Financial Decision Making MCQs

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Baldwin Corporation’s inventory expressed as a percentage of current assets increased from 25% last July to 35% this July. The factor that is least...






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A company’s cash ratio will decrease if the company






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Mayson Ltd. reported net income of £3,500,000 for last year. The company had 100,000 shares of common stock outstanding with a par value of £1 and ...






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Zoron Corporation experienced the following year-over-year changes. Net profit margin Increased 25% Total asset turnover Increased 40% Total assets...






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Which one of the following ratios would be most affected by miscellaneous or nonrecurring income?






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Acme Company has sales of $100,000, cost of sales of $40,000, interest expense of $4,000, taxes of $18,000, and operating expenses of $15,000. What i...






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FreezeIt Inc. is a manufacturer of refrigeration systems based out of the United States with one subsidiary in Canada. The Canadian subsidiary export...






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FreezeIt Inc. is a manufacturer of refrigeration systems based out of the United States with one subsidiary in Canada. The Canadian subsidiary export...






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To calculate cash flows using the indirect method, which one of the following items must be added back to net income?






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Since incorporating three years ago, Lawrence Inc. has estimated bad debts at a rate of 3% using the income statement approach. During its fourth yea...






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A major difference between economic profit and accounting profit is that economic profit






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OldTime Inc. is a mature firm operating in a very stable market. Earnings growth has averaged about 3.2% for the last dozen years, just staying in li...






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Using the capital asset pricing model (CAPM), determine the expected market risk premium from the following information. Beta of Investment A 1.4 R...






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A gold mining company expects to sell 10,000 ounces of gold 6 months from today. The revenue risk of selling the gold can be hedged by






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What variable is measured on the horizontal axis of the yield curve?






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Vega Inc. needs to raise $50,000,000 for expansion. The two available options are to sell 7%, 10-year bonds at face value or to sell 5% preferred sto...






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Zeta Corporation’s current year earnings are $2.00 per share. Using a discounted cash flow model, the controller determines that Zeta’s common st...






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With regard to a capital investment project, which one of the following statements best describes the relationship between the cost of capital and th...






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Pane Software Inc. has total capital of $100 million, and its cost of capital was 12%. A new project has been proposed that will require additional c...






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All other things being equal, which one of the following factors would result in an increase in cash reported on the balance sheet from one period to...






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Topka Inc. needs to borrow $500,000 to meet its working capital requirements for next year. The Merchant Bank has offered the company a 9.5% simple i...






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Which one of the options below best describes a public offering where there is less price uncertainty due to the existence of a benchmark price?






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Monroe Company needs an additional machine that will be used for the next five years at which time the machine will be obsolete and have zero salvage...






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BigCo, a large conglomerate, has a division that has developed a new and highly promising technology. BigCo would like to retain control of this divi...






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Suppose that Swiss wrist watches priced in Swiss Francs become very popular among U.S. consumers while at the same time Britain experiences relativel...






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A U.S. company has an account payable it must pay in six months with one Japanese company, and an account receivable to be received in six months wit...






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A company attempts to achieve an annual after-tax operating profit of $2,400,000 by selling a good for $3,000 per unit. Production of the good involv...






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Blount Inc. is considering discontinuing a certain product line if it does not have a margin of safety higher than 15%. The breakeven sales are $76,8...






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TwelCo produces and sells two main products, with contribution margins per unit as follows. Product A: $10.00 per unit Product B: $ 8.00 per unit ...






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Sudden economic changes have forced the Auto Facsimilie Co. to alter its business strategy. The company is considering eliminating product lines, lay...






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Oak Fine Furnishings manufactures a wide range of home furnishings. One of their products is an oak headboard. The company currently sells 4,000 head...






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Giant Co has received an offer from Patriot Co to produce units that Giant Co currently produces and sells. The unit price quoted by Patriot Co is hi...






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Joe Cooper owns and operates an ice cream truck that he drives through residential neighborhoods to sell five different treats to the area’s childr...






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Adams Corporation’s goal is for operating income to equal 6% of sales. Adams estimates that the highest selling price the market will bear is $115 ...






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Which one of the following statements best describes characteristics of the growth phase of the product life cycle?






