Tag: CMA Part 2

MCQ

A framework for analyzing the relationship between risks and rates of return on securities, especially common stocks. It asserts that the risk elements that influence returns on securities include; inflation rate, industrial production, and the slope of the term structure of interest rates.

1. Capital market line (CML)
2. Security market line (SML)
3. Arbitrage Pricing Theory (APT)
4. The Fama and French Factor Model

The Correct Answer

C

MCQ

When cash generated from firm’s operations and returned to financial managers

A.Cash reinvested in firms’ operations (retained earnings for reinvestment)

B.Cash returned to investors (interest payments or dividends)

C.A&B

D.Investment Cash Flows

The Correct Answer

C

MCQ

Framework for financial analysis includes

A.Analysis of the funds need of the firm

B.Analysis of financial condition and profitability of the firm

C.Analysis of the Business risk of the firm

D.all of the above

The Correct Answer

D

MCQ

Capital is allocated by financial markets by:

A.A lottery system between investment dealers.

B.Pricing securities based on their risk and expected future cash flows

C.By pricing risky securities higher than low-risk securities

D.By a government risk-rating system based on AAA for low risk and CCC for high risk

The Correct Answer

B

MCQ

In analyzing the firm, the investor should consider:

A.the risk inherent in the firm’s operation

B.the time patterns over which the firm’s earnings increase/decrease

C.the quality and reliability of the firm’s reported earnings

D.all of the above should be considered

The Correct Answer

D

MCQ

The ultimate measure of firm’s performance is:

A.the amount of the firm’s earnings

B.how the earnings are valued by the investor

C.the firm’s profit margin

D.return on the firm’s total assets

The Correct Answer

B

MCQ

Which one of the following is not a money market instrument?

A.a Treasury bond

B.a negotiable certificate of deposit

C.a Eurodollar account

D.a Treasury bill

The Correct Answer

A

MCQ

The market price of a share of common stock is determined by:

A.The board of directors of the firm.

B.The stock exchange on which the stock is listed.

C.The president of the company.

D.Individuals buying and selling the stock.

The Correct Answer

D

MCQ

Five areas that financial ratios concentrate on are:

A.liquidity, profitability, debt, efficiency, market related;

B.profitability, strategy, liquidity, auditing, share prices;

C.liquidity, current ratio, quick ratio, interest cover, dividend cover;

D.market related, share prices, dividend policy, debt policy, strategy.