WGU C214 Concepts Only Multi Choice MV pt 2
1. In an efficient market, new information will move prices almost
immediately
(T/F): T
2. What is the relationship between WACC and IRR?
a. Just 2 different numbers
b. IRR must exceed WACC to accept investment
c. WACC must exceed IRR to accept investment
d. WACC and IRR are the same thing: b
3. What is the relationship between NPV and IRR?
a. Both must exceed WACC to accept investment
b. If discount rate equals IRR, NPV is equal to zero.
c. NPV must exceed WACC to accept investment
d. If discount rate equals IRR, should accept investment: b
4. If a firm's financial and operating leverage is high, what is the implication?
a. The firm is more profitable
b. Profits are more volatile as sales fluctuate
c. The firm is less profitable
d. The two leverages offset each other - - neutral impact: b
5. If an industry, such as autos, has very high fixed costs and very cyclical
sales, what is the implication for financial leverage?
a. Use high financial leverage to offset high fixed costs
b. Use low financial leverage to offset high operating leverage
c. It has no implication at all
d. None of the above: b
6. The SGR measures:
a. Historical dividend growth rate
, WGU C214 Concepts Only Multi Choice MV pt 2
b. Sales growth rate
c. Potential sales growth with internal funding
d. None of the above: c
7. The SEC Securities & Exchange Commission requires public companies to do
the following:
a. File audited financial statements with SEC
b. Change CEOs on a regular basis
e. Regulates the Money Supply
d. Prohibits foreign bribery: a
8. What does the Sarbanes-Oxley Act require companies to do?
a. Have a board of directors
b. Register all foreign sales
c. Make estimated tax payments
d. Have internal control audits: d
9. If a company produces and sells a product only in the U.S., what international
developments may affect its sales?
a. Fluctuating exchange rates
b. Imports of competing products
c. Immigration policy
d. Inflation in Europe: b
10. The SEC requires the following to file audited financial statements:
a. All companies
b. All for-profit companies
c. All publicly-traded corporations
d. There is no such requirement: c
, WGU C214 Concepts Only Multi Choice MV pt 2
11. Which best describes conceptually the valuation of all financial assets in
financial markets?
a. Based on opinions of Wall Street analysts
b. The NPV of anticipated cash flows
c. Based on the book value of assets and liabilities
d. None of the above: b
12. Which accurately describes an "efficient" market?
a. Prices are low
b. Prices do not fluctuate
c. Deviations from "fair value" are quickly eliminated
d. "Hot stocks" are the best investment: c
13. If a firm's goal is to maximize stockholder wealth, which would the firm
avoid?
a. Stock buybacks
b. Risky long-term investments
c. Investments with negative NPV
d. Transparency in financial statements: c
14. If you wanted to evaluate a non-public company, what sources would you
use?
a. The financial statements filed with the SEC
b. The latest stock price quoted in the Wall Street Journal
c. The PE of a comparable public company
d. The book value of equity in its balance sheet: c
15. Which section of the Statement of Cash Flows describes the production
and sales of the firm's product?
a. Cash Flow Operations
b. Cash Flow Investing
, WGU C214 Concepts Only Multi Choice MV pt 2
c. Cash Flow Financing.
d. Cash Flow Securities: a
16. For calculating cash flows, why is depreciation added to Net Income?
a. To offset taxes
b. Depreciation is a non-cash deduction
c. To determine pre-tax income
d. None of the above: b
17. The fundamental concept underlying the valuation of all financial assets is:
a. The application of the PE ratio
b. Use of the Gordon Model
c. The present value of anticipated cash flows.
d. The future value of cash flows: c
18. What explains the size of the yield spread of junk bonds over Treasury?
a. It is the value of the expected default loss
b. It depends the firm'a profit
c. It is the probability of default
d. It is a "psychological' reaction of investors.: a
19. What does Beta measure?
a. The default risk of a stock
b. The relative riskiness of an individual stock
c. Indicates the market value of the stock
d. Stocks to avoid purchasing: b
20. What is the most effective use of financial statements in valuing a stock?
a. Use the book value of equity on the balance sheet
b. Use GAAP earnnings
c. Use data to estimate future earnings
1. In an efficient market, new information will move prices almost
immediately
(T/F): T
2. What is the relationship between WACC and IRR?
a. Just 2 different numbers
b. IRR must exceed WACC to accept investment
c. WACC must exceed IRR to accept investment
d. WACC and IRR are the same thing: b
3. What is the relationship between NPV and IRR?
a. Both must exceed WACC to accept investment
b. If discount rate equals IRR, NPV is equal to zero.
