corporate finance

1.

1 point

The amount of cash a firm holds to counter the uncertainty surrounding its future cash needs is called:

Precautionary balance

Transactions balance

Compensating balance

2.

1 point

Stretching accounts payable means

Paying less than the amount owned

Ignoring the payment due period and paying the amount owned later

Obtaining a change of the contractual terms regarding payments

3.

1 point

Which of the following ratios compares the amount of profit for the period available to the owners, with the owners’ average stake in the business during the same period?

Operating profit margin

Return on capital employed

Return on ordinary shareholders’ funds

Gross profit margin

4.

1 point

What is the trade credit?

The difference between receivables and payables that is the net amount of a firm’s capital consumed as a result of those credit transactions; the credit that a firm extends to its customers

The sum of receivables and payables that a firm extends to its customers

5.

1 point

A line of credit cannot be:

Uncommitted line of credit

Legal line of credit

Committed line of credit

6.

1 point

A bank loan arrangement in which a bank agrees to lend a firm any amount up to a stated
maximum is called:

Promissory note

Line of credit

Unsecured credit

7.

1 point

An amount a firm’s bank may require the firm to maintain in an account at the bank as compensation for services the bank may perform is called:

Precautionary balance

Compensating balance

Transactions balance

8.

1 point

The total length of time credit is extended to the buyer is called:

Credit period

Cash discount

Discount period

9.

1 point

The rate of interest at which banks borrow funds from each other in the London interbank
market is called:

LIBOR

ROBOR

BUBOR

10.

1 point

When a firm acquires inventory precisely when needed so that its inventory is always zero or close to it, we can say that the company uses a:

Zero investment management

Tolerant management of inventories

Just in time inventory management

11.

1 point

The cash flow statements can be drawn according to

Both the direct and indirect method

The indirect method

The direct method

12.

1 point

The length of time between when a firm pays cash to purchase its initial inventory and when it receives cash from the sale of the output produced from that inventory is called:

Operating cycle

Cash cycle

Cash conversion cycle

13.

1 point

Mergers are:

Combinations of two or more companies in which one new firm comes into being while the ones that were combined have stopped existing

Combinations of two or more companies in which one firm survives as a legal entity

14.

1 point

What does the average settlement period for trade receivables ratio measure?

The average time credit customers take to pay the amounts that they owe to the business

The shortest time credit customers take to pay the amounts that they owe to the business

The average time a company takes to pay its suppliers for the amounts it owes to them

15.

1 point

The number of days a buyer has to take advantage of the cash discount is named:

Cash discount

Discount period

Credit period

16.

1 point

When the lender can seek payment from the borrower should the borrower’s customers default
of their bills, a financing arrangement is considered to be:

Without recourse

With recourse

With warranty

17.

1 point

What kind of ratios are the average inventories turnover period, the average settlement period for trade receivables, the average settlement period for trade payables, the sales revenue to capital employed and the sales revenue per employee?

Profitability ratios

Efficiency ratios

Liquidity ratios

18.

1 point

Takeovers are:

Acquisitions of other companies that may take the form of a friendly or unfriendly merger

Forced acquisitions of other companies

Changes in the top management

19.

1 point

Financing short term needs with long term debt is considered to be

A conservative financing policy

An aggressive financing policy

A neutral financing policy

20.

1 point

The percentage discount offered if the buyer pays early is called:

Credit period

Cash discount

Discount period

21.

1 point

Spontaneous financing or trade credit is simply a way of obtaining more cash by:

Establishing a Line of Credit

Borrowing against your assets

Lengthening the Disbursement Cycle

Selling your receivables

22.

1 point

Appropriation budgets can be

zero base budgets

incremental budgets.

None of these.

23.

1 point

Standard quantities per unit of product for direct labor are normally determined by:

The accounting department.

The engineering department.

The personnel department.

The marketing department.

None of these.

24.

1 point

Which of the following ratios relates the operating profit for the period to the sales revenue during that period?

Return on capital employed

Operating profit margin

Gross profit margin

Return on ordinary shareholders’ funds

25.

1 point

Which of the following ratios is a more stringent test of liquidity?

The current ratio

The acid test ratio

26.

1 point

Which of the following ratios expresses the relationship between the operating profit generated during a period and the average long-term capital invested in the business during that period?

Return on capital employed

Gross profit margin

Return on ordinary shareholders’ funds

Operating profit margin

27.

