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# Part A: Multiple Choice Questions (20 Marks)

1. Calculate the value of shareholders equity for Omega Limited if it has PPE (net) of
\$35,000, long-term debt of \$14,000, net working capital of \$5,000, and current liabilities
of \$8,000.
a. \$13,000
b. \$21,000
c. \$26,000
d. \$27,000

2. Calculate the value of PPE (net) for Pioneer Limited if has shareholders' equity of \$20,000,
total debt of \$16,000, long-term debt of \$12,000, and net working capital of \$7,000.
a. \$13,000
b. \$19,000
c. \$20,000
d. \$25,000

3. Calculate the value of net working capital for Sigma Limited if it has total assets of \$50,000,
net fixed assets of \$25,000, shareholders equity of \$20,000, accounts receivable of
\$15,000, and current liabilities of \$10,000.
a. \$15,000
b. \$25,000
c. \$30,000
d. \$35,000

4. Calculate the value of shareholders equity for Mars Limited if it has long-term debt of
\$21,000, net fixed assets of \$40,000, current liabilities of \$6,000, and net working capital
of \$5,000.
a. \$14,000
b. \$24,000
c. \$25,000
d. \$32,000

5. Alpha Limited increased its accounts payable by \$100, increased its inventory by \$150, and
increased its accounts receivable by \$200 over the year. The effect on Alphas statement of
cash flows is
a. 250 source of cash
b. 250 use of cash
c. 450 source of cash
d. 450 use of cash

6. If a firm has a debt-equity ratio of 4.0, then its debt to asset ratio must be which one of the
following?
a. 0.20
b. 0.25
c. 0.80
d. 1.25

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7. If a firm produces a twenty percent return on assets and also a twenty-four percent return
on equity, then the firm has an equity multiplier of?
a. 0.05
b. 0.83
c. 1.20
d. 5.00

8. Pioneer Limited has a profit margin of 8 percent, a return on assets of 20 percent, and an
equity multiplier of 1.2. What is the return on equity?
a. 1.60%
b. 9.60%
c. 16.67%
d. 24.00%

9. Sally deposits \$20,000 in an account that earns 12% interest per annum. Calculate the
interest payment on a 5-year simple interest deposit.
a. \$2,400.00
b. \$12,000.00
c. \$15,246.83
d. \$19,200.00

10. Peter is going to pay an interest amount of \$1,200 on a 3-year loan. Calculate the loan
amount with an 5% simple interest rate.
a. \$3,600.00
b. \$7,947.31
c. \$8,000.00
d. \$10,823.53

11. Samuel has been promised \$1,500 of interest after 6 months of investing \$20,000 with St.
George Bank. What rate of simple interest is Samuel earning per annum?
a. 7.50%
b. 13.95%
c. 15.00%
d. 15.56%

12. Sam has a savings of \$25,000 at St. George Bank. The Bank provides a simple interest rate
of 6% per annum. How long (in months) must Sam invest for in order to earn \$7,500 of
simple interest.
a. 40.00 months
b. 46.00 months
c. 54.00 months
d. 60.00 months

13. Peter will receive a study excellence award of \$30,000 per year at the end of the next 4
years. Calculate the future value at the end of year 4 of Peter's cash flows if the effective
annual interest rate is 6%.
a. \$103,953.17
b. \$110,190.36
c. \$131,238.48
d. \$139,112.79

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14. Sam will receive a study excellence award of \$50,000 per year at the end of the next 2
years. Calculate the present value today of Sam's cash flows if the effective annual interest
rate is 8%.
a. \$89,163.24
b. \$96,296.30
c. \$104,000.00
d. \$112,320.00

15. If bond price is lower than face value, then this is a bond.
a. Discount
b. Par
d. None of the above

16. Long position in forwards contract makes a gain when underlying asset prices
exercise price.
a. Fall below
b. Rise above
c. Unchanged compared to
d. None of the above