c. NPV must exceed WACC to accept investment
d. If discount rate equals IRR, should accept investment: b
4. If a firm's financial and operating leverage is high, what is the implication?
a. The firm is more profitable
b. Profits are more volatile as sales fluctuate
c. The firm is less profitable
d. The two leverages offset each other - - neutral impact: b
5. If an industry, such as autos, has very high fixed costs and very cyclical
sales, what is the implication for financial leverage?
a. Use high financial leverage to offset high fixed costs
b. Use low financial leverage to offset high operating leverage
c. It has no implication at all
d. None of the above: b
6. The SGR measures:
a. Historical dividend growth rate
, WGU C214 Concepts Only Multi Choice MV pt 2
b. Sales growth rate
c. Potential sales growth with internal funding
d. None of the above: c
7. The SEC Securities & Exchange Commission requires public companies to do
the following:
a. File audited financial statements with SEC
b. Change CEOs on a regular basis
e. Regulates the Money Supply
d. Prohibits foreign bribery: a
8. What does the Sarbanes-Oxley Act require companies to do?
a. Have a board of directors
b. Register all foreign sales
c. Make estimated tax payments
d. Have internal control audits: d
9. If a company produces and sells a product only in the U.S., what international
developments may affect its sales?
a. Fluctuating exchange rates
b. Imports of competing products
c. Immigration policy
d. Inflation in Europe: b
10. The SEC requires the following to file audited financial statements:
a. All companies
b. All for-profit companies
c. All publicly-traded corporations
d. There is no such requirement: c
, WGU C214 Concepts Only Multi Choice MV pt 2
11. Which best describes conceptually the valuation of all financial assets in
financial markets?
a. Based on opinions of Wall Street analysts
b. The NPV of anticipated cash flows
c. Based on the book value of assets and liabilities
d. None of the above: b
12. Which accurately describes an "efficient" market?
a. Prices are low
b. Prices do not fluctuate
c. Deviations from "fair value" are quickly eliminated
d. "Hot stocks" are the best investment: c
13. If a firm's goal is to maximize stockholder wealth, which would the firm
avoid?
a. Stock buybacks
b. Risky long-term investments
c. Investments with negative NPV
d. Transparency in financial statements: c
14. If you wanted to evaluate a non-public company, what sources would you
use?
a. The financial statements filed with the SEC
b. The latest stock price quoted in the Wall Street Journal
c. The PE of a comparable public company
d. The book value of equity in its balance sheet: c
15. Which section of the Statement of Cash Flows describes the production
and sales of the firm's product?
a. Cash Flow Operations
b. Cash Flow Investing
, WGU C214 Concepts Only Multi Choice MV pt 2
c. Cash Flow Financing.
d. Cash Flow Securities: a
16. For calculating cash flows, why is depreciation added to Net Income?
a. To offset taxes
b. Depreciation is a non-cash deduction
c. To determine pre-tax income
d. None of the above: b
17. The fundamental concept underlying the valuation of all financial assets is:
a. The application of the PE ratio
b. Use of the Gordon Model
c. The present value of anticipated cash flows.
d. The future value of cash flows: c
18. What explains the size of the yield spread of junk bonds over Treasury?
a. It is the value of the expected default loss
b. It depends the firm'a profit
c. It is the probability of default
d. It is a "psychological' reaction of investors.: a
19. What does Beta measure?
a. The default risk of a stock
b. The relative riskiness of an individual stock
c. Indicates the market value of the stock
d. Stocks to avoid purchasing: b
20. What is the most effective use of financial statements in valuing a stock?
a. Use the book value of equity on the balance sheet
b. Use GAAP earnnings
c. Use data to estimate future earnings
