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Financial Management 2
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Financial Management 2
1 . If taxed equally, which would you prefer? Why?
A.
Dividends
B.
Capital gains
C.
Indifferent
2 . Which firm would be most interested in a capital increase? Why?
A.
Highly profitable
B.
Barely profitable
C.
Fairly profitable
3 . At equilibrium, reinvesting a part of profits results in a value creation of the same amount.
A.
True
B.
False
4 . Raising the dividend per share is a signal? Why?
A.
Positive
B.
Negative
C.
Neutral
5 . Cash flows taken into account when calculating net present value (NPV) are not affected by depreciation charges. Why?
A.
True
B.
False
6 . Does the tax system affect your choice of dividends over capital gains? Why?
A.
Yes, because dividends are taxed more favorably
B.
Yes, because capital gains are taxed more favorably
C.
Yes, one of the above depending on the tax system you are operating in
7 . When is a firm most interested in a capital reduction? Why?
A.
Share is overvalued
B.
Shaire is undervalued
C.
Share is valued correctly
8 . Splitting 10 shares into 11 new ones while maintaining the dividend per share is a signal? Why?
A.
Positive
B.
Negative
C.
Neutral
9 . To offer all shareholders warrants at a strike price that is twice the current price is a signal? Why?
A.
Positive
B.
Negative
C.
Neutral
10 . If there are no growth opportunities, is a share buyback a sound idea?
A.
Yes
B.
No
11 . How is it easier to create value?
A.
In the choice of financing
B.
In the choice of investment
12 . Do all sources of financing have the same cost?
A.
Yes
B.
No
13 . Should we prefer debt to equity because debt is always cheaper? Why?
A.
Yes
B.
No
14 . Does it make sense to increase capital when the share seems to be overvalued? Why?
A.
Yes
B.
No
15 . For a shareholder, there is no difference between a big dividend payout and a share buy-back of the same amount. Why?
A.
True
B.
False
16 . For a firm, there is no difference between a big dividend payout and a share buy-back of the same amount. Why?
A.
True
B.
False
17 . Does the issue of free shares affect shareholders' wealth? Why?
A.
Yes
B.
No
18 . Short-term source of financing is the cheapest. Why?
A.
True
B.
False
19 . Do financial synergies exist? Why?
A.
Yes
B.
No
20 . Does the value of assets vary depending on their financing mode (debt or equity)? Why?
A.
Yes
B.
No
21 . Is the NPV criterion better than the IRR criterion in the choice of investment? Why?
A.
True
B.
False
22 . Sale of the firm by the managing shareholder sends a signal to the market? Why?
A.
Positive
B.
Negative
C.
Neutral
23 . Sale of the firm by non-managing shareholder sends a signal to the market? Why?
A.
Positive
B.
Negative
C.
Neutral
24 . According to the theory of markets in equilibrium, an increase in dividends does not affect the share price.
A.
True
B.
False
25 . According to the signal theory, an increase in dividends does not affect the share price.
A.
True
B.
False
26 . Is debt less costly than equity? Why?
A.
Yes
B.
No
27 . If net financial debt is equal to zero, is the weighted average cost of capital (WACC) equal to the cost of equity? Why?
A.
Yes
B.
No
28 . Is the EPS criterion compatible with the objective of value maximization?
A.
Yes
B.
No
29 . Is the ROE criterion compatible with the objective of value maximization?
A.
Yes
B.
No
30 . Payback ratio is the best criterion for choosing investment. Why?
A.
True
B.
False
31 . When does a share buyback result in a higher EPS? Why?
A.
When the inverse of the PE ratio is higher than the after-tax cost of debt
B.
When the inverse of the PE ratio is equal to the after-tax cost of debt
C.
When the inverse of the PE ratio is lower than the after-tax cost of debt
32 . What determines the growth rate of equity?
A.
ROE
B.
The PE ratio
C.
Cost of equity
33 . Lenders like share buy-backs. Why?
A.
True
B.
False
34 . When subscribing to a capital increase with subscription rights, a new shareholder pays the current price for the share. Why?
A.
True
B.
False
35 . When subscribing to a capital increase without subscription rights does a new shareholder pays the current price for the share. Why?
A.
True
B.
False
36 . If a managing shareholder with 99% of his/her investments parked in the firm does not subscribe to a capital increase, what sort of signal is (s)he sending to the market? Why?
A.
Positive
B.
Negative
C.
Neutral
37 . If a financial investor does not subscribe to a capital increase, what sort of signal is (s)he sending to the market? Why?
A.
Positive
B.
Negative
C.
Neutral
38 . Not subscribing to a capital increase, particularly if it is with subscription rights, means selling a part of the firm. Why?
A.
True
B.
False
39 . Raising a loan at a rate lower than the market rates
A.
Creates value
B.
Transfers value
40 . What is important when every shareholder subscribes to a capital increase in exact proportion to his/her current stake? Why?
A.
Price of the newly issued shares
B.
Price to book ratio
C.
Nothing
41 . When it borrows excessively, what sort of signal is a family-run firm sending to the market? Why?
A.
Positive
B.
Negative
C.
Neutral
42 . What criterion can bee used to evaluate the dividend policy?
A.
Dividend to nominal value of the share ratio
B.
Payout ratio
C.
PE ratio
43 . If EPS rises after the capital increase, then value is created. Why?
A.
True
B.
False
44 . If an investment is debt-financed, should the cash flows used to calculate the NPV or IRR take into account financial expenses? Why?
A.
Yes
B.
No
45 . A free equity warrant is granted to all shareholders. Its value is w. What will be the share price after the detachment of this warrant, all other things being equal? Why?
A.
Price before the detachment
B.
Price before the detachment - w
46 . Does a big dividend ensure stability of the share price? Why?
A.
Yes
B.
No
47 . A LBO is a form of capital reduction. Why?
A.
Yes
B.
No
48 . Preference shares without voting rights are less expensive for the firm than the ordinary shares. Why?
A.
True
B.
False
49 . Does a dividend increase result in a higher share price? Why?
A.
Yes
B.
No
50 . If a firm with a highly volatile price is willing to widen its shareholders' base gradually, what will it issue? Why?
A.
Convertible bonds
B.
Preferred shares without voting rights
C.
Mandatory convertibles
Test Name :
Financial Management 2
Category :
Financial Test
Number of Question :
50
Pass Score :
80
Test Result
Your Score :
Passing Score :
80
Result :
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© 2007
