Corporate finance English test questionsMultiple Choice 3 points×20 =60 points1 Which of the following is not considered one of the basic questions of corporate finance A What long-lived assets

holders’ equity of $1,425. What was the company’s net working capital?A) $80B) $100C) $165D) $235E) $595Answer: A Difficulty: Easy Page: 10 6. The cost of capital is A) the minimum rate of return a project must earn to increase firm value. B) the return shareholders require on their investment in the firm. C) the weighted average of the costs of the firm's debt and equity financing. D) the cost of borrowing money. E) None of the above. Answer: C Difficulty: Medium Page: 29 7. Which of the following is not a factor that affects the cost of money?A) InflationB) TaxesC) RiskD) DividendsE) All of the above affect the cost of money. Answer: D Difficulty: Easy Page: 30 8. If the market interest rate is 8% and a bond pays an annual coupon of $80, what is the bond’s price?A) $800B) $860C) $1,000D) $1,200E) $10,000Answer: B Difficulty: Medium Page: 36 9. Which of the following is true regarding the relationship between bond prices and interest rates?A) As interest rates rise, bond prices rise.B) As interest rates rise, bond prices fall.C) There is no relationship between bond prices and interest rates.D) Bond prices and interest rates move in the same direction only if the bond is a zero-coupon bond.E) None of the above. Answer: B Difficulty: Medium Page: 36 10. Which of the following statements is true about preferred stock?A) It pays a fixed dividend every year.B) It has voting rights equal to common stock.C) It has a maturity date when the principal must be repaid.D) It is a form of debt.E) None of the above. Answer: A Difficulty: Medium Page: 39 11. A stock’s beta coefficient measures A) the stock's sensitivity to market risk. B) the stock's total risk. C) the stock's business risk. D) the stock's financial risk. E) None of the above. Answer: A Difficulty: Medium Page: 47 12. Which of the following is not a method used to value stocks?A) Price-Earnings RatioB) Dividend Discount ModelC) Return on AssetsD) Price-Book RatioE) All of the above are methods used to value stocks. Answer: C Difficulty: Medium Page: 47 13. Which of the following is not a cash flow related to a project?A) The initial investmentB) The incremental operating cash flowsC) The cost of capitalD) The salvage valueE) All of the above are cash flows related to a project. Answer: C Difficulty: Easy Page: 56 14. Which of the following is not a method used to evaluate capital budgeting projects?A) Payback periodB) Internal rate of return (IRR)C) Net present value (NPV)D) Return on investment (ROI)E) All of the above are methods used to evaluate capital budgeting projects. Answer: D Difficulty: Medium Page: 57 15. Which of the following is not a reason why a company might choose to lease equipment rather than buy it?A) The company has limited funds available for investment in new equipment.B) The company can receive a tax deduction for lease payments.C) The company can avoid the risk of equipment obsolescence.D) The company has a long-term need for the equipment.E) All of the above are reasons why a company might choose to lease equipment. Answer: D Difficulty: Medium Page: 66 16. Which of the following is not a way that a company can raise capital?A) Issuing bondsB) Issuing preferred stockC) Issuing common stockD) Taking out loans from banksE) All of the above are ways that a company can raise capital. Answer: E Difficulty: Easy Page: 31 17. Which of the following is not a financial statement used in corporate finance?A) Income statementB) Balance sheetC) Statement of cash flowsD) Statement of retained earningsE) All of the above are financial statements used in corporate finance. Answer: E Difficulty: Easy Page: 3 18. Which of the following is not a measure of liquidity?A) Current ratioB) Quick ratioC) Debt-to-equity ratioD) Cash ratioE) All of the above are measures of liquidity. Answer: C Difficulty: Medium Page: 10 19. Which of the following is not a factor that affects a company’s dividend policy?A) Availability of fundsB) Company’s financial needsC) Shareholders’ preferencesD) Company’s accounting policiesE) All of the above affect a company’s dividend policy. Answer: D Difficulty: Medium Page: 51 20. Which of the following is not a type of financial risk faced by a multinational corporation?A) Currency riskB) Interest rate riskC) Credit riskD) Country riskE) All of the above are types of financial risk faced by multinational corporations. Answer: C Difficulty: Medium Page: 7