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FIN 571 Final Exam Guide 1
1) Which principle states that extraordinary returns are achievable with new
ideas?
2) Occurs when a "follower" receives the benefit of an expenditure made by a
"leader" by imitating the leader's behavior.
3) Occurs when inaccurate information can falsely exist.
4) The annual report refers to
5) Remaining maturity refers to:
6) Generally accepted accounting principles (GAAP) refers to
7) The firm’s assets in the balance sheet refer to:
8) Original maturity refers to:
9) Book value (or Net book value) refers to:
10) Preferred stock payment obligations are typically __________.
11) Assume that the par value of a bond is $1,000. Consider a bond where the
coupon rate is 9% and the current yield is 10%. Which of
the following statements is true?
12) If the yield to maturity for a bond is less than the bond's coupon rate,
then the market value of the bond is __________.
13) According to the CAPM, the expected return for a portfolio is determined by
the portfolio's.
14) Certain countries have restrictions. In practice, U.S. investors have NOT
invested very much internationally. Possible factors include
__________.
15) Certain countries have restrictions. In practice, U.S. investors have NOT
invested very much internationally. Possible factors include
__________.
16) One problem with using negative values for w1 (the proportion invested in
the riskless asset) to represent a borrowed amount is that
the implied borrowing rate of interest is the same as __________.
17) According to the Principle of Risk-Return Trade-Off, investors require a
higher return to compensate for __________.
18) The Principle of __________ implies that the expected return for an asset
equals its required return.
19) Stony Products has a receivables turnover of ten times. What is Stony’s
receivables collection period (RCP)?
20) Stony Products has a payables turnover of six times. What is Stony's
payables deferral period (PDP)?

3. 21) Stony Products has an inventory conversion period (ICP) of about 60.83 days.
The receivables collection period (RCP) is 36.50 days.
The payables deferral period (PDP) is about 30.42 days. What is Stony's cash
conversion cycle (CCC)?
22) Bank term loans represent __________.
23) __________ says to compare the benefits and costs of alternative uses and
sources of money using after-tax APYs.
24) Firms make short-term financial decisions just about every day solving such
questions as __________.
25) Which (if any) of the following statements is false?
26) Credit-policy decisions involve all aspects of receivables management. The
decision does NOT include which of the following?
A. the choice of credit terms
27) Which of the following statements is (are) true?
28) An all-equity-financed firm would __________.
29) Whenever a firm splits itself into separate units, with each unit having
limited liability with respect to its financing, the capital structure
of each unit becomes __________.
30) A profitable firm would __________.
31) The capital budgeting process can be broken down into five steps. These
steps include which of the following?
32) Ideas for capital budgeting projects come from all levels within an
organization. The bottom up process results in ideas percolating
through the organization.
33) Boeing Corporation is a world leader in commercial aircraft. In the face of
competition, Boeing often faces a critical __________
decision: whether to develop a new generation of passenger aircraft.
35) Whenever projects are both independent and conventional, then the IRR and
NPV methods agree. Which of the following statements is
true?
36) In practice, the __________ rule is preferred.
37) Studies show systematic differences in capital structures across industries.
These are due mostly to differences in __________.
38) Studies show systematic differences in capital structures across industries.
These are due mostly to differences in __________.
A. management’s attitude toward what other industries are doing.
39) A firm cannot simply adopt the industry average debt ratio, because
differences exist among firms in any particular industry with
respect to __________.
40) There can be a variety of motives for stock repurchases including
__________.
41) There can be a variety of motives for stock repurchases including
__________.
42) Some countries have __________ in which shareholders' returns are not fully
taxed twice.
43) Conditional sales contracts __________.
44) The Time Value of Money Principle says __________.

4. 45) Stated maturity is __________.
46) __________ says to calculate the net advantage of leasing based on the
incremental after-tax benefits that leasing will provide.
47) __________ says to look for opportunities to develop asset-based financing
arrangements that offer new positive-NPV financing
mechanisms.
48) The Principle of Self-Interested Behavior says __________.
49) The wholesale price for Captain John’s is $3.00 per loaf. One million loaves
will be sold in the next year. What is the contribution
margin?
50) The wholesale price for Captain John’s is $0.612 per loaf, and the variable
cost of production is $0.387 per loaf. Captain John’s is
expecting that expansion will allow them to sell an additional 4.5 million
loaves in the next five years. What additional revenues minus
expenses will be generated from expansion?
51) The wholesale price for Captain John’s is $1.00 per loaf, and the variable
cost of production is $0.50 per loaf. Captain John’s is
expecting that expansion will allow them to sell an additional 5.0 million
loaves in the next year. What additional revenues minus expenses
will be generated from expansion?
52) Which of the following statements is true?
53) Pursuing valuable ideas is the best way __________.
54) Due to asymmetric information, the market fears that a firm issuing
securities will do so when the stock is ___________.
55) __________ says to forecast the firm’s cash flows, and analyze the
incremental cash flows of alternative decisions.
56) __________ says to carefully evaluate and monitor the financial plan’s
impact on the firm and its stakeholders.
57) ___________ says to use both bottom-up and top-down processes to increase
the chance of uncovering valuable ideas.