Ch1

Question text

Among the three forms of business, which of the following reasons do NOT increase the company’s
ability to raise capital?

Select one:

A. Unlimited life of the business.

B. Owners’ profit share. Correct

C. Ease of transferring ownership.

D. Ease of transferring ownership.

In a(n) _____ market, those who wish to sell securities are matched with those who wish to buy
them, whereas in the _____ market, the most of the buying and selling is done by the dealer.

Select one:

A. primary; secondary

B. auction; dealer

C. auction; primary

D. dealer; secondary

A firm’s stockholders are _____ owners which means that they are entitled to only what is left after
all other legitimate _____ are paid their due.

Select one:

A. residual; borrowers

B. preferred; borrowers

C. residual; stakeholders

D. preferred; stakeholders

The essence of capital budgeting is the evaluation of the size, _____, and risk of future _____ from a
long-term investment opportunity.

Select one:

A. amount; profits

B. timing; profits

C. amount; cash flows

D. timing; cash flows

_____ liability means that creditors can look beyond the firm’s assets to the _____ personal assets
for payment.

Select one:

A. Unlimited; owners’

B. Unlimited; creditors’

C. Limited; creditors’

D. Limited; owners’

A _____ fight is when a group of unhappy shareholders solicits the _____ rights of other
shareholders to replace the existing board of directors of a company.

Select one:

A. right; voting

B. proxy; payment

C. right; payment

D. proxy; voting
Ch2

The cash flow identity states that the cash flow from _____ must equal the cash flows to
__________.

Select one:

A. assets; suppliers of capital

B. liabilities; suppliers of capital

C. assets; creditors

D. liabilities; creditors

_____ liability means that creditors can look beyond the firm’s assets to the _____ personal assets
for payment.

Select one:

A. Limited; owners’

B. Limited; creditors’

C. Unlimited; owners’

D. Unlimited; creditors’

The more liquid a firm, the lower its financial _____, but also the lower its _____.

Select one:

A. distress; profitability

B. leverage; profitability

C. leverage; debt

D. distress; debt

A _____ fight is when a group of unhappy shareholders solicits the _____ rights of other
shareholders to replace the existing board of directors of a company.

Select one:

A. proxy; voting

B. right; payment

C. right; voting

D. proxy; payment
What is the marginal tax rate?

Select one:

A. It is the percentage of taxable income that is paid as tax.

B. It is the tax amount divided by the taxable income.

C. It is the percentage of tax on a firm’s additional taxable income.

D. It is the percentage of tax on a firm’s total taxable income.

In a(n) _____ market, those who wish to sell securities are matched with those who wish to buy
them, whereas in the _____ market, the most of the buying and selling is done by the dealer.

Select one:

A. auction; primary

B. dealer; secondary

C. primary; secondary

D. auction; dealer

A firm’s stockholders are _____ owners which means that they are entitled to only what is left after
all other legitimate _____ are paid their due.

Select one:

A. residual; borrowers

B. preferred; stakeholders

C. residual; stakeholders

D. preferred; borrowers

Among the three forms of business, which of the following reasons do NOT increase the company’s
ability to raise capital?

Select one:

A. Ease of transferring ownership.

B. Unlimited life of the business.

C. Ease of transferring ownership.

D. Owners’ profit share.

A firm’s net capital spending last year was a cash outflow of RM56 million, whereas its change in net
working capital was a cash outflow of RM9 million. Its depreciation expense for the year was RM48
million. So, the firm’s net fixed assets must have __________ million last year.

Select one:

A. decreased by RM1

B. increased by RM104

C. increased by RM8

D. decreased by RM8

A firm’s cash flow to stockholders last year was an outflow of RM37 million. It paid interest and
dividends of, respectively, RM4 million and RM9 million last year. This means that the firm had
__________ million last year.

Select one:

A. repurchased its shares for RM46

B. issued new shares for RM28

C. repurchased its shares for RM28 Correct

D. issued new shares for RM46

The essence of capital budgeting is the evaluation of the size, _____, and risk of future _____ from a
long-term investment opportunity.

Select one:

A. amount; profits

B. timing; cash flows

C. amount; cash flows

D. timing; profits

A firm’s cash flow to creditors last year was an inflow of RM8 million. The firm paid interest and
dividends of, respectively, RM16 million and RM9 million last year. So, the change in the firm’s long-
term debt last year must have been __________ million.

A. an increase of RM24

B. an increase of RM8

C. a decrease of RM24

D. a decrease of RM8
Ch 3

A firm’s equity was RM300 million, whereas its assets were RM459 million. The firm had 90 million
shares outstanding, with share price of RM3.40. The firm’s market-to-book ratio is _____ times.

Select one:

A. 1.5

B. 0.6667

C. 0.9804

D. 1.02 Correct

Common-_____ is one way of standardising a financial statement by expressing all items as

__________.

Select one:

A. size; percentages of total assets

B. base year; multiples of the items in the previous year

C. size; percentages of total sales

D. base year; multiples of the items in the base year

A firm’s activities that _____ cash are called _____ or applications of cash.

Select one:

A. involve spending; sources

B. bring in; sources

C. bring in; uses

D. involve spending; uses

If a firm’s current assets are now RM500,000 while its current liabilities are RM300,000, and the firm
uses RM50,000 cash to pay off its payables, the firm’s current ratio will __________.

Select one:

A. rise then fall

B. fall Incorrect

C. be unchanged

D. rise
A firm’s net fixed assets increased by RM9 million in 2019, while its depreciation expense for 2019
was RM3 million. So, there was cash __________ of fixed assets for the firm in 2019.

Select one:

A. inflow of RM6 million from the sale

B. inflow of RM12 million from the sale

C. outflow of RM12 million for the purchase

D. outflow of RM6 million for the purchase

If a firm’s return on assets is 18%, and its debt-equity ratio is 0.75, the firm’s return on equity would
then be _____%.

Select one:

A. 72

B. 10.29

C. 31.5

D. 13.5

If a firm’s equity multiplier is 1.40 times, its debt-equity ratio is _____ while its total debt ratio is
_____.

Select one:

A. 40.00%; 28.57%

B. 28.57%; 40.00%

C. 37.50%; 60.00%

D. 60.00%; 37.50%

If a firm’s fixed assets turnover is 1.25 times, whereas its total assets turnover is 0.75 times, then its
fixed assets make up _____ of its total assets

Select one:

A. 80%

B. 60%

C. 75%

D. 93.75%