FINANCE 302 FINAL EXAM QUESTIONS WELL ANSWERED LATEST UPDATE 2026

FINANCE 302 FINAL EXAM QUESTIONS WELL ANSWERED LATEST UPDATE 2026 by making a _________ the investment banker agrees to buy an entire issue of new securities from a firm and then attempt to sell the securities to the public - Answers firm commitment the SBA only aids __________when their applications would not be approved through normal processes - Answers small business owners In the life cycle of a business, a business that has peaked and is now in decline is most closely identified with ________ - Answers old age A ________ type of loan is similar to a line of credit. However, even though only a portion of the loan is available to the borrower, interest is paid on the entire face value of the loan - Answers compensating balance loan A major issue with venture capitalists and angel investors is the rate at which their funds will be used up. This is called the ________ - Answers burn rate or bleed rate Your bank grants you a lump sum loan today equal to the face value of the loan less the interest. Further you must repay the face value of the loan amount in a single lump sum at the end of one year. These terms most closely resemble which of the following types of bank loan? - Answers discount loan Financing that will take ________ ten years for repayment is ________ to angel investors - Answers more than, not attractive Rather than a single good for the exchange rate, economists use the concept of ________ as the price base for the exchange rate - Answers a basket of goods The euro was introduced as a physical currency in January 2002 at an exchange rate of $1.16/€. In early 2014, the euro traded as high as $1.40/euro. You would observe that by early 2014, the euro had ________ against the dollar - Answers appreciated The ________ refers to the price of one country's currency in units of another country's currency - Answers exchange rate Anticipated cash inflows may fall in value if unexpected movements in the exchange rate hurt your ability to convert the foreign currency into domestic currency. This reduction in the conversion of future payments is called ________ - Answers transaction exposure We can write any ________ as a function of the difference between the expected inflation rates of two countries and the current or spot exchange rate - Answers anticipated forward exchange rate ________ can be helpful for managers to understand short-term cash obligations - Answers liquidity ratios ________ break(s) down the return-on-equity into three components - Answers the DuPoint Identity With regard to trend analysis over time, which of the following statements is TRUE? -To look at trends over time requires that we examine a financial statement at one point in time. -The net income last year was $20,000 and the past five years has shown an increase of 10% on average for each of these five years. The predicted net income for next year is still $20,000. -We often look at the past five years of financial statements to establish trends and then predict future performance based on these trends. -It is better to predict future performance by basing it solely on net income than on all the individual accounts. - Answers We often look at the past five years of financial statements to establish trends and then predict future performance based on these trends. An example of a financial statement is ________ - Answers the Statement of Financial Position (Balance Sheet) the Income Statement the Sources and Uses of Cash A current ratio greater than 1 can tell us that the company _______ - Answers should be able to keep away from short-term cash problems should be able to cover the current liabilities may have too much capital tied up in current assets Which of the statements below is FALSE? -The times interest earned ratio tells us the number of times a company has resorted to debt financing over the year. -The debt ratio basically tells us the amount in debt for every dollar of assets. -Times interest earned equals EBIT divided by interest expense. -The cash coverage ratio is EBIT plus depreciation divided by interest expense. - Answers The times interest earned ratio tells us the number of times a company has resorted to debt financing over the year. Everything else equal, an industry with more leverage will have a ________ - Answers higher return on equity ________ help us analyze whether a company is moving toward financial stress or is using debt to benefit the company and ultimately, the owners of the company - Answers Financial leverage ratios Suppose the future anticipated cash flows of a foreign business produce less domestic currency upon conversion. This problem in the reduction in the value of future cash flow from operations is called - Answers operating exposure The euro was introduced as a physical currency in January 2002 at an exchange rate of $1.16/€. In early 2014, the euro traded as high as $1.40/euro. You would observe that by early 2014, the euro had ________ against the dollar. - Answers appreciated _______involves issues of translating foreign financial statements into consolidated reports of financial performance of both foreign and domestic operations. - Answers Translation exposure or accounting exposure The ________ is the amount of foreign currency you need to buy one U.S. dollar - Answers indirect rate Banks and other lending institutions ________ -frown upon family funding for start-up businesses -have lending models better fitted for start-up businesses compared with established businesses -are in competition with the Small Business Administration (SBA) for start-up loans -are often next sources of financing for businesses after personal and family contributions - Answers are often next sources of financing for businesses after personal and family contributions The bond ________ contains much of the information filed in the bond registration and is used to inform potential buyers about the bond. - Answers prospectus For your firm's initial public offering of stock, your investment banker has guaranteed a specific amount of funds your firm will receive. This is an example of what type of investment banker compensation? - Answers Firm commitment "A company can borrow money at a preset rate from the bank at any time without seeking approval of the loan each time it needs funds" is a description of what type of loan? - Answers Line of credit Return on equity can increase as a result of an increase in which of the following ratios? - Answers Net income/ sales Total assets/ equity Sales/ total assets ________ is the percentage of sales dollars that reaches net income on the common-size statements - Answers The profit margin The relationship between the American or direct rate and the European or indirect rate is simply ________ - Answers reciprocal Which of the statements below is TRUE? -All domestic rates can be computed using a setup with American rates and European rates with the U.S. dollar as the home currency. -When cross rates are out of line, there can be an arbitrage opportunity. -The opportunity to make a profit without risk by exchanging three currencies is known as triple arbitrage. -The foreign rate is derived by pricing two currencies against a third. - Answers When cross rates are out of line, there can be an arbitrage opportunity. Typical SBA guaranty loans carry an interest rate equal to _______ - Answers current market rates The 7(a) Loan Guaranty Program of the Small Business Administration (SBA) delivers loans through ________ that are guaranteed by ________ - Answers commercial lenders; the SBA Solvency (financial leverage) ratios - Answers can a company meet its obligations over long-term? 5 sources of Capital to start a business - Answers 1. personal funds 2. borrowed funds from family and friends 3. commercial bank loans 4. start-up funds like SBA 5. angel financing or venture capital Angel Investor vs. Venture - Answers both high risk investors angels: less than 10 years, use their own money, focus on early stages of business, limits of $2 million venture: longer time horizon, corporate entities, many investors, all stages of development, provide funding in stages asset management ratios - Answers how efficiently you manage assets and generate sales profitability ratios - Answers overall performance market value ratios - Answers how does the market (investors) view the companies financial prospects? purchasing power parity - Answers the price of similar goods is the same regardless of which currency one uses to buy the goods cross rates - Answers state the exchange rate between two non-US currencies cash ratio - Answers Cash/Current Liabilities