Mid Term Exam
FIN400
M1 – M5 Quiz
M1 - Quiz
1. A firm has an ROE of 14% and a debt ratio of 40%. If the total asset turnover is 3.4, what is the firms profit margin?
Ans – 2.47%
2. Which of the following statements is incorret?
Ans – The over the counter market operates in a fixed location to conduct trades for local stocks.
3. All the following are are secondary market transactions except?
Ans – GE sells $30 million of new preferred stock
4. Firm A and Firm B have the same total assets, ROA and profit margin. However, Firm B has a higher debt ratio and interest expense that Firm A. Which of the following statements is correct?
Ans – Firm B must have a higher ROE than Firm A
5. The term “capital structure” refers to?
Ans – The amount of debt verses equity on the balance sheet
6. Which of the following statements is correct?
Ans – All of these are correct
7. All of the following are functions of the board expet?
Ans – Provide reports to the auditors
8. The over all goal of the financial manager is to?
Ans – Maximize shareholder wealth
9. The real interest rate is?
Ans – The rate that a security would pay if no inflation were expected over it’s holding period.
10. An employee stock option plan is?
Ans – A way to align the interests of employees with those of the owners.
11. The board of directors?
Ans – are elected by shareholders
12. Methods to minimize agency problem include all except?
Ans – Allow the CEO to purchase bonds via an employee bond option plan
13. You are considering a stock investment in one of town firms (A and B) both of which operate in the same industry. A finances it’s $20 million in assets with $18 million in debt and $2 million in equity. B finances it’s $20 million in debt and $18 million in equity. Calculate the debt to equity ratio for the two firms?
Ans – Firm A: 9 times; Firm B: 11 times
14. One year treasury bill rates in 20XX averaged 5.15% and inflation for the year was 7.3%. If investors had expected the same
M1 – M5 Quiz
M1 - Quiz
1. A firm has an ROE of 14% and a debt ratio of 40%. If the total asset turnover is 3.4, what is the firms profit margin?
Ans – 2.47%
2. Which of the following statements is incorret?
Ans – The over the counter market operates in a fixed location to conduct trades for local stocks.
3. All the following are are secondary market transactions except?
Ans – GE sells $30 million of new preferred stock
4. Firm A and Firm B have the same total assets, ROA and profit margin. However, Firm B has a higher debt ratio and interest expense that Firm A. Which of the following statements is correct?
Ans – Firm B must have a higher ROE than Firm A
5. The term “capital structure” refers to?
Ans – The amount of debt verses equity on the balance sheet
6. Which of the following statements is correct?
Ans – All of these are correct
7. All of the following are functions of the board expet?
Ans – Provide reports to the auditors
8. The over all goal of the financial manager is to?
Ans – Maximize shareholder wealth
9. The real interest rate is?
Ans – The rate that a security would pay if no inflation were expected over it’s holding period.
10. An employee stock option plan is?
Ans – A way to align the interests of employees with those of the owners.
11. The board of directors?
Ans – are elected by shareholders
12. Methods to minimize agency problem include all except?
Ans – Allow the CEO to purchase bonds via an employee bond option plan
13. You are considering a stock investment in one of town firms (A and B) both of which operate in the same industry. A finances it’s $20 million in assets with $18 million in debt and $2 million in equity. B finances it’s $20 million in debt and $18 million in equity. Calculate the debt to equity ratio for the two firms?
Ans – Firm A: 9 times; Firm B: 11 times
14. One year treasury bill rates in 20XX averaged 5.15% and inflation for the year was 7.3%. If investors had expected the same