Marshall University - EM 660 MBA Finance Exam. Contains 89 Questions and Answers. All reviewed for 100% possible score.

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1. Started on Friday, January 31, 2020, 11:38 PM State Finished Completed on Friday, January 31, 2020, 11:43 PM Time taken 5 mins 4 secs Points 10.00/10.00 Grade 5.00 out of 5.00 (100%) Question... 1 Question text Bob is reviewing his company’s revenue and expenditures over the past 3 years. To do this, Bob needs to obtain copies of which financial statement? Select one: a. Balance sheet b. Statement of cash flows c. Statement of revenues and expenses d. Income statement Question 2 Question text Financial institutions use __________ to facilitate the exchange of money for securities. Select one: a. loans b. exchanges c. risks d. transfers Question 3 Question text On a company's balance sheet, the total liabilities and owner's equity equal $50,000. What is the value of the company's total assets? Select one: a. $25,000 b. $50,000 c. Not enough information to tell d. None of the above Question 4 Question text Which statement reflects the use of cash within a company? Select one: a. Balance sheet b. Retained earnings statement c. Income statement d. Statement of cash flows Question 5 Question text Companies use __________ to gain funds for expansion and growth. Select one: a. thought leadership b. speculation c. investment d. debt Question 6 Question text Which type of investment allows investors to potentially have voting and profit-sharing privileges in the company for a nominal investment of shares? Select one: a. Equity b. Debt c. Direct d. Long-term Question 7 Question text Sam and his broker discuss the need to diversify Sam’s investment portfolio. His broker recommends purchasing equity through an over-the-counter market. Which market is an example of an over-the-counter market? Select one: a. NYSE b. NASDAQ c. CBOE d. None of the above Question 8 Question text Which of the following does not affect the supply and demand for money? Select one: a. Indirect transfers b. Production opportunities c. Time preferences d. Risks Question 9 Question text Which investment option involves investors taking a direct financial interest in the company? Select one: a. Indirect investment b. Equity investment c. Debt investment d. Direct investment Question 10 Question text Which of the following is not one of the three main areas of financial management? Select one: a. Stock markets b. Investments c. Money d. Capital markets Started on Friday, January 31, 2020, 11:45 PM State Finished Completed on Friday, January 31, 2020, 11:58 PM Time taken 12 mins 36 secs Points 9.00/10.00 Grade 4.50 out of 5.00 (90%) Question 1 Question text John is evaluating which investment would be best for his company. He wants to determine the future value of a certain investment that has the following information: PV = $200 INT = 0.1 or 10% N = 1 (years) According to this information, what would be the future value of this investment? Select one: a. $110.67 b. $200.50 c. $220 d. None of the above Question 2 Question text Which of the following is a key component of discounted cash flows? Select one: a. Periods that the cash flows would affect b. Annuity due amounts c. Payment terms d. Principle amounts Question 3 Question text What is the term for trying to mitigate the risk associated with an investment or situation? Select one: a. Tolerance b. Avoidance c. Antecedence d. All of the above Question 4 Question text Bob is evaluating a bond issue to determine the right price for the bond. In his evaluation, he gathers the following information: N = 8 years INT = .025 or 2.5% PMT = $25 FV = $1,000 (par value) What is the above bond issue worth in today's dollars? Select one: a. $1,000 b. $1,181.63 c. $1,200.50 d. None of the above Question 5 Question text In which two ways can risk be defined? Select one: a. Total and market risk b. Mitigated and unmitigated risk c. Risky and very risky d. None of the above Question 6 Question text Which of the following is an example of how companies can mitigate some of an investment’s risk? Select one: a. Sell b. Buy more c. Short the investment d. Insurance Question 7 Question text A company is evaluating the use of insurance to mitigate its risk in the event of a market downturn. The company estimates that it has a total risk of 20% impact to its net income if a market downturn occurs, and the company currently has a net income of $150,000. At what cost should the company take out insurance to mitigate this risk? Select one: a. $25,000 premium b. $100,000 premium c. $150,000 premium d. $200,000 premium or above Question 8 Question