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Which one of the following is the most important difference between a monopoly and a firm facing perfect competition, assuming both are unconstrained...





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Virtucon Company identifies supply chain risks as part of their Enterprise Risk Management (ERM) process. After identification of this risk, Virtucon...






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At the beginning of the year, a portfolio manager who manages a portfolio with a mean annual return of 8% and annual standard deviation of 25% wants ...






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For a firm engaged in risk management, Value at Risk is defined as the






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DRP Insurance Company wants to be “best in class” in terms of Enterprise Risk Management (ERM) implementation. To achieve this goal, the company ...






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The stage of the capital budgeting process that has the most risk is






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Charles Company owns a building that originally cost $400,000 and has a current book value of $250,000. The building was financed by a loan that has ...






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The primary advantage of using the internal rate of return method to evaluate capital budgeting projects is that it






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A company invested $500,000 in a new project. The project is expected to yield annual incremental cash flows of $175,000 for 4 years. What is the app...






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One disadvantage of using internal rate of return is that it






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Assume that an investment project’s assumed cash flows are not changed, but the assumed weighted average cost of capital is reduced. What impact wo...






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If a project has a profitability index that is greater than 1.0, it means that the






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Large firms often seek to control risk through allocating or rationing capital among divisions. When capital is rationed, managers are most likely to...






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An analyst is in the process of determining what the current share price should be for PaperToy Inc. In early January, the analyst collected the foll...






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The U.S Foreign Corrupt Practices Act is particularly focused on the dealings of financial institutions and the safeguarding of the global financial ...






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Corporations have the responsibility to issue financial statements that are timely, accurate, and transparent, reflecting all the transactions of the...






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Jonathan is applying for a personal loan from a local bank. As part of its standard procedure for loan assessment, the bank has asked him to provide ...






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Mr. and Mrs. Yung, both aged 48 and each with a life expectancy of 90, have a current annual household income of $600,000 and current savings of $1.7...






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Ronald has taken out a car loan of $280,000 to be repaid over 3 years. Interest rate is at 3.5% for the first year, 4.5% for the second year, and 5.5...






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Which of the following types of business ownership imply that the nature of the liability of the owner(s) with respect to the business is a personal ...






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Ruby is 60 years old and expects to live until at least age 80. She is considering a proposal of an annuity from an insurance company. For a premium ...






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A financial planner has extracted the following information about a client from his file: “Existing investment portfolio: aggressive Findings of r...






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Robert is a 35-year old single male who has just lost his job as a salesperson due to the recent economic downturn. Which of the following are approp...






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Generally speaking, a financial planner is expected to ensure that the client’s I. goals are prioritized in the order of importance. II. investmen...






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Amy and Ben are a married couple aged 30 and 32 respectively, they are concerned about their heavy debt load as below: I. Mortgage (interest at 4.5%...






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A financial planner is writing an article on financial activities for readers over 60 years of age who have a personal profile typical for that age g...






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Freshly Restaurant (Freshly) has employed Rose as a full-time waitress for 6 months. Rose receives a fixed monthly salary, and at the end of each mon...






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Richard is an Australian citizen who came to Hong Kong under an employment visa in June 2010. He was contracted to work in the Hong Kong subsidiary o...






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Which of the following statements CORRECTLY describe “H-shares”? I. They are traded either in Hong Kong dollars or in Renminbi. II. They are iss...






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A monetary policy involves the control of: I. interest rates. II. government spending. III. the supply of money. IV. tax rates.






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Economic indicators suggest that there will be a rise in interest rates in the coming six months. Which ONE of the following investment portfolios wo...






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Which of the following are typical features of a forward contract? I. The price of the goods is determined at the time of making the contract. II. T...






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When investing in real assets such as properties or land at times of inflation, the future cashflows from the investments are likely to rise in: I. i...






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Which of the following abilities of a financial planning strategy can be evaluated with reference to information provided by a financial budget? I. ...






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In the early stage of establishing a relationship with a client, a financial planner should: I. discuss the process and concepts of financial plannin...






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Which of the following statements about determining the client’s personal and financial goals, needs and priorities are CORRECT? I. They must be d...






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Evaluating the client’s financial position is an important step in the financial planning process. Which of the following tasks should be completed...