Q1) The yield to maturity is: Select one: 1. the rate that equates the price of

Question

Q1)

The yield to maturity is:

Select one:

1. the rate that equates the price of the bond with the discounted cash flows.

2. the expected rate to be earned if held to maturity.

3. the rate that is used to determine the market price of the bond.

4. equal to the current yield for bonds priced at par.

5. All of the above.

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Q2)

Ratios that measure how efficiently a firm's management uses its assets and equity to generate bottom line net income are known as _____ ratios.

Select one:

1. asset management

2. long-term solvency

3. short-term solvency

4. profitability

5. market value

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Q3)

Which of the following will increase sustainable growth?

Select one:

1. Buy back existing stock

2. Increase profit margin

3. Decrease debt

4. Increase dividend payout ratio

5. Increase asset requirement or asset turnover ratio

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Q4)

_____ refers to the cash flow that results from the firm's ongoing, normal business activities.

Select one:

1. Cash flow from assets

2. Net working capital

3. Capital spending

4. Cash flow from operating activities

5. Cash flow to creditors

------------------------

Q5)

Earnings per share is equal to:

Select one:

1. net income divided by total shareholders' equity.

2. net income divided by the par value of the common stock.

3. gross income multiplied by the par value of the common stock.

4. net income divided by the total number of shares outstanding.

5. operating income divided by the par value of the common stock.

-----------------------------------

Q6)

When you are making a financial decision, the most relevant tax rate is the _____ rate.

Select one:

1. average

2. fixed

3. marginal

4. total

5. variable

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Q7)

Depreciation:

Select one:

1. reduces both the net fixed assets and the costs of a firm.

2. decreases net fixed assets, net income, and operating cash flows.

3. is a non-cash expense which decreases the net operating income.

4. is a non-cash expense that is recorded on the income statement.

5. increases the net fixed assets as shown on the balance sheet.

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Q8)

Cash flow to stockholders is defined as:

Select one:

1. interest payments.

2. cash dividends plus repurchases of equity minus new equity financing.

3. cash flow from financing less cash flow to creditors.

4. repurchases of equity less cash dividends paid plus new equity sold.

5. None of the above.

----------------------

Q9)

Art's Boutique has sales of $640,000 and costs of $480,000. Interest expense is $40,000 and depreciation is $60,000. The tax rate is 34%. What is the net income?

Select one:

1. $20,400

2. $39,600

3. $50,400

4. $79,600

5. $99,600

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Q10)

Use the following income statement and balance sheet to answer the next three questions (20-23):

What is the change in the net working capital from 2009 to 2010?

Select one:

1. $1,235

2. $1,035 $1,335

3. $1,035

4. $3,405

5. $4,740

_____________

What is the operating cash flow for 2010?

Select one:

1. $845

2. $1,930

3. $2,215

4. $2,845

5. $3,060

_____________

What is the cash flow of the firm for 2010?

Select one:

1. $405

2. $1,340

3. $1,340 $430

4. $2,590

5. $3,100

Explanation / Answer

Solution for question 1

Yield to maturity (YTM) is the expected rate of return if an investor hold the bond till maturity. At rate of YTM the price of bond equate with the discounted arte if bond. It is also use for calculation of current price of bond. A par value of bond Yield to maturity is equal to the current yield.

Hence, option (5) is correct answer,

Solution for question 2

Ratio is one of the most powerful and used tool in financial analysis. Ratio that use for determine the assets efficiency is called return on assets and ratio that use to determine how efficiently management use equity is called return on equity.

Both ratio, return on assets, return on equity is comes under Profitability ratio.

Hence, Option (4) is correct answer.

Solution for question 3

Sustainable growth rate is calculated by multiplication of return on equity and retained earnings. If any one or both, return on equity and retained earnings will increase then sustainable growth rate will also increase.

So, Increase profit margin will increase the sustainable growth rate.

Hence, option (2) is correct answer.

Solution for question 4

Cash flows that occur from normal business activity or firm’s ongoing business is called operating cash flow.

Hence, Option (4) is correct answer.

Solution for question 5

Earnings per share is calculated by net income divided by the total number of shares outstanding.

Hence, Option (4) is correct answer.

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