17. Long position in forwards contract makes a loss when underlying asset prices
a. Fall
b. Rise
c. Unchanged
d. None of the above

## 18. is acquiring excessive risk to make abnormal profit.

a. Arbitrage
b. Hedging
c. Speculation
d. None of the above

## 19. is when a company makes profit, it could distribute cash to shareholders.

a. Cash Dividend
b. Reverse Split
c. Stock Dividend
d. Stock Split

## 20. is when a company distributes profit as new shares instead of cash to

shareholders.
a. Cash Dividend
b. Reverse Split
c. Stock Dividend
d. Stock Split

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Part A: Multiple Choice Questions (20 Marks)

1. Calculate the value of current liabilities for Venus Limited if it has total assets of \$15,000,
net fixed assets of \$12,000, and net working capital of \$2,000.
a. \$1,000
b. \$3,000
c. \$5,000
d. \$10,000

2. Calculate the value of the long-term debt for Sigma Limited if it has total assets of \$50,000,
shareholders equity of \$25,000, current assets of \$15,000, and current liabilities of
\$10,000.
a. \$0
b. \$15,000
c. \$25,000
d. \$30,000

3. Calculate the value of dividends paid for Pioneer Limited if it an addition to retained
earnings of \$20,000, net income of \$30,000, and sales of \$150,000.
a. \$5,000
b. \$10,000
c. \$15,000
d. \$35,000

4. Calculate the value of the retained earnings account for Alpha Limited of 2016 if it has for
the year 2016 dividends of \$4,000, net income of \$10,000, and shareholders equity of
\$120,000. The year 2015 retained earnings is \$50,000.
a. \$56,000
b. \$60,000
c. \$70,000
d. \$74,000

5. A firm has total debt of \$10,000 and a debt-equity ratio of 2. What is the value of the total
assets?
a. \$5,000
b. \$15,000
c. \$20,000
d. \$30,000

6. Omega Limited has cash of \$5,000, accounts receivable of \$15,000, accounts payable of
\$25,000, and inventory of \$30,000. What is the value of the quick ratio?
a. 0.20
b. 0.67
c. 0.80
d. 2.00

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7. Venus Limited has net working capital of \$5,000, net fixed assets of \$80,000, sales of
\$60,000, and current liabilities of \$15,000. Calculate total asset turnover ratio.
a. 0.60 times
b. 0.67 times
c. 0.75 times
d. 0.86 times

8. Mars Limited has net income of \$10,000, a price-earnings ratio of 4, and earnings per share
of \$0.2. How many shares of stock are outstanding?
a. 2,500
b. 8,000
c. 40,000
d. 50,000

9. John can purchase a laptop on a 3-year loan at 8% simple interest per year. Calculate the
future value of a \$2,000 loan.
a. \$2,480.00
b. \$2,519.42
c. \$2,631.58
d. \$6,000.00

10. You have been told that the maturity value of a Treasury Bill that matures in 9 months is
\$50,000. The simple interest rate offered by the Treasury Bill is 6% per annum. Calculate
the principal of the investment.
a. \$37,500.00
b. \$47,750.00
c. \$47,846.89
d. \$47,861.97

11. Andrew bought an antique sculpture for \$20,000 and sold it 6-months later for \$21,200.
What simple interest rate did he earn on this sale?
a. 6.00%
b. 11.32%
c. 12.00%
d. 12.36%

12. Jacqueline wants to know how long (in months) it would take for her savings of \$24,000
to grow to \$26,160 if Westpac bank offers her a simple interest rate of 6% per annum.
a. 12 months
b. 18 months
c. 20 months
d. 9 months

13. Samuel would like to accumulate \$40,000 in his savings account at the end of 5 years. If
effective annual interest rate is 12%. What would be the amount of equal deposit at the end
of each year for 5 years.
a. \$5,621.78
b. \$6,296.39
c. \$9,907.49
d. \$11,096.39

