## Solution Library

#### Finance Objective Questions - Calculating Growth Rate by Sales and Time Taken to Repay Outstanding Bills

Question 1. Analysis of a company's financial statements: Below are simplified versions of the balance sheet and income statement for Toys by Tom, Inc.   Sales in 2003 were \$10,000. Therefore, the compounded average growth rate is:  8.6% 6.7% 6.3% Not enough information available ... Read More

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#### Finance Objective Questions - Cash Cycle Measuring Days to required to produce goods and Reduction of Assets, a source of funds

Question 1. The cash cycle measures the days required to produce finished goods or delivered services. True or False 2. In general, the reduction of an asset is a source of funds.  True or False Summary These two objective questions belong to Finance and they deal with cash cycle for meas ... Read More

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#### Finance Objective Questions - Cash Conversion Cycle Greater Than or Equal to Zero and How to Calculate Cash Conversion Cycle

Question 1. The cash conversion cycle as conventionally computed must be a number greater than or equal to zero. True or False 2. The cash conversion cycle is calculated as:  Days in Inventory + Collection Period  Days in Inventory - Payables Period  Days in Inventory + Collec ... Read More

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#### Finance Objective Questions - Optimal Growth Rate with Access to External Capital

Question 1. Which of the following is not a use of funds in a statement of sources and uses? Increase in long-term debt Increase in the cash account Reduction in accounts payable Increase in accounts receivable 2. What is the optimal growth rate for a company with access to external capita ... Read More

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#### Finance Objective Questions - Is Scenario Analysis Testing Forecasts and What is the Commonly used Pro Forma Statements

Question 1. Scenario analysis is a way of testing forecasts by changing one assumption at a time.  True or False 2. Which of the following is commonly used in preparing pro forma statements:  Historical financial statements  Projected sales  Efficiency ratios  All o ... Read More

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#### Finance Objective Questions - What are Pro Forma Statements and the Difference between Real and Financial Activities

Question 1. Pro forma statements are: 1. Summaries of historical financial statements   2. Government-mandated analyses of financial statements  3. Projected statements used in financial planning  4. Estimated tax liabilities 2. "Real" activities create cash for a business, ... Read More

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#### Finance Objective Questions - Company's Real Activities and is Cost of Detb better than Cost of Equity

Question 1. Which of the following liabilities form part of a company's "real" activities?  Short-term debt Accounts payable Accrued operating expenses Long-term debt III only II and III I and IV I only 2. The cost of debt is generally lower than the cost of equity. True or False S ... Read More

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#### Finance Objective Questions - Company Value and Capital Structure and Leverage and Managerial Discretion

Question 1. M&M's Proposition I states that a company's value depends on its capital structure. True or False 2. A higher level of leverage generally reduces managerial discretion. True or False Summary These two objective questions belong to Finance and the first question is about company ... Read More

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#### Problem: Speculator Investing in Japanese Yen Call Options

Question A speculator is considering the purchase of five three-month Japanese yen call options with a striking price of 96 cents per 100 yen. The premium is 1.35 cents per 100 yen. The spot price is 95.28 cents per 100 yen and the 90 day forward rate is 95.71 cents. The speculator believes the yen ... Read More

 Price: Original Price: \$19.50 Now at: \$14.00

#### Hedging a Bond Portfolio with T-Bond futures

Question A portfolio manager uses a T-bond futures contract to hedge a bond portfolio over the next 4 months. The portfolio is worth \$75 million and will have duration of 5 years in four months. The futures price is 118 and each contract is for \$200,000. There are three bonds that can be delivered ... Read More

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#### Determining Futures Prices with Bonds maturing at different times and with different coupon rates

Question The futures price for the June 17, 2009 CBOT bond futures contract is 118-23. 1.    Calculate the conversion factor for a bond maturing on Jan 1, 2025, paying a coupon rate of 9.5%. 2.    Calculate the conversion factor for a bond maturing on Oct 1, 2030, pay ... Read More