CTFA

CTFA practice questions, page 10 of 35, with answer review and explanations.

Question 46

The long-run objective of financial management is to:

  1. Maximize earnings per share
  2. Maximize the value of the firm's common stock
  3. Maximize return on investment
  4. Maximize market share

Question 47

What are the earnings per share (EPS) for a company that earned $100,000 last year in after-tax profits, has 200,000 common shares outstanding and $1.2 million in retained earning at the year end?

  1. $100,000
  2. $6.00
  3. $0.50
  4. $6.50

Question 48

A single, overall cost of capital is often used to evaluate projects because:

  1. It avoids the problem of computing the required rate of return for each investment proposal
  2. It is the only way to measure a firm's required return
  3. It acknowledges that most new investment projects have about the same degree of risk
  4. It acknowledges that most new investment projects offer about the same expected return

Question 49

The cost of equity capital is all of the following Except:

  1. The minimum rate that a firm should earn on the equity-financed part of an investment
  2. A return on the equity-financed portion of an investment that, at worst, leaves the market price of the stock unchanged
  3. By far the most difficult component cost to estimate
  4. Generally lower than the before-tax cost of debt

Question 50

If the following are balance sheet changes: $5,005 decrease in accounts receivable $7,000 decrease in cash $12,012 decrease in notes payable $10,001 increase in accounts payablea "use" of funds would be the:

  1. $7,000 decrease in cash
  2. $5,005 decrease in accounts receivable
  3. $10,001 increase in accounts payable
  4. $12,012 decrease in notes payable