text What type of annuity pays at the beginning of a period? Select one: a. Annuities prepaid b. Ordinary annuities c. Annuities due d. Beginning annuities Question 9 Question text What are the three main types of business securities? Select one: a. Preferred, nonpreferred, and trading b. Debt, savings, and loans c. Preferred, common, and debt d. Stock, equity, and debt Question 10 In 0.00 points out of 1.00 Question text How do financial managers tend to value all assets in the same terms? Select one: a. By evaluating cash flows b. By qualifying cash flows c. By interpreting cash flows d. By estimating cash flows Started on Saturday, February 1, 2020, 12:20 AM State Finished Completed on Saturday, February 1, 2020, 12:22 AM Time taken 1 min 37 secs Points 10.00/10.00 Grade 5.00 out of 5.00 (100%) Question 1 Question text Company A has an internal cost of capital of 7% annually. It is evaluating its investment options against its internal costs and has identified three potential investments: Investment A: Bond with annual returns of 8% Investment B: Bond with annual returns of 4% Investment C: Bond with annual returns of 12% Which of the above investments should the company consider taking on given its internal cost of capital? Select one: a. A only b. C only c. A and C only d. B only Question 2 Question text The optimal capital budget represents the intersection of what two items? Select one: a. Marginal return on capital and marginal cost b. Net future value and internal rate of return c. Marginal cost and net present value d. Internal rate of return and net present value Question 3 Question text What is the first step of evaluating a project’s cash flows? Select one: a. Evaluate whether to do the project. b. Break down the project’s key elements. c. Determine the project’s needs. d. Evaluate all the cash flows. Question 4 Question text What does the payback period represent? Select one: a. The time it takes to gain a return on investment b. The time it takes to recover the money invested c. The risk to the capital invested d. The required rate of return on an investment Question 5 Question text An optimal capital budget is the set of projects that does which of the following? Select one: a. Minimizes the company's value b. Levels the company's value c. Maximizes the company's value d. Balances the company's value Question 6 Question text A company has a capital structure that includes 30 debts, 10 preferred stock, and 60% common stock. The before-tax cost of debt is 11%. The cost of preferred stock is 10.3%. The cost of common stock is 14.7%. New common stock sales cost approximately 16%. The marginal tax rate is 40%. According to the above information, what is the weighted average cost of capital for this company? Select one: a. 10.3% b. 11% c. 11.8% d. None of the above Question 7 Question text What does the cost of debt represent? Select one: a. The cost of carrying debt b. The after-tax cost of borrowing c. The cost of financing d. None of the above Question 8 Question text Which of the following is most useful for evaluating an investment? Select one: a. Net future value b. Internal rate of return c. Neither A nor B d. Either A or B Question 9 Question text What does the weighted average cost of capital represent? Select one: a. The cost of borrowing capital b. Financing costs c. Returns on borrowed money d. A company’s current cost of capital Question 10 Question text What measure should financial managers use when they do not know the internal rate of return? Select one: a. Net future value b. Internal rate of return c. Net present value d. External rate of return Started on Saturday, February 1, 2020, 2:50 PM State Finished Completed on Saturday, February 1, 2020, 3:07 PM Time taken 16 mins 49 secs Points 10.00/10.00 Grade 5.00 out of 5.00 (100%) Question 1 Question text A company has total revenue of $195,000 and total assets on its balance sheet of $2,015,000. What is the return on assets for this company? Select one: a. 10% b. 12% c. 15% d. None of the above Question 2 Question text __________ is the return to investors divided by total assets. Select one: a. Return on investment b. Return on average assets c. Return on assets d. Return on risk Question 3 Question text Which form of payment causes a company to pay taxes twice on the same amount? Select one: a. Dividends b. Interest c. Stock splits d. Net present value Question 4 Question text Which of the following is not an assumption in capital structure theory? Select one: a. Potential investors carry the same assumptions about a company's risks. b. Companies can measure business risk. c. Investors trade stocks and bonds in perfect capital