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33 Cards in this Set
- Front
- Back
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An agent of the firm is A Any supplier of services to the firm B any manager who owns less than 100% of the firm C a shareholder D none of the above |
B any manager who owns less than 100% of the firm |
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Which best describes a corporate stakeholder A anyone with interest in the firm B company’s customers C those who own bonds of the company D those who own equity of the company |
A anyone with interest in the firm |
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Which of the following statements is correct A one of the problems with maximising accounting profit as a financial objective is that accounting profit can be manipulated |
statements is correct A one of the problems with maximising accounting profit as a financial objective is that accounting profit can be manipulated |
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It is generally accepted that corporate social responsibility A is the primary objective of the firm B is never a good objective of the firm C will reduce profits D plays a supporting role in the framework of corporate objectives |
D plays a supporting role in the framework of corporate objectives |
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According to the efficient market hypothesis (EMH) no one can make abnormal returns if the markets are A strong form efficient B semi strong form efficient C weak form efficient D inefficient |
A strong form efficient |
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According to the efficient market hypothesis (EMH) only insiders can make abnormal returns if the markets are
A strong form efficient B semi strong form efficient C weak form efficient D inefficient |
B semi strong for efficient |
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Q6. What’s the fisher formula |
(1+a) = (1+b)(1+c) |
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In a typical Islamic home finance facility, in the UK, the rental is calculated using: A average rental costs in area B average rental costs in country C LIBOR as a benchmark D Lloyd’s bank 2 years fixed mortgage rate |
C LIBOR as a benchmark |
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Q8. Internal rate of return formula |
On formula sheet |
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Q9 what to remember |
INGORE WHEN IT BEGINS |
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Which of the following would not be a sensible use of a Forward Rate Agreement (FRA) by a manufacturer? A covering changes in interest rates when the company is committed to borrow for commercial reasons B offsetting trading losses due to changes in interest rates C speculating on a hunch that interest rates will change D offsetting changes in floating interest rates |
C speculating on a hunch that interest rates will change |
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What’s the criteria for a full listing on the London stock exchange ? |
25% of the company and 0.7 market capitalisation |
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Which of the following does NOT occur as a direct consequence of getting a listing on the London stock exchange? A a valuation of the company’s shares B an increase in company profitability C the opening of new avenues of finance D increased liquidity if of a company’s shares |
B an increase in company profitability |
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Which of the following statements is not true? A maximisation of dividends over time maximises the stock market value of a company B maximising the stock market value of a company maximises shareholder wealth C managers should always seek to maximise company profits D managers should seek to maximise dividends over time and or cause the market value to increase |
C managers should always seek to maximise company profits |
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Which of the following statements regarding the capital asset pricing model (CAPM) is NOT correct? A CAPM is a development of portfolio theory B CAPM ignores unsystematic risk C underpriced securities lie below the security market line D CAPM assumes investors are rational |
C underpriced securities lie below the security market line |
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Q13. Equivalent rate of return calculation You purchased a shade at 40p and sold at 43p 3 months later having received a 4p dividend |
43-40+4 divided by 40 ( Answer + 1 ) to the power of 4 minus 1 |
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When comparing 2 mutually exclusive projects using NVP the general rule is A select the project with the greater NVP B Select the one with the lowest initial investment C select the shortest project D select the one with the highest initial investment |
A select the one with the greater NVP |
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From the viewpoint of an investor, which of the following securities in a company would be considered riskier than the others ? A unsecured loan stock B irredeemable secured denture C redeemable secured denture D irredeemable preference shares |
D irredeemable preference shares |
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Which of the following statements is true in relation to the IRR internal rate of return A if we know the market return, we can always make the best decision using IRR B because IRR does not recognise the size of the investment, it is potentially unreliable C IRR does not take into account the time value of money D IRR will always be less than the ARR (accounting rate of return) |
B because IRR does not recognise the size of the investment, it is potentially unreliable |
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Which of the following is not a right of a shareholder? A to receive a dividend declared by the company B to attend and vote meetings C to receive the company’s accounts D to manage company affairs |
D to manage company affairs |
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What role does an underwriter perform in relation to a new equity issue? A keeps a record of shareholder register B agrees to buy unsold shares C insures company cars D sets the dividend level |
B agrees to buy any unsold shades |
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Front (Term) |
C risk neutral |
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Front (Term) |
B risk loving |
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Q22-26 what’s the order of the table |
Revenue/sales Variable costs Gross profit Fixed costs Depreciation Total profit before tax Tax Profit after tax Add depreciation Operating cash flow after tax |
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Consider a project that consists of an initial outflow followed by a series of positive cash inflows, where the forks cash bla bla bla What would be the effect on the payback period ? Remember skiing technique ⛷ |
Decrease PBP Increase IRR Weeee woahhh |
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Q29. Calculate historic annual dividend growth for orange cow plc how to ? |
( New / old ) to the power of 1/n - 1 |
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Q31 Cost of preference shares |
Annual dividend / current trading losses |
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In relation to preference shares as a source of capital for a company, which of the following statements is correct? A preference shares are a form of loan capital which carry lower risk B preferences shares are a form of equity capital which carry a higher risk C preference shares are a form of loan capital which carry a higher risk D preference shares are a form of equity capital which carry lower risk |
Equity capital that carry a lower risk |
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Long dated bonds tend to have higher yields than short dated bonds because A they carry higher income risk B they carry higher capital risk C they are less liquid D there is less demand in port |
B they carry higher capital risk |
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In portfolio theory, what is the range of possible values for correlation coefficient? A negative infinity to positive infinity B zero to 1 C -1 to +1 D -100 to +100 |
C -1 to 1 |
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Front (Term) |
D an investors indifference curves |
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Based on the capital asset pricing model, which of the folllwjng does NOT affect a company’s cost of equity?
A return on assets B expected market return C risk free rate of return D the company’s beta |
Return on assets |
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In a mudharaba or mudarabah (risk sharing financing) contract, the provider of capital known as Rab Al Maal as such a bank A charges interest based on LIBOR B has a share only in any profit C bears any financial losses and does not have a share in profit D shares in any profit and bears all the financial losses |
Shares in any profit and bears all the financial losses |
