This quiz works best with JavaScript enabled. Home > Corporate Finance > Corporate Finance > Corporate Finance – Quiz 44 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Corporate Finance Quiz 44 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Diversification is ..... It ..... A) The mixing of different assets within a portfolio; reduces overall portfolio risk. B) Buying more than three stocks; reduces overall portfolio risk. C) The mixing of different assets within a portfolio; increases the expected return. D) Buying more than three stocks; increases the expected return. Show Answer Correct Answer: A) The mixing of different assets within a portfolio; reduces overall portfolio risk. 2. What is a lease that is substantially shorter than the useful life of the asset and is cancelable by the lessee ( Ex:car rents for a business trip)? A) Capital Lease. B) Right Lease. C) Operating Lease. D) Warranty Lease. Show Answer Correct Answer: C) Operating Lease. 3. DuPont Identity breaks ROE into three parts, which are ....., asset efficiency, and financial leverage A) Durability. B) Profitability. C) Liquidity. D) Market Value. Show Answer Correct Answer: B) Profitability. 4. Which one of the following terms denotes for certain that a bond is unsecured? A) Debenture. B) Bearer form. C) Call provision. D) Sinking fund. Show Answer Correct Answer: A) Debenture. 5. The equity ratio is determined by: A) $\frac{Equity\ equity\ ownership}{Total\ debt}$. B) $\frac{Equity\ equity\ ownership}{Total\ resources\ capital}$. C) $\frac{Equity\ equity\ ownership}{Debt\ liabilities\ payable}$. D) $\frac{Total\ resources\ capital}{Equity\ equity\ ownership}$. Show Answer Correct Answer: B) $\frac{Equity\ equity\ ownership}{Total\ resources\ capital}$. 6. Which of the following is incorrect regarding contributory factors to the financial crisis of 2008? A) Over-optimistic rating by the credit rating agencies. B) Mortgage lending to high-risk homebuyers. C) Creation of new financial securities. D) High introductory interest rates on home mortgages. Show Answer Correct Answer: D) High introductory interest rates on home mortgages. 7. The market where previously issued securities are sold A) Capital Market. B) Secondary Market. C) Primary Market. D) Money market. Show Answer Correct Answer: B) Secondary Market. 8. For project Z, year-5 inventories increase by $ 6, 000, accounts receivables by $ 4, 000 and accounts payables by $ 3, 000. Calculate the increase or decrease in working capital for year-5. A) Increases by $ 6, 000. B) Decreases by $ 4, 000. C) Increases by $ 7, 000. D) Decreases by $ 7, 000. Show Answer Correct Answer: C) Increases by $ 7, 000. 9. What is the present value of $ 1, 000 to be received in 3 years if the interest rate is 5% compounded annually? A) $ 853.84. B) $ 873.84. C) $ 863.84. D) $ 833.84. Show Answer Correct Answer: C) $ 863.84. 10. What is securitization? A) The process of transferring financial assets into cash. B) The process of issuing different types of securities to investors. C) The process of aggregating multiple assets into a tradable security. D) The process of restructuring a company's debts. Show Answer Correct Answer: C) The process of aggregating multiple assets into a tradable security. 11. The generally accepted accounting principles (GAAP) are A) Rules that outline how a firm can operate ethically. B) Rules on how the firm will be valued in the event of a merger. C) Rules and procedures that define how companies are to maintain financial records and prepare financial reports. D) Rules for how a company can issue stock to raise money. Show Answer Correct Answer: C) Rules and procedures that define how companies are to maintain financial records and prepare financial reports. 12. Preference Shareholders can take part in Management. A) True. B) False. Show Answer Correct Answer: B) False. 13. Does industry consolidation consider a motive for a merger that makes economic sense? A) Yes. B) No. Show Answer Correct Answer: A) Yes. 14. 1) A warrant bestows on its owner the: A) Obligation to sell securities directly to the issuer at a fixed price for a statedperiod of time. B) Right to sell securities directly to the issuer at the prior day's closing price for astated period of time. C) Right to purchase securities directly from the issuer at a fixed price for a statedperiod of time. D) Right to sell securities directly to the issuer at a fixed price for a stated period oftime. Show Answer Correct Answer: C) Right to purchase securities directly from the issuer at a fixed price for a statedperiod of time. 15. " How are we going to raise the money?" what kind of decision is it? A) Capital structure decision. B) Capital budgeting decision. C) Dividend decision. D) None of above. Show Answer Correct Answer: A) Capital structure decision. 16. The principle in which as an investor you cannot find an attractive investment or that exceeds the hurdle rate, the most advisable thing is to five cach back to the owners: A) Financing Principle. B) Investment Principle. C) Dividend Principle. D) None of the above. Show Answer Correct Answer: C) Dividend Principle. 17. Balance sheet? A) Snapshot of the financial position of a company at a specified time, Assets = Liabilities + Equity. B) Snapshot of the financial position of a company at a specified time, Asset = Liabilities + Withdraw. C) Reporting a company's financial performance over a specific accounting period, Asset = Liabilities + Withdraw. D) Reporting a company's financial performance over a specific accounting period, Assets = Liabilities + Equity. Show Answer Correct Answer: A) Snapshot of the financial position of a company at a specified time, Assets = Liabilities + Equity. 18. What is the main responsibility of corporate finance departments in managing short-term finances? A) Managing shareholder dividends. B) Maximizing long-term investments. C) Ensuring enough liquidity for ongoing operations. D) Optimizing capital structure. Show Answer Correct Answer: C) Ensuring enough liquidity for ongoing operations. 19. Who is known as the 'Father of Economics'? A) Adam Smith. B) Chanakya. C) Machiavelli. D) None of these. Show Answer Correct Answer: A) Adam Smith. 20. When we compute the cost of equity capital for a project we assume that the ..... of the project is equivalent to the average market risk of the firm's investments. A) Diversifiable risk. B) Market risk. C) Unsystematic risk. D) Volatility. Show Answer Correct Answer: B) Market risk. ← PreviousNext →Related QuizzesCorporate Finance QuizzesCorporate Finance Quiz 1Corporate Finance Quiz 2Corporate Finance Quiz 3Corporate Finance Quiz 4Corporate Finance Quiz 5Corporate Finance Quiz 6Corporate Finance Quiz 7Corporate Finance Quiz 8Corporate Finance Quiz 9 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books