Question 1: A $1,000 par value bond with a conversion price of $40 has a conversion ratio of ________.
a) $25
b) 25 shares
c) $40
d) 40 shares
Question 2: A firm has beginning inventory of 300 units at a cost of $11 each. Production during the period was 650 units at $12 each. If sales were 700 units, what is the cost of goods sold (assume FIFO)?
a) $9,000
b) $8,000
c) $7,700
d) $8,100
Question 3: The efficient market hypothesis deals primarily with:
a) random speculation in securities.
b) the degree to which prices adjust to new information.
c) degrees to which price movements are the result of past trends.
d) how an investor can significantly outperform the market in general.
Question 4: The conversion premium will be large:
a) if investors have great expectations for the price of the common stock.
b)if interest rates decline.
c) when the conversion value is much greater than the pure bond value.
d)when the stock price is very stable.
Question 5: A rapid rate of growth in sales and profits may require:
a) higher dividend payments to shareholders.
b) increased borrowing by the firm to support the sales increase.
c) the firm to be more lenient with credit customers.
d)sales forecasts to be made less frequently.
Question 6: The key initial element in developing pro forma statements is _____________.
a) a cash budget
b) an income statement
c) a sales forecast
d) a collections schedule
Question 7: The theoretical floor value for a convertible bond is its____________.
a) conversion price
b) conversion value
c) par value
d) pure bond value
Question 8: The difference between total receipts and total payments is referred to as:
a) cumulative cash flow.
b) beginning cash flow.
c) net cash flow.
d) cash balance.
Question 9: The conversion ratio is the:
a) price at which a convertible security is exchanged into common stock.
b) ratio of conversion value to market value of a convertible security.
c) number of shares of common stock into which the convertible may be converted.
d) ratio of the conversion premium to market value of a convertible security.
Question 10: The Securities Act of 1933 is primarily concerned with:
a) original issues of securities.
b) secondary trading of securities.
c) national securities market.
d) protecting customers of bankrupt securities firms.
Question 11: Three years ago, the U.S. dollar's exchange rate with the Iceland krona was .0102 dollars per krona. Today, the exchange rate was .0086 dollars per krona. These figures indicate that over this three-year period, the dollar:
a) strengthened against the krona.
b) weakened against the krona.
c) is not highly correlated to the krona.
d) the answer cannot be determined without knowing the number of kronas needed to buy a dollar.
Question 12: Assume that you had dollar quotes for the Japanese Yen and the British Pound. If you want to know the Yen/Pound exchange rate, you would rely on ____________.
a) forward rates
b) cross rates
c) the Wall Street Journal
d) hedge ratios
Question 13: The rising ratio of divestitures to new acquisitions which occurred in the past suggests that:
a) poison pills are no longer effective as a defense against takeovers.
b) too much diversification strained the operating capabilities of many firms.
c) the portfolio effect has been a highly successful method of reducing risk.
d) multinational firms are increasingly considered highly risky investments.
Question 14: A multinational corporation may be defined as:
a) a company which owns property in a foreign country.
b) a company which hires foreign laborers.
c) a company which carries on some business activity outside of its own national borders.
d) any company that does business in a foreign country.
Question 15: White Knights:
a) advise companies on ways to avoid being taken over.
b) offer a higher purchase price and more friendly offer in the event of an unsolicited and unfriendly takeover attempt.
c) attempt to make money in the stock market on stocks that are likely merger candidates.
d) buy depressed stock of quality companies when merger talks are discontinued.
Question 16: Which of the following type of merger decreases competition?
a) horizontal merger
b) vertical merger
c) cash purchase
d) stock-for-stock exchange
Question 17: Which of the following is a tender offer that utilizes borrowed funds and the acquired firm's assets as collateral?
a) unfriendly take-over
b) divestiture
c) two-step buy-out
d) leveraged buy-out
Question 18: The portfolio effect in a merger has to do with _________.
a) increasing EPS
b) reducing risk
c) creating tax advantages
d) writing off goodwill
Question 19: Which of the following factors will not increase the value of a currency in foreign markets?
a) high interest rates
b) high inflation
c) positive balance of payments
d) strong stock market rally
Question 20: Synergy is said to occur when the whole is:
a) equal to the sum of the parts.
b) less than the sum of the parts.
c) greater than the sum of the parts.
d) greater than or equal to the sum of the parts.