Tycoandnumerousothers.

b）adramaticriseintheUStradedeficit.

c）chargesofexcessivecompensationtotopcorporateexecutives.

d）risingcomplaintsbyinvestorsandsecurityanalystsoverthefinancialaccountingforstockoptions.

Topic2CapitalStructure

A1.Theterm"capitalstructure"refersto:

a）long-termdebt,preferredstock,andcommonstockequity.

b）currentassetsandcurrentliabilities.

c）totalassetsminusliabilities.

d）shareholders'equity.

C2.Acriticalassumptionofthenetoperatingincome（NOI）approachtovaluationis:

a）thatdebtandequitylevelsremainunchanged.

b）thatdividendsincreaseataconstantrate.

c）thatkoremainsconstantregardlessofchangesinleverage.

d）thatinterestexpenseandtaxesareincludedinthecalculation.

B3.Thetraditionalapproachtowardsthevaluationofacompanyassumes:

a）thattheoverallcapitalizationrateholdsconstantwithchangesinfinancialleverage.

b）thatthereisanoptimumcapitalstructure.

c）thattotalriskisnotalteredbychangesinthecapitalstructure.

d）thatmarketsareperfect.

D4.Twofirmsthatarevirtuallyidenticalexceptfortheircapitalstructurearesellinginthemarketatdifferentvalues.AccordingtoM&M

a）onewillbeatgreaterriskofbankruptcy.

b）thefirmwithgreaterfinancialleveragewillhavethehighervalue.

c）thisprovesthatmarketscannotbeefficient.

d）thiswillnotcontinuebecausearbitragewilleventuallycausethefirmstosellatthesame

value.

C5.Thecostofmonitoringmanagementisconsideredtobea（an）:

a）bankruptcycost.

b）transactioncost.

c）agencycost.

d）institutionalcost.

D6.Whatisthevalueofthetaxshieldifthevalueofthefirmis$5million,itsvalueifunleveredwouldbe$4.78million,andthepresentvalueofbankruptcyandagencycostsis$360,000?

a）$140,000

b）$220,000

c）$360,000

d）$580,000

A7.Accordingtotheconceptoffinancialsignaling,managementbehaviorresultsinnewdebtissuesbeingregardedas"news"byinvestors.

a）good

b）bad

c）non-event

d）risk-neutral

B8.Thecostofcapitalforafirm--whenweallowfortaxes,bankruptcy,andagencycosts--

a）remainsconstantwithincreasinglevelsoffinancialleverage.

b）firstdeclinesandthenultimatelyriseswithincreasinglevelsoffinancialleverage.

c）increaseswithincreasinglevelsoffinancialleverage.

d）decreaseswithincreasinglevelsoffinancialleverage.

B9.Whensequentiallong-termfinancingisinvolved,thechoiceofdebtorequityinfluencesthefuturefinancialofthefirm.

a）timing

b）flexibility

c）liquidity

d）instrument

B10.Thediscountrateusedtodeterminethepresentvalueofastreamofexpectedfuturecashflowsisreferredtoasthe__________.

a）netoperatingincome

b）capitalizationrate

c）capitalstructure

d）yieldonthecompany'smarketvalueofcommonequity

D11.Thetraditionalapproachtowardsthevaluationofacompanyassumesthat__________.

a）thecostofcapitalisindependentofthecapitalstructureofthefirm

b）thefirmmaintainsconstantriskregardlessofthetypeoffinancingemployed

c）thereexistsnooptimalcapitalstructure

d）thatmanagementcanincreasethetotalvalueofthefirmthroughthejudicioususeoffinancialleverage

D12.ThepresenceofwhichoneofthefollowingcostsisnotusedasamajorargumentagainsttheM&Marbitrageprocess?

a）Bankruptcycosts.

b）Agencycosts.

c）Transactionscosts.

d）Insurancecosts.

C13.Whatisthepresentvalueofthenettax-shieldofdebtifthecurrentmarketvalueofthefirmis$10million,itsvalueifunleveredwouldbe$8million,andthepresentvalueofbankruptcyandagencycostsis$500,000?

a）$1,500,000

b）$2,000,000

c）$2,500,000

d）Noneoftheabovearecorrect.

C14.WhatisthemarketvalueofcommonequityundertheNOIapproach?

Thefirmhasanexpectednetoperatingincomeof$5,000with$4,000ofdebt（marketvalue）.Assumethattheoverallcapitalizationrateis20%.

a）$5,000

b）$20,000

c）$21,000

d）$25,000

C15.Whichofthefollowingstatementsregardingthenetoperatingincomeapproachisincorrect?

a）Theoverallcapitalizationrate,kO,isconstant.

b）Thecostofdebtfunds,ki,isconstant.

c）Therequiredreturnonequity,ke,isconstant.

d）Thetotalvalueofthefirmisunaffectedbychangesinfinancialleverage.

A16.Whichofthefollowingstatementsregardingthetotalvalueprincipleisincorrect?

a）Thetotalvalueprincipleallowsforcorporateborrowingandexcludespersonalborrowingsviaarbitrage.

b）Thetotalvalueprinciplemustholdorelsearbitragewilltakeplaceandthenitspresencewillcausethevaluetoremainconstantregardlessofthecapitalstructure.

c）Thetotalvaluedoesnotchangebecausetheunderlyingprofitandriskofthefirmarewithitsoperations,whichdonotchangewhenthefinancingchanges.

d）ModiglianiandMiller,intheiroriginalposition,advocatethatthetotalvalueofthefirmisidenticalregardlessofthefinancingmix.

C17.TwoidenticalfirmsexistexceptthatFirmAusesnodebtandFirmBusessomedebt.ThetotalvalueofFirmAislessthanthetotalvalueofFirmB,butyouown2%ofFirmB.BasedontheargumentsbyModiglianiandMillerregardingthetotalvalueprinciple,whatshouldyoudo?

a）Buy2%ofFirmAwithfundsfrom"shorting"yoursharesinFirmB.Submitapressreleasethatthetwofirmsshouldbeworthidenticalvalues.ThiswillcauseFirmAtoriseinvalueandleaveyouextrafundsforinvestment.

b）Youshouldborrowenoughfundstoequalthedifferenceinfirmvalue,purchasesharesofFirmAwiththesefunds,andsellyoursharesinFirmB.Thiswillleaveextrafundsforaninvestmentofyourchoice.

c）Sellyourshares,personallyborrow2%ofthequantityoffirmdebt,andpurchase2%ofFirmA.Thiswillleaveextrafundsforaninvestmentofyourchoice.

d）Sellenoughofyourshares（FirmB）topurchase2%ofFirmA.Thiswillleaveextrafundsforaninvestmentofyourchoice.

D18.Allowingforbankruptcycostsandanincreasingprobabilityofbankruptcywithincreasingfinancialleverage,weshouldexpect__________thanwouldbethecasewithoutbankruptcycosts.

a）thepremiumforbusinessrisktobehigher

b）thepremiumforbusinessrisktobelower

c）thepremiumforfinancialriskshouldrisebyless

d）thepremiumforfinancialriskshouldrisebymore

B19.Theexistenceof__________onthebalancesheetgeneratestaxadvantagesthatdirectlyinfluencethecapitalstructureofthefirm.

a）alargeproportionoffixedassets

b）long-termdebt

c）retainedearnings

d）Alloftheaboveanswersare

A20.Astheamountof__________increasesthepresentvalueof__________.

a）debt;nettax-shieldbenefitsofdebtincreases

b）commonequity;bankruptcyandagencycostsincrease

c）debt;nettax-shieldbenefitsofdebtdecrease

d）commonequity;nettax-shieldben