markets. d. All the above are assumptions in capital structure theory. Question 5 Question text A company is evaluating its options for filing bankruptcy and needs to determine the total costs it would incur as a result of being in distress. Below is a summary of the information for this scenario: • Filing fees equal $100. • Creditor-revised terms would increase the financing costs of the company by 2% upward on the existing $1,000 floating credit facility annually. • Expected loss in customer sales equals $30 annually. What is the company's total cost to choose bankruptcy? Select one: a. $100 annually b. $150 annually c. $300 annually d. $500 annually Question 6 Question text What do stock splits often increase? Select one: a. The price of shares b. The number of shares c. The cost of shares d. The value of shares Question 7 Question text Dividends are typically taxed at which level? Select one: a. Investor level b. Company level c. No level d. Both A and B Question 8 Question text Which of the following represents the right blend of capital debt and equity for companies? Select one: a. Structure b. Risk c. Loans d. Theory Question 9 Question text What happens when companies sell a stock for more than what they paid for it? Select one: a. Loss b. Dividend c. Capital gain d. Split Question 10 Question text Which of the following are two methods that financial managers use to determine a company's overall risk? Select one: a. Capital and financial methods b. Financial and business methods c. Time and money methods d. Expected and unexpected methods Started on Saturday, February 1, 2020, 3:20 PM State Finished Completed on Saturday, February 1, 2020, 3:22 PM Time taken 1 min 17 secs Points 10.00/10.00 Grade 5.00 out of 5.00 (100%) Question 1 Question text Company A wants to revise its financial goals for the next 5 years. Which type of financial plan would this represent? Select one: a. Short-term financial plan b. Bankruptcy c. Mitigated financial plan d. Long-term financial plan Question 2 Question text What are the base tools for monitoring a budget? (Choose all that apply.) Select one or more: a. Pro forma statements b. Budgets c. Ratios d. Financial managers Question 3 Question text Which of the following defines inventory conversion? Select one: a. The time frame between when companies generate a payable and when they ultimately pay the bill to their suppliers b. The time needed to convert materials into finished goods c. The time required to convert sales made on account or credit to cash d. None of the above Question 4 Question text Which of the following does not describe long-term financial plans? Select one: a. Plans that span more than one period b. Near-term financial plans c. Plans that are longer than 12 months in duration d. All the above Question 5 Question text Which of the following is a base tool for financial controls within companies? Select one: a. Pro forma statements b. Budgets c. Financial statements d. Both pro forma statements and budgets Question 6 Question text Sherry is evaluating her company's cash budget for the coming quarter and identifies the following items: $50 in investing activities $100 in financing activities $200 in operating activities Using your knowledge of cash budgets, what will the total cash outlay likely be for the next quarter? Select one: a. $50 b. $200 c. $350 d. $800 Question 7 Question text What is the first step in a long-term financial plan? Select one: a. Establish financial statements. b. Estimate the sales. c. Evaluate the monitoring process. d. Reinvest the company's funds. Question 8 Question text What does corporate scope define? Select one: a. The company's line of business b. The company's objectives c. The company's approach to profit d. None of the above Question 9 Question text What is the term for borrowing to cover short-term capital needs? Select one: a. Long-term financing b. Short-term financing c. Loans d. Long-term float Question 10 Question text What is the final step in establishing a long-term financial plan? Select one: a. Forecast the term of the plan. b. Evaluate the short-run plan. c. Establish a set of projected financial statements. d. Establish a budget. Started on Saturday, February 1, 2020, 3:22 PM State Finished Completed on Saturday, February 1, 2020, 3:30 PM Time taken 8 mins 21 secs Points 10.00/10.00 Grade 5.00 out of 5.00 (100%) Question 1 Question text Company YY offers a 3% yield on all its savings deposits. It then reinvests these amounts by loaning to its customers at 8%. What is the profit margin? Select one: a. 3% b. 5% c. 8% d. 11% Question 2 Question text Banks do not offer which of the following