# Financial Management Online Test

Variance

Risk

Return

Beta

Because investors dislike uncertainty, they will require _____ rates of return from risky investments.

None of the above

The same

Lower

Higher

The benefits attributed to an investment project are:

After tax operating benefits

Tax shield benefits of depreciation

Both 1 and 2 are correct

Rate of return less than the cost of capital

When a firm places a budgetary constraint on the projects it invests in, this is called:

None of the above

Cash budgeting

Working capital management

Capital rationing

According to reinvestment rate assumption, which method of capital budgeting assumes cash flows are reinvested at the project’s rate of return?

None of the above

Internal rate of return

Net present value

Payback period

If two projects are independent, that means that_______

None of the above

Both 1 and 2

You should analyze the projects independently

Selection of one precludes selection of the other

Which of the following capital budgeting methods measures how long it takes to recover the initial investment in a project?

None of the above

Internal rate of return

Net present value

Payback period

Which of the following capital budgeting methods is most theoretically correct?

None of the above

Internal rate of return

Net present value

Payback period

Which of the following capital budgeting methods states the return of a project as a percentage?

None of the above

Internal rate of return

Net present value

Payback period

Since capital budgeting uses cash flows instead of accounting flows, the financial manager must add back ______ to the analysis.

Depreciation

Investments

The cost of accounts payable

The cost of fixed assets

_____ Focuses on long-term decision-making regarding the acquisition of projects.

None of the above

Cash budget

Capital budgeting

Working capital management

Firms that have high price/earning ratios are generally:

None of the above

Equally risk as firms with all firms

Les risky than firms with low price/earning ratios

Riskier than firms with low price/earning ratios

A low price/earning ratio usually means that a firm:

Is doomed in the market place

Is a mature firm

Has positive expectations for the future

Is a growth stock

A high price/earnings ratio usually indicates that a firm is a:

Constant security

Convertible security

Growth stock

Value stock

Common stock that has no growth in dividend is valued as if it were:

None of the above

An option

A bond

Preferred stock

One characteristic of preferred stock is that:

All of the above

It pays a fixed dividend payment

It is a hybrid security with characteristics of both common stock and debt

It has maturity date

As time to maturity draws near, a bond’s value approaches:

None of the above

The coupon payment

Par

Zero

An annuity is

A series of equal and non- consecutive payments

A series of equal and consecutive payment

A series of unequal but consecutive payments

More than one payment

If you have Rs. 1000 and you plan to save it for 4 years with an interest rate of 10%, what is the future value of your saving?

Cannot be determined

Rs.1331.00

Rs.1000.00

Rs.1464.00

Time value of money is an important finance concept because:

All of the above

It takes compound interest into account

It takes time into account

It takes risk into account

The present value of a rupee to be received in the future is:

None of the above

Less than a rupee

Equal to a rupee

More than a rupee

The future value of a rupee that you invest today is:

None of the above

Less than a rupee

Equal to a rupee

More than a rupee

The future value of an annuity is:

None of the above

More than each annuity payment

Equal to each annuity payment

Less than each annuity payment

The concept of present value and future value are:

Inversely related to each other

Proportionately related to each other

Not related to each other

Directly related to each other

If you win the lottery and you choose to have your proceeds distributed to you over a twenty- year period, which calculation would you use to calculate the worth of those proceeds to you today?

Present value of an annuity

Present value of a lump sum

Future value of an annuity

Future value of a lump sum

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