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1 | |
Retained earnings are: |
| | A) | The amount of cash the firm has saved up |
| | B) | The difference between the net income earned and the dividends paid during a year |
| | C) | The difference between the market price of the stock and the book value |
| | D) | The amount of directly contributed equity capital in excess of par value |
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2 | |
Internally generated cash is calculated as: |
| | A) | Retained earnings plus interest payments |
| | B) | Retained earnings plus depreciation |
| | C) | Retained earnings minus depreciation |
| | D) | Dividends paid plus interest payments |
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3 | |
Generally, managers of corporations prefer internally generated cash to finance their capital expenditures because: |
| | A) | They can avoid the discipline of the security markets. |
| | B) | The costs of issuing new securities are high. |
| | C) | The announcement of new equity issue is usually bad news for investors. |
| | D) | All of the above |
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4 | |
A firm has $100 million in current liabilities, $200 million in total long-term liabilities, and $300 million in stockholders' equity, total assets of $600 million. Calculate the debt ratio for the firm. |
| | A) | 40% |
| | B) | 20% |
| | C) | 50% |
| | D) | None of the above |
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5 | |
Total capitalization is defined as: |
| | A) | Total long-term liabilities plus stockholders' equity |
| | B) | Total debt plus stockholders' equity |
| | C) | Total debt minus stockholders' equity |
| | D) | Current liabilities and stockholders' equity |
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6 | |
A stock certificate has a stated value on it. This amount is called the: |
| | A) | Book value |
| | B) | Par value |
| | C) | Liquidation value |
| | D) | None of the above |
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7 | |
Capital surplus usually refers to: |
| | A) | The stock's par value |
| | B) | The accumulated retained earnings during the life of the corporation |
| | C) | The amount of directly contributed equity capital in excess of par value |
| | D) | The amount of stock repurchased |
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8 | |
Shares of stock that have been repurchased by the corporation are called |
| | A) | Treasury stock |
| | B) | Repurchase agreements |
| | C) | Authorized shares |
| | D) | Retained equity |
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9 | |
The market value of equity is calculated as: |
| | A) | (Market price) x (# of shares outstanding) |
| | B) | (Market price) x (# of treasury shares) |
| | C) | (Market price) x (# of authorized shares) |
| | D) | (Par value) x (# of shares outstanding) |
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10 | |
The equity accounts of ABX Company is as follows:| Common Shares ($1.00 par value) | $2,000,000 | | Additional Paid-in-capital | $1,000,000 | | Retained Earnings | $4,000,000 | | Net Common Equity | $7,000,000 |
Suppose the company sells 1,000,000 additional shares at a price of $5.00 per share, what is the new value of Common Shares account? |
| | A) | 4,000,000 |
| | B) | 3,000,000 |
| | C) | 2,000,000 |
| | D) | None of the above |
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11 | |
If you own 1,000 shares of stock and you can cast 5,000 votes for a particular director, then the stock features: |
| | A) | Cumulative voting |
| | B) | Straight voting |
| | C) | Majority voting |
| | D) | None of the above |
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12 | |
Suppose you own 500 shares of common stock of a firm and there are five directors being elected, what is the maximum number of shares you can cast for a particular director under majority voting? |
| | A) | 500 |
| | B) | 2,500 |
| | C) | 100 |
| | D) | None of the above |
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13 | |
A grant of authority allowing someone else to vote shares of stock you own is called a: |
| | A) | Power of share authorization |
| | B) | Proxy voting |
| | C) | Restricted conveyance |
| | D) | None of the above |
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14 | |
A modification to the company charter that requires 75% shareholder approval for a merger is called a(n): |
| | A) | Majority voting amendment |
| | B) | Cumulative voting amendment |
| | C) | Proxy voting amendment |
| | D) | Supermajority amendment |
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15 | |
Long-term debt is often called: |
| | A) | Secured debt |
| | B) | Subordinated debt |
| | C) | Funded debt |
| | D) | Unfunded debt |
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16 | |
The gap between the cash companies need and the cash they generate internally is called: |
| | A) | Financial Deficit |
| | B) | Inflationary Gap |
| | C) | Recessionary Gap |
| | D) | Specific pattern of corporate financing |
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17 | |
Debt policy answers the following question: |
| | A) | How much profit should be paid out as dividends rather than plowed back into the business? |
| | B) | How much profit should be plowed back into the business rather than paid out as dividends? |
| | C) | What proportion of the deficit should be financed by borrowing rather than by an equity issue? |
| | D) | How different patterns of corporate financing influence proportion of deficit that is financed by equity issue? |
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18 | |
A corporation is owned by its |
| | A) | Board of directors |
| | B) | Common stockholders |
| | C) | CEO |
| | D) | Stakeholders |
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19 | |
Most of the companies have: |
| | A) | One class of common stock, and each share has one vote |
| | B) | Several classes of common stock, and each share has two votes |
| | C) | Various classes of preferred and common stock and each share has one vote |
| | D) | One class of preferred stock, and each share has two votes |
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20 | |
Convertible bond gives its owner the option to: |
| | A) | Turn bond into a preferred stock |
| | B) | Sell bond at the market premium |
| | C) | To sell bond at its par value |
| | D) | Exchange the bond for a predetermined number of shares |
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21 | |
Markets where there is no organized exchange are known as |
| | A) | Over-the-counter (OTC) markets |
| | B) | Primary markets |
| | C) | Secondary markets |
| | D) | Securities markets |
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22 | |
Eurobonds are |
| | A) | international debt instruments |
| | B) | marketed by the London branches of international banks |
| | C) | denominated in dollars, yen, or any other currency |
| | D) | All of the above |
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23 | |
Most issues of preferred are known as cumulative preferred stock, which means |
| | A) | the firm must pay all past preferred dividends before common stockholders get a cent |
| | B) | the firm must pay common stock holders in the first place |
| | C) | the firm must retire its long-term debt |
| | D) | None of the above |
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