| Learn about what is going on in the Financial World.
Sign up for FinanceProfessor's free newsletter! |
Find
finance books at Amazon.com
Search FinanceProfessor.com
| Lotteries have been around for years. In fact as you may read on this page Thomas Jefferson ran a lottery. So why not? It is free and you might wind $1m.. Of course the odds are VERY VERY low, but.... |
 |
Finance 301 Test 1 Name _______________________
Summer 2000
Answer 4 of 5 “short answers” plus the multiple choice.
1. List and give a description of the ten Finance Axioms listed in the text.
2. Give a brief description of the financial system. A diagram may help. Be sure to identify any relevant cash flow and the roles of the various players.
3. What are the various types of business structures a firm can choose? What are the advantages and disadvantages of each?
4. What is an IPO? Discuss the IPO process (include the role of
investment bankers) as well as the pricing of IPOs. (Include the
mispricing explanations we discussed.)
Multiple Choice
1. Which of the following is false concerning secondary markets?
a. The New York Stock Exchange (NYSE) is larger than the American Stock Exchange when measured by share or dollar volume.
b. The NYSE can trace its roots back to the late 1700s when investors met to exchange shares.
c. All NASDAQ trades take place at a single location.
d. NASDAQ stands for the National Association of Security Dealers Automatic Quotation System.
e. The NYSE utilizes a specialist trading system whereas the NASDAQ has multiple market makers.
2. Which of the following is an advantage an organization structured
as a corporation over an organization structured as a sole-proprietorship
or partnership?
a. Investors have limited liability when investing in corporations.
b. Corporations have a limited live.
c. Investors have unlimited liability when investing in corporations.
d. Corporations are easier to set up than either partnerships or sole-proprietorships.
e. Corporations are generally smaller and thus can react to changing market conditions faster.
3. Which of the following is GENERALLY false ?
a. Acting ethically is good for shareholders
b. Growth stocks generally have a lower PE ratio than income stocks.
c. Contracts are designed to reduce conflicts between various groups of stakeholders.
d. An increase in NWC (net working capital) is a USE of cash.
e. The Board of Directors is elected by shareholders to ensure that management acts in the shareholders’ best interests.
4. Which of the following BEST represents the “balance sheet identity?”
a. Book value = market value
b. Owners’ equity = total assets and total liabilities
c. ROE = profit margin * total asset turnover
d. Total assets = total liabilities plus owners’ equity
e. total liabilities = owners’ equity + total assets
5. Suppose there are three dealers in a particular stock.
BID ASKWhich dealer provides the lowest price at which you can purchase the stock? At what price would you be buying the shares?
Dealer A 18 18 3/4
Dealer B 18 1/8 18 1/2
Dealer C 18 3/8 18 5/8
a.dealer a, at 18
b.dealer a, at 18 1/8
c.dealer b, at 18 1/2
d.dealer c, at 18 3/8
e.dealer c, at 18 5/8
f. dealer b, at the mid point of 18 and 18 ½
6. Which of the following is TRUE?
a. Return on Equity will equal Return on Assets if the firm has 50% debt
b. ROE is always greater than ROA if the firm has debt in their capital structure
c. The higher the Times-Interest Earned ratio, the lower the company's default risk
d. Historically the NASDAQ has had smaller firms than the NYSE
e. All of the above are true
7. Which of the following is true with respect to ratio analysis?
a. It can rarely be used across country lines.
b. It should be used in conjunction with other methods of analysis.
c. It can be useful in screening companies
d. It is useful as a warning or "red-flag" to warn you of pending difficulties.
e. All of the above are true.
8. Which of the following is the BEST explanation for Financial
intermediaries?
a. They lower transaction costs
b. Intermediaries allow investors to pool their investments and thus diversify more readily than they would be able to on their own.
c. Intermediaries help money to flow from investors to organizations that need the money for investment.
d. Financial Intermediaries help firms raise capital.
e. All of the above are true.
9. Which of the following are correct?
a. There are fewer closed-end funds than there are open-ended funds.
b. The number of shares in an open-ended is constantly changing.
c. Open-ended funds can have back-loads or front-loads.
d. Index funds are examples of passive investment funds.
e. All of the above are true.
10. Which of the following is true?
a. ECNs are gaining market share from existing financial markets.
b. The Nasdaq has tougher listing requirements than the NYSE.
c. The NYSE recently purchased the American Stock Exchange.
d. Regional exchanges are growing in importance as transaction costs increase.
e. All of the above are true.
go back to FinanceProfessor.com Main page