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14. Amanda deposited \$50,000 at 10% effective annual interest rate. She will make equal
withdrawals at the end of each year over an 8-year term. What would be the amount of
equal withdrawal?
a. \$3,974.73
b. \$4,372.20
c. \$8,520.18
d. \$9,372.20

15. If coupon rate is lower than yield to maturity, then this is a bond.
a. Discount
b. Par
d. None of the above

16. Short position in forwards contract makes a gain when underlying asset prices
exercise price.
a. Fall below
b. Rise above
c. Unchanged
d. None of the above

17. Short position in forwards contract makes a loss when underlying asset prices
a. Fall
b. Rise
c. Unchanged
d. None of the above

## 18. is eliminating or reducing existing risk in the underlying asset.

a. Arbitrage
b. Hedging
c. Speculation
d. None of the above

19. is when a company issues higher number of new shares to replace old shares.
a. Cash Dividend
b. Reverse Split
c. Stock Dividend
d. Stock Split

20. is when a company issues lower number of new shares to replace old shares.
a. Cash Dividend
b. Reverse Split
c. Stock Dividend
d. Stock Split

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Part A: Multiple Choice Questions (20 Marks)

1. Land is classified as
a. Current assets
b. Current liabilities
c. Intangible assets
d. Tangible assets

## 2. Which one of the following is included in net working capital?

a. 10-year bonds
b. Accounts payable
c. Contributed capital
d. Machine

## 3. The statement of financial performance is also known as the

a. Balance sheet
b. Income statement
c. Statement of cash flows
d. Statement of stockholder's equity

4. Pioneer Limited has sales of \$200,000, total assets of \$500,000, and a profit margin of 12
percent. The firm has a total equity ratio of 30 percent. What is the return on equity?
a. 4.80%
b. 16.00%
c. 40.00%
d. 250.00%

5. Sigma Limited has sales of \$500,000, costs of goods sold of \$400,000, inventory of
\$80,000, and accounts receivable of \$50,000. How many days, on average, does it take the
firm to sell its inventory assuming that all sales are on credit?
a. 36.50 days
b. 45.63 days
c. 58.40 days
d. 73.00 days

6. On the Statement of Cash Flows, which of the following are considered operating
activities?
I. costs of goods sold
II. decrease in accounts payable
III. interest paid
IV. dividends paid
a. I and III only
b. III and IV only
c. I, II, and III only
d. I, III, and IV only

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7. Luke invested \$32,000 at 6% effective annual interest rate for 9 years. Calculate the future
value of his investment.
a. \$49,280.00
b. \$54,063.33
c. \$69,565.22
d. \$288,000.00

8. Jacob would like to have a savings of \$40,000 in an account at the end of three years.
Calculate the amount he needs to save now if the saving account earns an annually effective
rate of return of 4%.
a. \$4,800.00
b. \$35,200.00
c. \$35,559.85
d. \$35,714.29

9. Amanda borrowed \$6,000 from her best friend, six months later, Amanda repaid her
\$6,235.38. Calculate the effective annual interest rate.
a. 3.92%
b. 7.55%
c. 7.85%
d. 8.00%

10. Madelene deposits \$3,000 at the end of each year for 7 years. The effective annual interest
rate is 4%. Calculate the accumulated value of Madelenes savings account at the end of
year 10.
a. \$16,007.41
b. \$16,647.71
c. \$26,653.52
d. \$27,719.66

11. Andrew paid annual instalments of \$5,000 on 1 January 2012 for 6 years. The effective
annual interest rate is 12%. Calculate the value of the loan on 1 January 2008.
a. \$14,632.09
b. \$16,387.94
c. \$57,006.28
d. \$63,847.04

12. What happens to the price of a discount bond over time until it reaches maturity?
a. Decreases
b. Increases
c. Remains constant
d. Cannot be determined

## 13. In case of a discount bond, current yield is yield to maturity.

a. Equal to
b. Greater than
c. Less than
d. Cannot be determined

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14. Zero-coupon bond is a bond.
a. Discount
b. Par
d. None of the above

