FIN370T Wk. 1 Apply: Exercise

Maximizing owners’ equity value means carefully considering all of the following EXCEPT

• how best to return the profits from those projects to the owners over time.
• which projects to invest in.
• how to best bring additional funds into the firm.
• how best to increase the firm’s risk.

This subarea of finance involves methods and techniques to make appropriate decisions about what kinds of securities to own, which firms’ securities to buy, and how to be paid back in the form that the investor wishes.

• financial management
• investments
• real markets

When determining a form of business organization, all of the following are considered EXCEPT

• the owners’ risks.
• the physical location of the business.
• who owns the firm.
• the tax ramifications.

From the perspective of ownership risk, the best form of business organization is the

• S corporation.
• sole proprietorship.
• corporation.

All of the following are an example of a fiduciary relationship EXCEPT

• a financial advisor advises her clients.
• the shareholder elects a board member.
• a bank employee manages deposits.
• a CEO manages the firm.

Which ratio assesses how efficiently a firm uses its fixed assets?

• fixed asset turnover
• capital intensity ratio
• current ratio
• average collection period

What is the debt ratio for a firm with an equity multiplier of 3.5?

• 09 percent
• 51 percent
• 43 percent
• 25 percent

Which of these ratios show the combined effects of liquidity, asset management, and debt management on the overall operation results of the firm?

• coverage
• profitability
• financial
• liquidity

Which of the following statements is correct?

• Time-series analysis is useless in assessing improvement or deterioration of ratios since the data is historical.
• To interpret financial ratios, users should analyze the performance of the firm over time and the performance of the firm against one or more companies in the same industry.
• Performing cross-sectional analysis is easy since industries are usually clustered with firms that are identical.
• Performing cross-sectional ratio analysis refers to assessing how a firm performed over a certain section of time.

Which of the following is the maximum growth rate that can be achieved by financing asset growth with new debt and retained earnings?

• internal growth rate
• sustainable growth rate
• retained earnings growth rate
• weighted growth rate

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