1 point

The combining of multiple small companies in the same industry to create one larger
company is known as:

Acquisition

Initial public offering

Roll-up transactions

28.

1 point

Stretching accounts payable means

Paying less than the amount owned

Obtaining a change of the contractual terms regarding payments

Ignoring the payment due period and paying the amount owned later

29.

1 point

What does the average inventories turnover period ratio measure?

The average period for which inventories are being held

The biggest period for which inventories are being held

The average period in which inventories are being purchased

30.

1 point

Which company needs more cash to conduct its daily operations?

A company with a short cash cycle

A company with a long cash cycle

31.

1 point

Budgeted unit sales is normally determined by:

The marketing department.

None of these

The personnel department.

The engineering department.

The accounting department.

32.

1 point

The amount of cash a firm needs to be able to pay its bills is called:

Transactions balance

Compensating balance

Precautionary balance

33.

1 point

What does the average settlement period for trade receivables ratio measure?

The average time credit customers take to pay the amounts that they owe to the business

The shortest time credit customers take to pay the amounts that they owe to the business

The average time a company takes to pay its suppliers for the amounts it owes to them

34.

1 point

The amount of cash that should be held is a function of four amounts: Transaction Amount (includes
compensating balances), Precautionary Amount, Speculative Amount, and Financial Amount. As a general
rule, the minimal amount of cash that should be held is:

Speculative Amount + Financial Amount

Transaction Amount + Precautionary Amount

Speculative Amount

Transaction Amount

35.

1 point

Which of the following ratios relates the gross profit of the business to the sales revenue generated for the same period?

Return on ordinary shareholders’ funds

Return on capital employed

Operating profit margin

Gross profit margin

36.

1 point

A business venture (representing a new business enterprise) jointly owned and controlled
by two or more independent firms, that continue to exist as separate firms, is known as:

A strategic alliance

A virtual corporation

A joint venture

37.

1 point

Which are the 5 C’s of credit?

Character, capacity, constraints, collateral, conditions

Character, client, capital, collateral, conditions

Character, capacity, capital, collateral, conditions

38.

1 point

An arrangement in which a firm sells receivables to the lender and the lender agrees to pay the
firm the amount due from its customers at the end of the firm’s payment period is called:

Factoring of accounts receivable

Pledging of accounts receivable

Closing of a committed line of credit

39.

1 point

An agreement in which a lender reviews the credit sales of the borrowing firm and decides
which credit accounts it will accept as collateral for the loan, based on its own credit standards
is called:

Closing of a committed line of credit

Factoring of accounts receivable

Pledging of accounts receivable

40.

1 point

What does the average inventories turnover period ratio measure?

The biggest period for which inventories are being held

The average period in which inventories are being purchased

The average period for which inventories are being held

41.

1 point

An offer to buy current shareholders’ stock at a specified price (often higher than the
market price), often with the objective of gaining control of the company is known as:

A two-tier tender offer

A tender offer

A purchase offer

42.

1 point

The amount that a firm must keep invested in its short-term assets to support its continuing
operations is called:

Working capital

Permanent working capital

Temporary working capital

43.

1 point

Which of the following ratios does not evaluate the profitability of the business:

Return on capital employed

Sales revenue per employee

Gross profit margin

Operating profit margin

44.

1 point

The average length of time between when a firm originally receives its inventory and when it receives the cash back from selling its product is called:

Cash cycle

Operating cycle

Cash conversion cycle

45.

1 point

One way of decreasing the collection time for cash receipts is to:

Accept cash payments only.

Treat all customers the same.

Invoice customers quickly.

46.

1 point

A measure of the cash cycle calculated as the sum of a firm’s inventory days and accounts receivable days, less its accounts payable days is called:

Operating cycle

Cash cycle

Cash conversion cycle

47.

1 point

Financing part or all of the permanent working capital with short term debt is known as:

A neutral financing policy

An aggressive financing policy

A conservative financing policy

48.

1 point

Which of the following ratios does not evaluate the liquidity of the business:

Current ratio

Gross profit margin

Acid test ratio

49.

1 point

Which of the following is a purpose or advantage of the master budget process?

Coordination of the activities of the different functional areas of the firm.

Communication to managers of how their efforts add value to the organization's products or services.

Forces management to establish profit objectives.

Provides a tool for evaluation and control.

All of these.