Business Finance, 2014-15
Multiple Choice Questions for Practice
Some of the MCQs below are from past mid-term tests. Others were created so that you can
practice prior to this year’s test.
Answers are available in another file. Try to solve them on your own and then check the
solutions that are available in the other file.
sh is
ar stu
ed d
vi y re
aC s
o
ou urc
rs e
eH w
er as
o.
co
m
1. Alex owns 30 shares of equity in John & John Ltd. The firm has a total of 100 shares of equity
outstanding. Each share receives one vote. Presently, the company is voting to elect three new
directors. Alex wants to win a seat on the board of directors. Which one of the following
statements must be true given this information?
A. Regardless of the voting procedure, Alex does not own enough shares to gain a seat on the
board.
B. If straight voting applies, Alex is assured a seat on the board.
C. If straight voting applies, Alex can control all of the open seats.
D. If cumulative voting applies, Alex can control all of the open seats.
E. If cumulative voting applies, Alex is assured one seat on the board.
2. Capital structure decisions include consideration of the:
I. amount of long-term debt to assume.
II. cost of acquiring funds.
III. current assets and liabilities.
IV. net working capital.
A. I and II only.
B. II and III only.
C. III and IV only.
D. I, II, and IV only.
E. I, III, and IV only.
Th
3. In a limited partnership:
A. each limited partner's liability is limited to his net worth.
B. each limited partner's liability is limited to the amount he put into the partnership.
C. each limited partner's liability is limited to his annual salary.
D. there is no limitation on liability; only a limitation on what the partner can earn.
E. None of the above.
1
https://www.coursehero.com/file/18569537/MCQs-for-Practice-2014-15-Corrected/
4. Which one of the following statements related to taxes is correct?
A. The marginal tax rate must be equal to or lower than the average tax rate for a firm.
B. The tax for a firm is computed by multiplying the firm's current marginal tax rate times the
taxable income.
C. Additional income is taxed at a firm's average tax rate.
D. Given the corporate tax structure in 2008, the highest marginal tax rate is equal to the highest
average tax rate.
E. The marginal tax rate for a firm can be either higher or lower than the average tax rate.
5.
2011
£ 5,831
3,670
291
25
250
1,092
617
1,495
2,400
4,006
1,900
590
2012
£ 6,423
4,109
280
122
313
1,162
1,051
1,521
1,100
4,123
2,100
670
sh is
ar stu
ed d
vi y re
aC s
o
ou urc
rs e
eH w
er as
o.
co
m
JJC Plc
Sales
Cost of Goods Sold
Interest
Depreciation
Cash
Trade receivables
Current liabilities
Inventory
Long-term debt
Net non-current assets
Ordinary Equity
Taxes
.
What is the change in net working capital from 2011 to 2012?
A. - £175
B. - £275
C. - £158
D. £240
E. £315
Th
6. Uptown Men's Wear has trade payables of £2,214, inventory of £7,950, cash of £1,263, noncurrent assets of £8,400, trade receivables of £3,907, and long-term debt of £4,200. What is the
value of the net working capital to total assets ratio?
A. 0.31
B. 0.42
C. 0.47
D. 0.51
E. 0.56
2
https://www.coursehero.com/file/18569537/MCQs-for-Practice-2014-15-Corrected/
7. You have collected the following information about firm ABC.
Profits: £100,000; Dividends: £75,000; Current Assets: £600,000; Current ratio: 1.5; Long term
liabilities: 700,000; Equity: 1,400,000.
What is the internal growth rate?
A. 2.26%
B. 3.82%
C. 1.01%
D. 1.49%
E. 3.32%
sh is
ar stu
ed d
vi y re
aC s
o
ou urc
rs e
eH w
er as
o.
co
m
8. Use the information in question 7. What is the sustainable growth rate?
A. 3.62%
B. 2.52%
C. 1.21%
D. 1.82%
E. 4.21%
9. George opened a savings account this morning. His money will earn 5 percent interest,
compounded annually. After five years, his savings account will be worth £3000. Assume he will
not make any withdrawals. Given this, which one of the following statements is true?
A. George deposited more than £3,000 this morning.
B. The present value of George's account is £3,000.
C. George will earn an equal amount of interest every year for the next five years
D. George would have had to deposit more money to have £3,000 in five years if he could have
earned 6 percent interest.
E. George could have deposited less money and still had £3,000 in five years if he could have
earned 5.5 percent interest.
Th
10. Gerold invested €6,200 in an account that pays 5 percent simple interest. How much money
will he have at the end of ten years?
A. €8,710
B. €9,000
C. €9,300
D. €9,678
E. €10,099
3
https://www.coursehero.com/file/18569537/MCQs-for-Practice-2014-15-Corrected/
11. Jonathan invested €6,200 in an account that pays 5 percent interest compounded annually.
How much money will he have at the end of ten years?
A. €13,710.32
B. €10,099.15
C. €9,200.58
D. €19,678.21
E. €12,099.24
sh is
ar stu
ed d
vi y re
aC s
o
ou urc
rs e
eH w
er as
o.
co
m
12. You collect old coins. Today, you have two coins each of which is valued at £250. One coin
is expected to increase in value by 6 percent annually while the other coin is expected to increase
in value by 4.5 percent annually. What will be the difference in the value of the two coins 15
years from now?
A. £115.32
B. £208.04
C. £241.79
D. £254.24
E. £280.15
13. Suppose you are committed to owning a €140,000 Ferrari. You believe your mutual fund can
achieve an annual rate of return of 9 percent and you want to buy the car in 7 years. How much
must you invest today to fund this purchase assuming the price of the car remains constant?
A. €74,208.16
B. €76,584.79
C. €77,911.08
D. €78,019.82
E. €79,446.60
14. Continue from Q. 13. Assume that you can earn an interest of 10% instead of 9%. How much
money less will you have to invest today compared to Q11?
Th
A. €3221.26
B. €5124.15
C. €4742.66
D. €3125.16
E. €4247.88
15. Continue from Q. 13. Assume that you want to buy the car in 5 years instead of 7 years.
What is the additional amount that will you have to invest today compared to Q11?
A. €10,305.70
B. €11,456.10
C. €14,405.60
D. €11,218.90
E. €16,301.21
4
https://www.coursehero.com/file/18569537/MCQs-for-Practice-2014-15-Corrected/
Powered by TCPDF (www.tcpdf.org)