C214 Study QA - Practice test for the
OA. Make sure you don't memorize
the question and answers
Financial Management (Western
Governors University)
, If an asset increases, is it a cash inflow or outflow?
Outflow - - firm must pay for the asset it acquired
If a liability or equity increases, is it a cash inflow or outflow?
Inflow
Which will be larger: actual taxes payable or accounting income tax expense
Accounting tax expense will be higher; actual taxes based on IRS
rules will be lower
Which financial ratios measure “efficiency”?
Asset turnover and Fixed Asset turnover
Which decision requires using subjective
estimates?
Economic life of a new asset and depreciation of asset
If there is a 30% chance of a recession, what is the probability of expansion?
70% - - the sum of the probabilities must equal
100% What is the yield to maturity of a bond?
The return earned from purchase date to maturity
How much interest is paid on a 5% bond over 2 years and 6 months?
(Simple Interest)
5% x 1000 = $50 per year $50 x 2.5 = $125
If a firm buys a 30-day CD, where is it carried on the balance sheet?
Cash and ST in Current assets
How does a “prudent investor” select investments?
Seeks the highest return for “reasonable” amount of risk
What is the difference between WACC and CAPM’s required return?
CAPM includes only equity required return; WACC includes debt &
equity What do points on the Efficient Frontier measure?
The maximum return for a given level of risk; maximum Return-to-risk
ratio
OA. Make sure you don't memorize
the question and answers
Financial Management (Western
Governors University)
, If an asset increases, is it a cash inflow or outflow?
Outflow - - firm must pay for the asset it acquired
If a liability or equity increases, is it a cash inflow or outflow?
Inflow
Which will be larger: actual taxes payable or accounting income tax expense
Accounting tax expense will be higher; actual taxes based on IRS
rules will be lower
Which financial ratios measure “efficiency”?
Asset turnover and Fixed Asset turnover
Which decision requires using subjective
estimates?
Economic life of a new asset and depreciation of asset
If there is a 30% chance of a recession, what is the probability of expansion?
70% - - the sum of the probabilities must equal
100% What is the yield to maturity of a bond?
The return earned from purchase date to maturity
How much interest is paid on a 5% bond over 2 years and 6 months?
(Simple Interest)
5% x 1000 = $50 per year $50 x 2.5 = $125
If a firm buys a 30-day CD, where is it carried on the balance sheet?
Cash and ST in Current assets
How does a “prudent investor” select investments?
Seeks the highest return for “reasonable” amount of risk
What is the difference between WACC and CAPM’s required return?
CAPM includes only equity required return; WACC includes debt &
equity What do points on the Efficient Frontier measure?
The maximum return for a given level of risk; maximum Return-to-risk
ratio