## 15. Interest rate is an example of

a. Systematic risk
b. Total risk
c. Unsystematic risk
d. None of the above

a. In exchange In exchange
b. In exchange Over the counter
c. Over the counter In exchange
d. Over the counter Over the counter

## 17. Forward contracts are while future contracts are

a. Customised Customised
b. Customised Standardised
c. Standardised Customised
d. Standardised Standardised

18. Forward contracts have while future contracts have credit risk.
a. High High
b. High Low
c. Low High
d. Low Low

## 19. Cash dividend results in market capitalization.

a. Constant
b. Higher
c. Lower
d. Cannot be determined

## 20. Stock dividend results in market capitalization.

a. Constant
b. Higher
c. Lower
d. Cannot be determined

3
Part A: Multiple Choice Questions (20 Marks)

## 1. Gross profit is calculated as

a. Total sales - cost of sales - selling, general and administrative expenses - depreciation
and amortization
b. Total sales - cost of sales - selling, general and administrative expenses
c. Total sales - cost of sales
d. None of the above

## 2. Which of the following is NOT an operating expense?

a. Interest expense
b. Depreciation and amortization
c. Selling, general and administrative expenses
d. Research and development

## 3. Which of the following statements regarding net income is correct?

a. Net Income = Additional Retained Earnings - Dividends
b. Additional Retained Earnings = Net Income + Dividends
c. Net Income = Additional Retained Earnings + Dividends
d. Additional Retained Earnings - Net Income = Dividends

4. The sources and uses of cash over a stated period of time are reflected on the:
a. Balance sheet
b. Income statement
c. Statement of cash flows
d. Statement of shareholders equity

## 5. According to the Statement of Cash Flows, a decrease in accounts receivable will

the cash flow from activities.
a. decrease; operating
b. decrease; financing
c. increase; operating
d. increase; financing

## 6. According to the Statement of Cash Flows, an increase in interest expense will

the cash flow from activities.
a. decrease; operating
b. decrease; financing
c. increase; operating
d. increase; financing

7. Nicolas invested \$24,000 in a fund offering a rate of return of 14% per year, approximately
how many years will it take for the investment to reach \$52,679.34?
a. 2.19 years
b. 3.89 years
c. 6.00 years
d. 8.54 years

1
8. Lucy invested \$50,000 in a fund offering a rate of return of 6% per year, approximately
how many years will it take for the investment to reach \$100,000?
a. 6 years
b. 10 years
c. 12 years
d. 18 years

9. Monica saved \$15,000 today at 8% interest rate, compounded quarterly. How much would
she accumulate after 5 years?
a. \$21,000.00
b. \$22,039.92
c. \$22,289.21
d. \$25,000.00

10. Jennifer would like to receive \$20,000 at the end of each year indefinitely, what amount
she have to invest today if the annual effective interest rate is 8%.
a. \$114,932.78
b. \$124,127.40
c. \$250,000.00
d. \$333,333.33

11. Mary would receive an annual cash flow of \$40,000 at the end of each year that will
continue indefinitely. This cash flow is expected to grow at 2% per annum. Calculate the
present value of these cash flows if the effective annual interest rate is 12%.
a. \$277,507.97
b. \$285,714.29
c. \$333,333.33
d. \$400,000.00

## 12. An advantage(s) of public company

a. Easier to raise equity
b. Good publicity
c. More liquid
d. All of the above

13. Which of the following is false? Investors are concerned with the following determinants
of investment:
a. Higher return for a given level of risk
b. Higher risk for a given level of return
c. Relatively more liquid investment
d. Higher frequency of periodic cash inflows

14. represents ownership of the company and has the right to vote.
a. Bonds
b. Ordinary shares
c. Preference shares
d. Term loans

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15. Which of the following is less accurate, shares are characterised by
a. It benefits from capital gains
b. It has a lower risk compared to bonds
c. It has a higher expected return compared to bonds
d. It allows shareholders to vote for major investment decisions