services? Select one: a. Risk mitigation b. Check clearing c. Lockboxes d. Banks offer all the above services. Question 3 Question text What do bonds pay for the use of the principal? Select one: a. Interest b. Risk c. Stock d. Dividends Question 4 Question text What is a line of credit? Select one: a. An interest-free loan b. A long-term loan c. A bank opening a short-term loan for a company d. A sale of assets Question 5 Question text Which of the following is a company's process of converting sales on credit to cash? Select one: a. Income management b. Receivables management c. Cash management d. Time management Question 6 Question text Bob is trying to decide which bank to deposit his checks into and narrows down three options. Which bank would he choose based on the principle of convenience? Bank A is right next door to his house. Bank B pays 11% on all deposits. Bank C is giving away an iPad to new customers. Select one: a. Bank A b. Bank B c. Bank C d. All the above represent convenience terms. Question 7 Question text Which of the following is typically a nonearning asset for a company? Select one: a. Buildings b. Plant property and equipment c. Cash d. Intangible assets Question 8 Question text What is a credit policy? Select one: a. The difference between a bank's record of a company's cash balance and the company's record of its balance b. A company's set of guidelines for establishing and carrying credit on an ongoing basis c. Any investment that has a maturity of 1 year or less d. The right to purchase secondary issue shares Question 9 Question text Christine is trying to take out a loan at her local bank to pay off some bills. The bank loan officer asks her for security on the loan. Which of the items below could Christine use for security? Select one: a. Savings b. Another loan c. Contract d. A neighborhood watch Question 10 Question text What does a secured loan require? Select one: a. An unsecured form of cash b. An asset-backed transaction for the loan c. A transfer of assets d. An insured loan Started on Saturday, February 1, 2020, 3:31 PM State Finished Completed on Saturday, February 1, 2020, 3:36 PM Time taken 5 mins 2 secs Points 10.00/10.00 Grade 5.00 out of 5.00 (100%) Question 1 Question text Company X is trying to raise additional capital to expand into Europe. In determining the best method of raising capital, the company's management finds that paying dividends is better than paying interest. Given this, which type of investment is best? Select one: a. Bonds b. Line of credit c. Loans d. Preferred stock Question 2 Question text Which class of common stock carries voting rights? Select one: a. A b. B c. C d. D Question 3 Question text Investor Z reviews the different option prices of an asset. One option carries a strike price of $25, and when she reviews the underlying asset's value, the investor establishes that the market value of the asset is $45. What is the option value before the purchase? Select one: a. $20 b. $25 c. $45 d. $70 Question 4 Question text Which type of funding source is very flexible and easy to access because of its short term? Select one: a. Term loans b. Long-term debt c. Stock d. Debt Question 5 Question text Company Y decides to lease its new equipment rather than purchase it outright. The lease contains the following information: The lessor must maintain and service the equipment. The lease cannot be amortized, and has no ownership rights. The lease comes with a cancellation clause. Based on this information, which type of lease did Company Y enter into? Select one: a. Financial b. Sale and leaseback c. Operating d. None of the above Question 6 Question text What is a key disadvantage of going public? Select one: a. Flexibility b. The cost of reporting c. More funds d. Access to new capital Question 7 Question text Investment banking helps companies obtain which of the following? Select one: a. Lower risk b. New risk c. Stock in other companies d. New capital Question 8 Question text Which type of bonds includes a security feature? Select one: a. Debenture b. Subordinated bonds c. Mortgage bonds d. None of the above Question 9 Question text Investor A is reviewing the different options available on the open market and identifies one that has a strike price of $25. The investor establishes that the underlying asset's value is $45. What is the value of the option? Select one: a. $15 b. $20 c. $25 d. $45 Question 10 Question text What does common stock often pay to shareholders? Select one: a. Stock warrants b. Dividends c. Interest d. None of the above Started on Saturday, February 1, 2020, 3:36 PM State Finished Completed on Saturday, February 1, 2020, 