Review Questions_Corporate Finance

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Choose the best answer for each question

Which of the following in an index of liquidity of a business?

Equity ratio

Return on sales

Current ratio

Days in inventory
  

A firm has following information: Current liabilities = VND 1,200 billion, Non-current
liabilities = 500 billion, Equity = 900 billion, Net Income = VND 150 billion, Net sales
= 620 billion. Calculate the firm’s return on equity?

15.50%

16.67%

18.20%

17.35%

Which one of the following forms of business organisation is best suited for raising
a large amount of capital:

Sole proprietorship

Limited liability company

General partnership

Corporation
A firm has following information: Current assets = VND 1,200 billion, Non-current
assets = 2,500 billion, Current liabilities = 1,040 billion, Non-current liabilities =
1,890 billion. Calculate the firm’s current ratio?

0.48

1.15

2.32

1.52

Five years from now, you will receive VND 100 million. If the interest rate were
suddenly increased, the present value of that future value would …

Fall

Increase

Remain unchanged

Cannot be determined without more information

A firm has following information: Current assets = VND 1,200 billion, Non-current
assets = 2,500 billion, EBIT = VND 450 billion, Net sales = 620 billion, Interest
expenses = 90 billion, Income tax rate = 20%. Calculate the firm’s earnings before
tax?

VND 288 billion

VND 360 billion

VND 320 billion

VND 297 billion

A firm has following information: Current assets = VND 1,200 billion, Non-current
assets = 2,500 billion, Current liabilities = 1,040 billion, Non-current liabilities =
1,890 billion. Calculate the firm’s Equity?

VND 830 million

VND 3,700 million

VND 770 million

VND 2,800 million

A firm has following information: Current assets = VND 1,200 billion, Non-current
assets = 2,500 billion, Current liabilities = 1,040 billion, Non-current liabilities =
1,890 billion. Calculate the firm’s Net working capital?

VND – 610 billion

VND 3,700 billion

VND 160 billion

VND 610 billion

A decision for replacing current machine by a modern one with higher production
capacity is …

Dividend decision

Financing decision

Investment decision

Working capital decsion

Two measures of asset efficiency are:

Average collection period and debt ratio

Days in inventory and average collection period

Total asset turnover and current ratio

Working capital turnover and return on assets

What is the present value of a perpetuity which pay VND 5 million each year if the
discount rate is 8%?

VND 7 million

VND 6.9 million

VND 6.25 million

VND 5.92 million

If the nominal rate of interest is 12% per annum and there is quarterly
compounding, the effective rate of interest will be:

3% per annum

12.00% per annum

13.05%per annum

12.55% per annum

A firm has following information: COGS = VND 470 billion, Average Inventory = 125
billion, Equity = 900 billion, Net Income = VND 150 billion, Net sales = 620 billion. If
there is 360 working days in a year, what is the firm’s days in inventory?

96 days

120 days

94 days

85 days
The risk-free security has a beta equal to …, whereas the market’s portfolio’s beta is
…

One, more than one

Zero, one

Less than zero, more than one

Zero, less than one

A stock has expected return of 12%, beta of 1.3. If the risk free rate is 5%, what is
the market risk premium:

5.28%

5.38%

6.28%

6.38%
An investment has the following cash inflows occurring at the end of each year
from year 1 to 4: VND 200 million, VND 250 million, VND 158 million and VND 340
million. If the discount rate is 13%, what is the present value of the cash inflows?

VND 689.25 million

VND 545.38 million

VND 720.42 million

VND 690.81 million

Current ratio of less than one means:

Current assets < Current liabilities

Current assets > Current liabilities

Current assets = Current liabilities

Positive NWC
A firm has following information: Current assets = VND 1,200 billion, Non-current
assets = 2,500 billion, Net Income = VND 450 billion, Net sales = 620 billion, Income
tax rate = 20%. Calculate the firm’s total asset turnover?

1.2

0.17

0.12

0.53

A manufacturing company has an expected usage of 90,000 units of product X

during the next year. The firm’s economic order quantity is 5,000 units. Calculate
the firm’s number of order per year?

12

15

18

20
The stock A’s beta is 1.4. Which of the following statements is true when
interpreting the meaning of stock A’s beta:

The standard deviation of the return of stock A is 1.4

The expected return on the stock A is equal to the expected return on the market

The returns of the stock A are magnified 1.4 times over those of the market

The stock A is 40% less volatile than the market

Which of the following statement is true?

Systematic risk is also known as diversifiable risk

Systematic risk is a type of risk that can only affect one or some industries

Unsystematic risk is also called market risk

Unsystematic risk can be reduced by diversification

A portfolio includes two stock A and B. The expected returns of the stock A and B
are 19% and 8% respectively. The standard deviations of stock A and B are 10% and
5% respectively. The amount invested in stock A is VND 720 million while the
amount invested in stock B is VND 480 million. What is the expected return of the
portfolio?

15%

14.6%

13.9%

17.2%

Which of the following statement is False?

Annuity is an infinite series of equal cash flows

A VND received one year from now will be worth less than a VND received today

Perpetuity is a stream of cash flow payments continues indefinitely

Inflation has a negative impact on the time value of money because the purchasing
power decreases as prices rise
A firm has the following information: Sales = VND 5 billion, Debt = 2 billion, Debt
ratio = 0.5, ROE = 15%. Calculate the firm’s ROA:

ROA = 6.5%

ROA = 7.5%

ROA = 8.5%

ROA = 9.5%

A firm has following information: Current assets = VND 1,200 billion, Non-current
assets = 2,500 billion, Net profit = VND 450 billion, Net sales = 620 billion. Calculate
the firm’s return on assets?

14.5%

15.22%

18%

12.16%
Which of the following ratio represents a firm’s profitability?

Current ratio

Debt ratio

Return on assets

Total asset turnover

A company purchases 100,000 units of product Y for its annual requirements and
each unit cost is VND 50,000. The ordering cost per order is VND 2 million and the
carrying cost per unit per year is 10% of the unit cost. What is the total inventory
cost?

VND 49 million

VND 44.72 million

VND 52.35 million

VND 42.15 million

A company purchases 100,000 units of product Y for its annual requirements and
each unit cost is VND 50,000. The ordering cost per order is VND 2 million and the
carrying cost per unit per year is 10% of the unit cost. Calculate the EOQ?

8,944 units

8,235 units

7,540 units

7,245 units

A portfolio includes two stock A and B. The expected returns of the stock A and B
are 19% and 8% respectively. The standard deviations of stock A and B are 10% and
5% respectively. Stock A’s beta is 1.4 whereas stock B’s beta is 0.8. The amount
invested in stock A is VND 720 million while the amount invested in stock B is VND
480 million. What is the beta of the portfolio?

1.16

1.1

1.25

1.19
 How much of money you need to deposit in a saving account today in order to have
VND 500 million in the account in 5 years?  Assuming that the interest rate is
constant at 10% per annum?

VND 725.43 million

VND 350.15 million

VND 805.26 million

VND 310.46 million

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