FIN622 Current Quiz 5 26 July 2010

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Quiz #5
Fin 622

Question # 1 of 15 ( Start time: 01:17:12 PM ) Total Marks: 1
An un-geared beta refers to the beta of a firm with:
Select correct option:

• 100% Debt financed
  
• 100% Equity financed
  
• 50% Equity and 50% Debt financed
  
• 60% Equity and 40% Debt financed
  

Question # 2 of 15 ( Start time: 01:18:40 PM ) Total Marks: 1
When a firm places a budgetary constraint on the projects it invests in, this is called:
Select correct option:

• Capital rationing
  
• Working capital management
  
• Cash budgeting
  
• None of the above
  

Question # 3 of 15 ( Start time: 01:19:28 PM ) Total Marks: 1
In which of the following dividend policy, the amount of dividend is relatively fixed?
Select correct option:

• Constant payout ratio policy
  
• Hybrid Dividend policy
  
• Residual Dividend policy
  
• Stable dividend policy
  

Question # 4 of 15 ( Start time: 01:20:13 PM ) Total Marks: 1
If sensitivity analysis concludes that the largest impact on profits would come from changes in the sales level, then which of the following recommendations should be considered?
Select correct option:

• Fixed costs should be traded for variable costs
  
• Variable costs should be traded for fixed costs.
  
• The project should not be undertaken.
  
• Additional marketing analysis may be beneficial before
  

Question # 5 of 15 ( Start time: 01:21:12 PM ) Total Marks: 1
If a creditor wanted to know if a potential customer paid its bills on time, the creditor could look at the potential customer's:
Select correct option:

• Current ratio.
  
• Acid ratio.
  
• Average age of accounts payable.
  
• Average age of accounts receivable
  

7Question # 6 of 15 ( Start time: 01:21:59 PM ) Total Marks: 1
What we get after subtracting operating costs and capital expenditures necessary to at least sustain cash flows from total firm revenues?
Select correct option:

• Free cash flows
  
• Strategic cash flows
  
• Net income
  
• Earnings before interest and taxes (EBIT)
  

Question # 7 of 15 ( Start time: 01:23:25 PM ) Total Marks: 1
Which of the following situation may arise due to overtrading by a firm?
Select correct option:

• Liquidity of the firm deteriorates
  
• Liquidity of the firm improve
  
• Risk of the firm decreases
  
• Long-term capital of the firm increases
  

Question # 8 of 15 ( Start time: 01:24:42 PM ) Total Marks: 1
The proper amount of safety stock, to be maintained, depends on all of the following EXCEPT:
Select correct option:

• The cost of being out of stock
  
• The cost of placing an order
  
• The uncertainty associated with forecasted demand
  
• The cost of carrying additional inventory
  

Question # 9 of 15 ( Start time: 01:26:08 PM ) Total Marks: 1
A firm is holding cash to take advantage of any temporary business opportunity. This is an example of the ________ motive for holding cash.
Select correct option:

• Capital needs
  
• Precautionary
  
• Transaction
  
• Speculative
  

Question # 10 of 15 ( Start time: 01:27:02 PM ) Total Marks: 1
A dividend payment made in the form of additional shares, rather than a cash payout is known as:
Select correct option:

• Stock Dividend
  
• Cum Dividend
  
• Ex Dividend
  
• Extra Dividend
  

Question # 11 of 15 ( Start time: 01:27:53 PM ) Total Marks: 1
Virgo Airlines will pay Rs.4.00 dividend next year on its common stock, which is currently selling at Rs.100 per
share. What is the market's required return on this investment if the dividend is expected to grow at 5% forever?
Select correct option:

• 4 percent.
  
• 5 percent.
  
• 7 percent.
  
• 9 percent.
  

Question # 12 of 15 ( Start time: 01:28:40 PM ) Total Marks: 1
A company has a dividend yield of 8%. If its dividend is expected to grow at a constant rate of 5%, what must be the expected rate of return on the company’s stock?
Select correct option:

• 14%
  
• 13%
  
• 12%
  
• 10%
  

Question # 13 of 15 ( Start time: 01:29:05 PM ) Total Marks: 1
You have calculated that the required rate of return on a particular common stock is less than the expected rate of return. Therefore, you would conclude:
Select correct option:

• That the stock is more risky than the market portfolio
  
• That an investor should buy the stock.
  
• That the stock has a high dividend payout ratio.
  
• That an investor should sell the stock.
  

Question # 14 of 15 ( Start time: 01:29:53 PM ) Total Marks: 1
Economies of scale can best be realized with a ________ merger.
Select correct option:

• Horizontal
  
• Vertical
  
• Financial
  
• Conglomerate
  

Question # 15 of 15 ( Start time: 01:31:22 PM ) Total Marks: 1
The greater the proportion of permanent current assets financed with short-term debt, the:
Select correct option:

• Riskier would be the working capital policy of the firm
  
• Lower would be the safety margin needed to protect
  
• Less likely that the firm will try to lengthen the mature
  
• Lower would be the firm's potential return on total in