C09S : Principles of Finance
Of the following, which is NOT one of the four main areas of finance?
International finance
Corporate finance
Investments
All are considered main areas of finance.
________ is a major disadvantage of the corporate form of business.
Double taxation
Unlimited liability
Lack of ability to raise capital
Transfer of ownership
Everything else equal, an industry with more leverage will have a:
higher return on assets.
higher return on equity.
lower return on equity.
Both A & B
If you can earn 5.25% per year on your investments, how long will it take to double your money?
6.31 years
19.05 years
13.55 years
There is not enough information to answer this question.
Travis bought a share of stock for $31.50 that paid a dividend of $.85 and sold six months later for $27.65. What was his dollar profit or loss and holding period return?
-$3.00, -9.52%
-$3.85, -12.22%
-$.85, -2.70%
-$3.85, -9.52%
If you were required to estimate the average return for one category of securities for the coming year, history tells us that you should have the greatest degree of confidence estimating which of the following?
Long-term government bonds
3-month U.S. Treasury bills
Small-company stocks
Large-company stocks
Which of the following are not considered a part of the firm’s capital structure?
Long-term debt
Retained earnings
Inventory
Preferred stock
Which of the following choices lists the least to most aggressive actions in the pursuit of overdue debt?
1) a collection agency, 2) court action, 3) a letter requesting overdue payment
1) court action, 2) a collection agency, 3) a letter requesting overdue payment
1) a letter requesting overdue payment, 2) court action, 3) a collection agency
1) a letter requesting overdue payment, 2) a collection agency, 3) court action
John is in a high income-tax bracket and wishes to minimize current taxes payable. He also has a sizeable current income and prefers high growth rates to significant annual cash flow from his equity investments. Which of the following dividend polices would John most likely prefer if we assume that the dividend policy has no impact on the value of the firm and that the capital gains tax rate is lower than the ordinary tax rate?
High-dividend-payout policy
No-dividend-payout policy
Low-dividend-payout policy
John would be indifferent to all of the dividend policies.
Which of the following would NOT be considered a cost of debt financing?
The required return on a bank loan
The required return on preferred stock
The yield-to-maturity of a bond issue
The required return on money borrowed from a venture capitalist
