Which of the following is NOT considered to be a disadvantage of the sole proprietorship form of a business organization? A) Limited ability to raise capital B) Its life is limited to that of the owner C) Unlimited liability of business owners D) Fewer regulations and reporting requirements ANSWER D
Date: September 19th, 2020
If a firm has a positive debt-equity ratio, then the unlevered beta is greater than the levered beta. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Which of the following ratios would be the most useful to assess the risk associated with a firm being able to pay off its short-term line of credit? A) the acid test ratio B) the fixed asset turnover C) the operating profit margin D) return on equity ANSWER A
Date: September 19th, 2020
You are considering an investment in a AAA-rated U.S. corporate bond but you are not sure what rate of interest it should pay. Assume that the real risk-free rate of interest is 1.0%; inflation is expected to be 1.5%; the maturity risk premium is 2.5%; and, the default risk premium for AAA rated corporate bonds […]
Date: September 19th, 2020
Discuss whether the standard deviation of a portfolio is, or is not, a weighted average of the standard deviations of the assets in the portfolio. Fully explain your answer. What will be an ideal response? ANSWER The standard deviation of a portfolio is not a weighted average of the standard deviations of the […]
Date: September 19th, 2020
An inventory turnover ratio of 7.2 compared to an industry average of 5.1 is likely to indicate that A) the firm is selling a product mix that includes more high margin items. B) the firm has higher sales than the industry average. C) the firm’s products are in inventory for fewer days before they are […]
Date: September 19th, 2020
Which of the following is NOT a valid theory that attempts to explain the shape of the term structure of interest rates? A) the Fisher Effect theory B) the unbiased expectations theory C) the liquidity preference theory D) the market segmentation theory ANSWER A
Date: September 19th, 2020
To maximize FLEXIBILITY in capital structure, it is ideal to have HIGH levels of debt. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
Which method of determining interest provides the largest interest amount? A) LIFO B) FIFO C) Day-of-deposit-day-of-withdrawal D) Minimum balance ANSWER C
Date: September 19th, 2020
Which of the following investments is clearly preferred to the others for a risk-averse investor? Investment k Η A 14% 2% B 22% 20% C 18% 16% A) Investment A B) Investment B C) Investment C D) Cannot be determined without additional information ANSWER D
Date: September 19th, 2020
