FINC 600 Week 8 Practice Quiz Corporate Finance Question 1 of 25 4.0/ 4.0 Points Indirect costs of bankruptcy are borne principally by: A.Bondholders B.Stockholders C.Managers D.The federal government Answer Key: B Question 2 of 25 4.0/ 4.0 Points Which of the following lists events in the chronological order from earliest to latest? A.Record date, declaration date, ex-dividend date B.Declaration date, record date, ex-dividend date C.Declaration date, ex-dividend date, record date D.None of the above Answer Key: C Question 3 Dividends are decided by: I) The managers of a firm II) The government III) The board of directors A.I only B.II only C.III only D.I and II only Question 4 Discuss some examples of the conflicts of interest that may arise between bondholders and stockholders when a firm is in financial distress. Question 5 The main advantage of debt financing for a firm is: I) no SEC registration is required for bond issue II) interest expense of a firm is tax deductible III) unlevered firms have higher value than levered firms A.I only B.II only C.III only D.I and III only Question 6 Capital structure of the firm can be defined as: I) the firm’s debt-equity ratio II) the firm’s mix of different securities used to finance assets III) the market imperfection that the firm’s manager can exploit A.I only B.II only C.III only D.I, II, and III Question 7 If the capital markets are efficient, then the sale or purchase of any security at the prevailing market price is: A.Always a positive NPV transaction B.Generally a zero NPV transaction C.Is always a negative NPV transaction D.None of the above Question 8 of 25 0.0/ 4.0 Points Briefly describe the traditional position on capital structure. Question 9 Profitability ratios indicate: I) How productively is the firm utilizing its assets. II) How liquid is the firm. III) How profitable is the firm. IV) How highly is the firm valued by the investors. A.I only B.II only C.III only D.III and IV only Question 10 What are the primary reasons for a company to use debt in its capital structure? Question 11 The difference between Current Assets of a firm and its Current Liabilities is called. A.Net worth B.Net working capital C.Gross working capital D.None of the above Question 12 What are the three basic financial statements? Question 13 The cash budget is the primary short-term financial planning tool. The key reasons a cash budget is created are: I) To estimate your investment in assets II) To estimate the size and timing of your new cash flows III) To prepare for potential financing needs A.I only B.II and III only C.II only D.III only Question 14 Firms can repurchase shares in the following ways: I) Open market repurchase II) Through a tender offer III) Through a Dutch auction process IV) Through direct negotiation with a major shareholder A.I only B.II only C.III only D.I, II, III, and IV Question 15 Stock price cycles or patterns self-destruct as soon as investors recognize them through: A.stock market regulation by the Securities and Exchange Commission (SEC) B.price fixing by the specialists on New York Stock Exchange C.trading by the investors D.none of the above Question 16 Which of the following is a statement of semi-strong form efficiency? I) If the markets are efficient in the semi-strong form then prices will adjust immediately to public information II) If the markets are efficient in the semi-strong form then prices reflect all information III) If the markets are efficient in the semi-strong form then prices will adjust to newly published information
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