Cairo university Quiz one Date: 21/8/2021

Faculty of commerce Fundamentals of finance Time: one hour

English/Georgia section Summer course 2021 No. of pages: 2

Determine whether the following statements are true or false (Select (a) for True and (b) for False):
1 Investment based on profits of the firm ignores three main issues (risk, time value of money and
cashflows)
2 The president or chief executive officer is hired by the board of directors to achieve the main goal of the
firm on behalf of the shareholders
3 Shadow banking system describes a group of institutions that work under the same regulations as
traditional banks.
4 Maximizing the price per share is the main goal of the firm
5 Based on statistics, individuals are considered net suppliers of the fund
6 The main difference between accounting and finance is that accounting is based on accrual basis, while
finance is based on cashflow basis.
7 Corporate bonds is an example for money market instrument, while treasury bills is an example for
capital market instruments.
8 Stock options is one of the mechanisms that help in reducing the agency problem
Answer the following questions:
9 In the capital market:
a. Investments last for a period of time higher than one year
b. Investments last for a period of time lower than one year
c. Commercial papers are traded
d. (b and c)
10 You have the following data: cost of goods sold is $200,000 and the inventory value is $50,000
then the inventory turnover is around:
a. 4 times b. 10 times
c. 3 times d. none of the above
11 You have the following data: the sales revenue is $900,000, the operating profit is $660,000, what is the
Operating profit margin?
a. 12.5% b. 25%
c. 73% d. 40%
12 You have the following data: Company (A) has a ROA ratio of 12%, Company (B) has a ROA ratio of 15%,
select the correct answer of the following:
a. Company (B) is more efficient than company (A)
b. Company (B) is riskier than company (A)
c. Company (B) is more profitable than company (A)
d. Company (B) is more liquid than company (A)
13 You have the following data: current assets value is $750,000, current liabilities value is $500,000. Based on
your calculation to the current ratio, select the correct statement:
a. The company is able to cover its short term obligations.
b. The company is unable to cover its short term obligations.
c. The liquidity position of the firm is deteriorating.
d. The debt ratio of the firm has been increased.
14 You have the following data: the total liability of the firm is $500,000, the total assets of the firm
$1000,000, the interest coverage ratio is 3 times, the fixed obligations coverage ratio is 1.1, the debt ratio of
the industry average is 35%. The company would like to raise capital, as a financial analyst would you

1
 recommend the company to get loans from the bank?
a. Yes
b. No
c. Can’t determine as there is no sufficient information

15 You have the following data: net profit after tax is $100,000, preferred dividends is $5,000, total assets is
$500,000, what is the Return on Assets ratio (ROA)?
a. 55%
b. 2%
c. 19%
d. None of the above

16 you have the following data: the inventory turnover value is 8, the number of days in the year is 365,
what is the approximate average age of inventory?
a. 60 days b. 37 days
c. 46 days d. none of the above
17 You have the following data: net profit after tax is $90,000, preferred stock dividends value is $10,000,
number of common outstanding shares is 50,000, what is the EPS?
a. $3.5 b. $2.9
c. $1.6 d. none of the above
18 The higher the …...ratio, the higher the efficiency of the firm in generating sales revenue using the available
assets.
a. Asset turnover ratio b. ROA
c. ROE d. debt ratio
19 you have the following data: the accounts receivables value is $150,000, the annual sales value is $900,000,
the number of days in the year is 365 days, the average payment period is 90 days. Based on your
calculation to the average collection period select the suitable answer:
a. the company has a good management for the collection and payment of the cash
b. the firm has a poor management for the collection and payment of the cash
c. can't determine as there is no sufficient information
20 you have the following data: Fitch company stock price is currently selling at $10, the Earning per share is
2.5, the price earnings ratio of the last year was 5. based on your calculation to the current price earnings
ratio, select the suitable answer:
a. the investors’ confidence in the company has been increased
b. the investors’ confidence in the company has been decreased
c. the company efficiency in generating profit has been increased
d. none of the above

Good luck