## 16. Unsystematic risk is also known as

a. Diversifiable risk
b. Firm risk
c. Idiosyncratic risk
d. All of the above

## 17. Which of the following has the highest total risk?

a. A stock with a beta of 1
b. A stock with a beta of 1.4
c. A stock with a standard deviation of 1
d. A stock with a standard deviation of 1.4

## 18. Which of the following has the highest systematic risk?

a. A stock with a beta of 1
b. A stock with a beta of 1.4
c. A stock with a standard deviation of 1
d. A stock with a standard deviation of 1.4

## 19. Stock Split results in market capitalization.

a. Constant
b. Higher
c. Lower
d. Cannot be determined

## 20. Reverse Split results in market capitalization.

a. Constant
b. Higher
c. Lower
d. Cannot be determined

3
Part A: Multiple Choice Questions (20 Marks)

## 1. Which one of the following is classified as a current asset?

b. Inventory
c. Land
d. Short term loan

## 2. Notes payable is classified as

a. Current assets
b. Current liabilities
c. Intangible assets
d. Tangible assets

## 3. A companys financial position at a certain point in time is recorded in which financial

statement
a. Balance sheet
b. Income statement
c. Statement of cash flow
d. Statement of Stockholder's Equity

4. Financial ratios that measures the ability of a firm to meet its short-term commitments are
known as ratios.
a. Activity ratios
b. Liquidity ratios
c. Profitability ratios
d. Solvency ratios

5. Financial ratios that measures the ability of a firm to meet its long-term commitments are
known as ratios.
a. Activity ratios
b. Liquidity ratios
c. Profitability ratios
d. Solvency ratios

## 6. Which one of the following is a source of cash?

a. Increase in accounts receivable
b. Decrease in notes payable
c. Decrease in common stock
d. Increase in accounts payable

7. Mike would like to have a savings of \$40,000 in an account at the end of three years.
Calculate the amount he needs to save now if the saving account earns an annual rate of
return of 6%, compounded semi-annually.
a. \$32,800.00
b. \$33,499.37
c. \$33,584.77
d. \$33,898.31

1
8. A savings account earns 15% per annum, compounded monthly. Calculate the interest rate
per month.
a. 1.25%
b. 2.50%
c. 3.75%
d. 5.00%

9. Calculate the effective annual rate equivalent to 6% annual interest rate compounded
quarterly.
a. 1.50%
b. 5.87%
c. 6.00%
d. 6.14%

10. Pioneer Limited has a deposit of \$500,000 at St. George bank. If effective annual interest
rate is 6%, calculate how much annual interest Pioneer Limited could withdraw every year
continuing indefinitely.
a. \$25,000.00
b. \$30,000.00
c. \$95,925.77
d. \$101,681.31

## 11. A Disadvantage(s) of public company

a. Expensive
b. Disclose a lot of information
c. Listing requirements
d. All of the above

12. represents ownership of the company and has the right to get regular dividends.
a. Bonds
b. Ordinary shares
c. Preference shares
d. Term loans

## 13. is selling share of your company to raise money.

a. Loans
b. Bonds
c. Equity
d. All of the above

## 14. is selling share of your company to raise money.

a. Loans
b. Bonds
c. Equity
d. All of the above

2
15. is not listed on the stock exchange.
a. Private company
b. Public company
c. Listed company
d. All of the above

## 16. is measured by a shares beta.

a. diversifiable risk
b. systematic risk
c. total risk
d. unsystematic risk

17. If the average monthly return and volatility of ASX 200 is 12% and 20% respectively and
the average monthly return on U.S. treasury bills is 4%. Calculate sharp ratio.
a. 0.400%
b. 0.600%
c. 1.667%
d. 2.500%

