Liberty University BUSI 530 Exam 4
Liberty University BUSI530 Exam 4
1
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Item 1
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An investor who owns stock on the company’s __________ date will receive the dividends declared.
Multiple Choice
• ex-dividend
Incorrect
• record Correct
• payment
• declaration
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Item 2
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In recent years more than half of U.S. corporations did not pay a dividend nor did they repurchase shares.
TrueCorrectFalse
Item 3
The information content of dividends says that dividend increases send good news about cash flow and earnings, while dividend cuts send bad news.
True or False
TrueCorrectFalse
Item 4
Managers have been characterized as reluctant to increase dividends if:
Multiple Choice
•
dividends were increased in the preceding year.
•
earnings have permanently increased.
•
the dividend increase cannot be sustained.
Correct
•
the dividend payout ratio exceeds 20%.
Item 5
A two-for-one stock split is like a 200% stock dividend
True or False
TrueCorrectFalse
Item 6
Financial planning is concerned with possible surprises as well as the most likely outcomes.
True or False
TrueCorrectFalse
Item 7
Adaptability is not a desirable feature in financial plans.
True or False
TrueFalseCorrect
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Item 8
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Increased needs for net working capital are:
Multiple Choice
•
recognized in pro forma balance sheets.
Correct
•
totally absorbed by retained earnings.
•
typically financed with short-term debt.
•
ignored due to their great variability.
Item 9
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Which one of the following is not an output of a financial plan?
Multiple Choice
•
Financial ratios
•
Pro forma statements
•
Sources and uses of cash statement
•
Sales forecasts
Correct
Item 10
Financial planning is necessary because financing and investment decisions interact and should not be made independently.
True or False
TrueCorrectFalse
Item 11
Which of these assets is likely to be the least liquid?
Multiple Choice
•
receivables
•
marketable securities
•
inventories of work in progress
Correct
•
inventories of finished goods
Item 12
Managers with a large surplus of cash are often tempted to run a less tight ship.
True or False
TrueCorrectFalse
Item 13
When financial managers are asked the key reason for choosing short-term rather than long-term debt, they often say that they try to match the maturities of the firm’s assets and liabilities.
True or False
TrueCorrectFalse
Item 14
There are three steps to constructing a cash budget. Which of the following is not one of those steps?
Multiple Choice
•
Calculate whether the firm is facing a cash shortage or surplus.
•
Forecast the uses of cash.
•
Set a policy for deciding how much time to give customers to pay.
Correct
•
Forecast the sources of cash.
Item 15
The principle of matched maturities in finance refers to:
Multiple Choice
•
finding sources of funds with the longest maturity, in order to avoid liquidity crises.
•
funding long-term assets with long-term sources and short-term assets with short-term financing.
Correct
•
using as much short-term financing as possible due to the lower cost of interest.
•
buying marketable securities when demand is high and borrowing short-term when demand is low.
Item 16
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Assume a firm can either hold cash paying no interest or invest in marketable securities. Which one of the following might induce the manager to hold higher cash balances today?
Multiple Choice
The cost of borrowing is high relative to interest rates on marketable securities.
Correct
•
Future cash flows are relatively predictable.
•
The cost of cash balances is relatively high.
•
Bank interest rates are expected to decrease.
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Item 17
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Which one of the following changes to the terms of credit would increase the effective annual interest rate charged?
Multiple Choice
•
Increasing the cash discount percentage
Correct
•
Extending the discount period and payment period by 10 days each
•
Extending the payment period only
•
Decreasing the discount period only
Item 18
The decision to offer credit depends on the probability of payment. You should grant credit if the expected profit from doing so is greater than the profit from refusing.
True or False
TrueFalseIncorrect
Item 19
The set of rules that determines whether or not credit should be extended is known as:
Multiple Choice
•
credit analysis.
•
credit policy.
Correct
•
multiple discriminate analysis.
•
the terms of trade credit.
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Item 20
If goods are sold on terms of 5/10, net 90, what effective interest rate is if the purchaser pays on day 90?
Multiple Choice
•
20.00%
•
22.81%
•
24.93%
•
26.37%
Correct
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