3:48 PM Time taken 11 mins 17 secs Points 10.00/10.00 Grade 5.00 out of 5.00 (100%) Question 1 Question text Company A and Company B decide to merge their operations; Company B is the acquiring organization. Before completing the merger, they determine that Company A has a total worth of $50 million and Company B has a total worth of $100 million. What would the combined company be worth after the merger? Select one: a. $50 million b. $100 million c. $150 million d. $300 million Question 2 Question text Chapter 11 allows a company to do which of the following? Select one: a. Rename itself b. Close c. Wash itself of all debt d. Reorganize Question 3 Question text Which advantage of multinational operations allows companies to expand to other countries when they exhaust growth in their own country? Select one: a. Production b. Diversification c. New technologies d. Additional sales and revenues Question 4 Question text Which of the following is not a type of merger? Select one: a. Sideways b. Horizontal c. Conglomerate d. Vertical Question 5 Question text Which of the following is a challenge for multinational operations? Select one: a. Political concerns b. Government regulations c. Language differences d. All of the above Question 6 Question text Investor A reviews foreign currency exchange rates and tries to determine how many euros 100 U.S. dollars (USD) will buy. At the current exchange rate, 1 euro equals 1.37 USD. How many euros does 100 USD equal? Select one: a. 73 euros b. 100 euros c. 137 euros d. None of the above Question 7 Question text Who establishes the fairness and feasibility of a bankruptcy? Select one: a. Courts b. Investment bankers c. Loan officers d. Financial managers Question 8 Question text Bankruptcy means that a company is under which of the following? Select one: a. Distress b. Risk c. Foreclosure d. None of the above Question 9 Question text The International Monetary Fund sets guidelines for which of the following? Select one: a. Trade b. Loans c. Risk d. Exchange Question 10 Question text Which of the following occurs when the fundamentals that the owners used to start the company are no longer intact? Select one: a. Economic failure b. Bankruptcy c. Business failure d. Technical insolvency 2. Started on Saturday, February 1, 2020, 3:36 PM State Finished Completed on Saturday, February 1, 2020, 3:48 PM Time taken 11 mins 17 secs Points 10.00/10.00 Grade 5.00 out of 5.00 (100%) Question 1 Question text Company A and Company B decide to merge their operations; Company B is the acquiring organization. Before completing the merger, they determine that Company A has a total worth of $50 million and Company B has a total worth of $100 million. What would the combined company be worth after the merger? Select one: a. $50 million b. $100 million c. $150 million d. $300 million Question 2 Question text Chapter 11 allows a company to do which of the following? Select one: a. Rename itself b. Close c. Wash itself of all debt d. Reorganize Question 3 Question text Which advantage of multinational operations allows companies to expand to other countries when they exhaust growth in their own country? Select one: a. Production b. Diversification c. New technologies d. Additional sales and revenues Question 4 Question text Which of the following is not a type of merger? Select one: a. Sideways b. Horizontal c. Conglomerate d. Vertical Question 5 Question text Which of the following is a challenge for multinational operations? Select one: a. Political concerns b. Government regulations c. Language differences d. All of the above Question 6 Question text Investor A reviews foreign currency exchange rates and tries to determine how many euros 100 U.S. dollars (USD) will buy. At the current exchange rate, 1 euro equals 1.37 USD. How many euros does 100 USD equal? Select one: a. 73 euros b. 100 euros c. 137 euros d. None of the above Question 7 Question text Who establishes the fairness and feasibility of a bankruptcy? Select one: a. Courts b. Investment bankers c. Loan officers d. Financial managers Question 8 Question text Bankruptcy means that a company is under which of the following? Select one: a. Distress b. Risk c. Foreclosure d. None of the above Question 9 Question text The International Monetary Fund sets guidelines for which of the following? Select one: a. Trade b. Loans c. Risk d. Exchange Question 10 Question text Which of the following occurs when the fundamentals that the owners used to start the company are no longer intact? Select one: a. Economic failure b. Bankruptcy c. Business failure d. Technical insolvency [Show More]

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