## 18. is measured by a shares standard deviation.

a. diversifiable risk
b. systematic risk
c. total risk
d. unsystematic risk

## 19. Cash dividend results in shares outstanding.

a. Constant
b. Higher
c. Lower
d. Cannot be determined

## 20. Stock dividend results in shares outstanding.

a. Constant
b. Higher
c. Lower
d. Cannot be determined

3
Part A: Multiple Choice Questions (20 Marks)

## 1. Net working capital is defined as

a. current assets divided by current liabilities
b. current assets minus current liabilities
c. current assets multiplied by current liabilities
d. current assets plus current liabilities

## 2. Which of the following are classified as current assets?

I. Equipment
II. Accounts receivables
III. Buildings
IV. Inventory
a. I and III only
b. I and IV only
c. II and III only
d. II and IV only

## 3. Which of the following are classified as Long-term tangible assets?

I. Equipment
II. Goodwill
III. Buildings
IV. Inventory
a. I and III only
b. I and IV only
c. II and III only
d. II and IV only

4. An increase in which one of the following will increase a firm's quick ratio without
affecting its cash ratio?
a. Accounts payable
b. Accounts receivable
c. Cash
d. Inventory

5. The formula which breaks down the return on equity into three component parts is referred
to as which one of the following?
a. Altman Z Score
b. Balance of payment
c. Balance sheet
d. Du Pont Analysis

6. Relationships determined from a firm's financial information and used for comparison
purposes are known as
a. Dimensional analysis
b. Financial ratios
c. Scenario analysis
d. Sensitivity analysis

1
7. A dollar today is worth a dollar after 1 year.
a. same value as
b. More than
c. Less than
d. None of the above

8. Andrew won a lottery of \$1,000,000 and would like to make a deposit for 1 year only.
Commonwealth bank offers an effective annual rate of 10% and St. George bank offers a
simple interest rate of 10% per annum. Andrew should choose the offer of for 1
year deposit.
a. St. George bank only
b. Commonwealth bank only
c. Both banks give the same return for a year
d. None of them

9. Effective annual rate (EAR) is annual percentage rate (APR) when interest is
paid many times a year.
a. Equal to
b. Greater than
c. Less than
d. None of the above

10. Lucy has a deposit of \$100,000 at Westpac bank. Effective annual interest rate is 8%. Lucy
wants to withdraw a series of consecutive payments at the end of each year that continue
indefinitely, and each payment grows at 2%. Calculate the value of the first withdrawal at
the end of year 1.
a. \$6,000.00
b. \$8,000.00
c. \$16,112.48
d. \$17,401.48

11. Which of the following equity financing method(s) is not issued at a discount price.
a. Private Placement
b. Public Offering
c. Rights issue
d. All of the above

## 12. is listed on the stock exchange.

a. Private company
b. Public company
c. Unlisted company
d. All of the above

13. Which of the following is not considered as an advantage for rights issue?
a. Limited raised capital
b. Lower transaction cost compared to public offering
c. Same shareholders structure
d. Shareholders ownership is not diluted

2
14. Which of the following is not considered as a disadvantage for private placement?
a. Cannot place over 15% of shares
b. Dilutes the proportionate claims of existing shareholders
c. Issued at discount to market price
d. Sold to certain investor(s) of special interest

15. Which of the following is not considered as a disadvantage for public offering?
b. Company has no control over who buys shares unlike private placement
c. Dilute control of existing shareholders
d. Higher cost compared to private placement

## 16. The risk that applies to the majority of shares is

a. diversifiable risk
b. idiosyncratic risk
c. systematic risk
d. unsystematic risk

## 17. Inflation rate is an example of

a. Systematic risk
b. Total risk
c. Unsystematic risk
d. None of the above

## 18. is an example of systematic risk

a. a flood that hit Queensland
b. Chocolate price increase after discovering that it helps bold people to grow hair
c. loss of confidence because of global financial crisis
d. Woolworth has to recall the apples

## 19. Stock Split results in shares outstanding.

a. Constant
b. Higher
c. Lower
d. Cannot be determined

## 20. Reverse Split results in shares outstanding.

a. Constant
b. Higher
c. Lower
d. Cannot be determined