FIN 370 Final Exam Guide
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True or False Questions
1. Financial management is concerned with the maintenance and creation of wealth.
2. The current ratio and the acid test ratio are both measures of financial leverage.
3. Sales occurring in the secondary markets increase the total stock of financial assets that exist in the economy.
4. The key ingredient in a firm’s financial planning is the sales forecast.
5. The present value of an annuity increases as the discount rate increases.
6. As the volume of production increases, the fixed cost per unit of the product decreases.
7. Whenever the IRR on a project equals that project’s required rate of return, the NPV equals zero.
8. The hedging principle involves matching the cash flow from an asset with the cash flow requirements of the financing used.
9. Because they operate within a highly uncertain environment, utilities hold a large percentage of their total assets in cash.
10. Accounts receivable are an asset that reflects sales made on credit.
11. Working capital for a project includes investment in fixed assets.
12. Sales captured from the firm’s competitors can be relevant to the capital-budgeting decision.
13. The weighted average cost of capital is the minimum required return that must be earned on additional investment if firm value is to remain unchanged.
14. The firm financed completely with equity capital has a cost of capital equal to the required return on common stock.
15. Financial structure includes long-term and short-term sources of funds.
16. Real assets should be financed with temporary capital due to the short-term nature of depreciation expense
17. The nature of a firm’s assets has a major influence on the types of financial capital a firm uses.
18. Compared with other developed countries, the U.S. is particularly reliant on foreign trade for self-subsistence.
19. The foreign exchange market is similar in...