Semester 1

1. The prime goal of a publicly owned for Value Creation

2. Shareholders of a corporations may be among others: (All the answers) Pension Funds,
Investment Banks, Individual Investors

3. A firm has a net working capital of £1200. Long-term debt is £6,270, total assets are £10,605.
and non-current assets are £4.185. What is the amount of the total liabilities? £11490

4. What is the future value of £5000 in four years if the annual interest rate is 6%? £6312.38

5. Which one of the following is the financial statement that shows the accounting value of a firm's
equity as of a particular date? Statement of Financial Position

6. Which of the following is/are an advantage of incorporation? None of the Above : [Access to
capital markets, Unlimited liability, Full control of decision making]

7. Determining whether a company's assets should be financed with debt or equity if they are
mostly related with: Financing Activity.

8. Which of the following balance sheet equations is INCORRECT? Assets - Current Liabilities =
Long-Term Liabilities

CORRECT ONES = Assets - Liabilities= Shareholders' Equity

Assets = Liabilities + Shareholders' Equity
Assets - Current Liabilities = Long Term Liabilities+ Shareholdrs' Equity

9. If you were able to invest £2,500 at a rate of 7% for 9 months, how much money would you
have at the end of that period? £2,630.13

10. Which one of the following statements concerning a sole proprietorship is correct? The owner
has unlimited liability for the business.

11. A non-current asset is: An item that cannot be converted into cash very easily.

12. Which one of the following is a capital budgeting decision? Deciding whether or not to
purchase a new machine for the production line.

13. What is agency cost? Cost of solving agency problems

14. Calculate net income based on the following information. Sales are £400, cost of goods sold is
£250, depreciation expense is £40, interest paid is £25, and the tax rate is 40%. £51.00

15. Accounts receivable is: Current Asset

 16. The current liability of Martin Corp in 2021 was £140 million. and their net working capital was
£14 million. What was their current asset? £14million

17. Free Motion Enterprises paid a £2.20 per share annual dividend last week. Dividends are
expected to increase by 3.75 per cent annually. What is one share of this equity worth to you
today if your required rate of return is 15 per cent? £20.29

18. Collection float is made up of all of the following, EXCEPT: Disbursement float.

19. Gabe Inc.. has sales of £640000 net income of £350,000, assets worth £5,000,000. and total
common stockholder equity of £4,000,000. The ROE for Gabe is: 8.75%

20. The higher the degree of financial leverage employed by a firm the:
Higher the probability that the firm will encounter financial distress

Semester 2

1. ZYC PLC had sales revenue. The firm’s financial leverage indicates the degree to which effective use
of borrowing contributed to the firm's ROE.

2. The distinguishing feature of a corporation is that: It is a legally defined, artificial

being, separate from its owners.

3. “Determining how much debt should be assumed to fund a project is a capital structure
decision” - True

4. Which one of the following is a real asset? A patent

5. A conflict of interest between the shareholders and management of a firm is called:

Agency problem

6. James owns a bond that will pay him £75 each year in interest plus a £1,000 principal
payment at maturity. What is the £1,000 called? Face value

7. Jane deposited £3,000 this morning into an account that pays 5 per cent interest,
compounded annually. George also deposited £3,000 this morning into an account
that pays 5 per cent interest, compounded annually. Jane will withdraw her interest
earnings and spend it as soon as possible. George will reinvest his interest earnings
into her account. Given this, which one of the following statements is true?
George will earn interest on interest.
8. At an annual interest rate of 9%, the present value of £8000 received in four years is
closest £5,667

9. A zero-coupon bond: Has a face value but pays no interest

10. Zing Inc. borrows £400m by issuing new long-term bonds. It places £100m of the
proceeds in the bank and uses £300m to acquire new fixed assets for further
expansion. What item of the balance sheet would change : Cash at the bank will
increase by £100m

11. Marks plc had invested £10 billion in expanding their operation. They have
borrowed £ 4 billion from the bank loans and the rest is raised through ordinary
share issuance. The market value of the share currently is £14 billion. If they have
100m shares outstanding what would be the price per share? £100

12. Refresh Inc. has sales of £3,500,000, net income of £100,000, assets worth
£1,700,000, and total common stockholder equity of £2,500,000. The ROE for the
firm is: 4.00%

13.The DuPont method decomposes the ROE into the product of three other ratios.
those ratios are Profit margin, asset turnover, and financial leverage.

14. The price per £100 face value of a five-year, zero-coupon, risk-free bond with YTM
of 6.5% : £72.99

15. ZE Plc presently pays an annual dividend of £2.50 per share and it is expected that
these dividend payments will continue indefinitely. If ZE’s equity cost of capital is
14%, then the value of a share of ZE’s stock is closest to: £17.86

16. The amount of cash a firm needs to be able to pay its bills is sometimes referred to
as a(n): Transactions balance

17.Performance measures (i.e., ratio analysis) allow for: Internal assessment of a

firm, External assessment of a firm, Comparison with other firms in the
industry (all are correct)

18. Financial market mainly consists of: The money and the capital markets.
19. The Principal-Agent Problem arises:
Statement 1: Because managers have little incentive to work in the interest of
shareholders when this means working against their own self-interest.
Statement 2: Because of the separation of ownership and control in a corporation
Statement 1 and Statement 2

20. Which one of the following transactions occurs in the primary market? Purchase of newly
issued share of Apple Inc.