Multiple choices

questions
CORPORATE FINANCE 1
1. If the nominal rate of interest is 10% per annum and there is quarterly
compounding, the effective rate of interest will be:

a) 10% per annum

b) 10.10 per annum
c) 10.25%per annum
d) 10.38% per annum

2. Relationship between annual nominal rate of interest and annual effective rate
of interest, if frequency of compounding is greater than one:

a) Effective rate > Nominal rate

b) Effective rate < Nominal rate
c) Effective rate = Nominal rate
d) None of the above
3. Time value of money indicates that

a) A unit of money obtained today is worth more than a unit of money obtained in
future
b) A unit of money obtained today is worth less than a unit of money obtained in
future
c) There is no difference in the value of money obtained today and tomorrow
d) None of the above

4. What is the present value of a $1,000 ordinary annuity that earns 8% annually for
an infinite number of periods?
a) $80
b) $800
c) $1000
d) $12,500
5. You expect to deposit the following cash flows at the end of years 1 through 5,
$1,000; $4,000; $9,000; $5,000; and $2,000 respectively. What is the future account
value at the end of year 6 if you can earn 10% compounded annually?
a) $15,633.62
b) $21,000
c) $25,178.10
d) $27,695.91

6. How much of money Mr X has to deposit in the bank today if he wants to gets VND
300 m after 5 years. Assume that the interest rate is 10%pa?
a) VND 186 m
b) VND 300 m
c) VND 450 m
d) VND 330 m
7. If today you put VND 10m in a savings account in a bank at the stated annual
interest rate of 12%. How much interest payment will you receive after 5 years
when the bank pays interest semi-annually?
a) VND 1,338 m
b) VND 17,623 m
c) VND 7,910 m
d) VND 1,689 m

8. Today you deposit VND 100 m in the bank and expect to receive VND 112 m
next year. If the inflation is expected at the rate of 5% for the coming year, what
is the real interest rate of this investment?
a) 12%
b) 5%
c) 6.67%
d) 19%
9. The beta of stock A is 1.5. Which of the following statement is true?
a. The standard deviation of the return of stock A is 1.5
b. The expected return on the stock A is equal to the expected return on the market
c. The return of the stock A are magnified 1.5 times over those of the market
d. The expected return of the stock A is 1.5 higher than the expected return of the
market

10. Correlation coefficient between A and B equal 1. Which of the following

statement is true?
a. Return of A and B are perfectly positively correlated
b. Both return of A and B are higher than the average at the same time
c. The covariance of two securities is 1
d. Return of A is higher than the average while return of B is lower than the average
11. Market risk premium is 8% and risk-free return is 7%, then the market
required return would be:
a. 15%
b. 1%
c. 1.14%
d. 2%

12. Yield on bond is 7% and the market required return is 14%, then the market
risk premium would be:
a. 21%
b. 2%
c. 0.5%
d. 7%
13. Suppose a stock has an ending share price of VND 25,000, paid dividend of
VND 1000 per share and has initial price of VND 22,000, the percentage return is:
a. 16%
b. 4%
c. 12%
d. 18.18%

14. Stock A, B and C has the expected return of 10%, 8% and 16% respectively.
Their standard deviations are 14%, 12% and 20% respectively. Determine which
asset is the riskiest investment
a. A
b. B
c. C
d. Not enough information is given
15. Gross profit margin is added to cost of goods sold to calculate ….
a. Net revenues
b. Selling price
c. Unit price
d. Before tax profit

16. … provides a snapshot of the financial condition of a firm at a

particular time
a. The balance sheet
b. The income statement
c. The cash flow statement
d. The financial footnote
17. A measure of asset utilization is …
a. Return on assets
b. Current ratio
c. Return on sales
d. Days working capital

18. Return on assets is a function of …

a. Sales and total assets
b. The after-tax profit margin and the asset turnover ratio
c. The after-tax profit and the asset turnover
d. The net income and fixed assets
19. A firm has a higher asset turnover ratio than the industry average, which implies
a. The firm has a higher P/E ratio than other firms in the industry
b. The firm is more profitable than other firms in the industry
c. The firm is utilizing assets more efficiently than other firms in the industry
d. The firm is more likely to avoid insolvency in the short run than other firms in the
industry

20. A firm has a higher quick ratio than the industry average, which implies
a. The firm has a higher P/E ratio than other firms in the industry
b. The firm is more profitable than other firms in the industry
c. The firm is utilizing assets more efficiently than other firms in the industry
d. The firm is more likely to avoid insolvency in the short run than other firms in the
industry
21. A firm has current ratio is above the industry average, which implies
a. The firm is efficiently managing its current assets
b. The firm’s financial risk is higher than other firms in the industry
c. The firm is more profitable than other firms in the industry
d. The firm’s liquidity is better than other firms in the industry

22. If cost of goods sold is VND 8,000 million and gross profit is VND 5,000 million,
the net revenue is …
a. VND 3,000 million
b. VND 13,000 million
c. - VND 3,000 million
d. - VND 13,000 million
23. If debt to equity ratio is 1.2, net profit on pre-tax profit ratio is 0.625, pre-tax
profit on EBIT ratio is 0.9, return on equity is 17.82%, current ratio is 8 and return
on sales ratio is 8%, the firm’s assets turnover is …
a. 0.0125
b. 1.0125
c. 2.0125
d. 3.0125
24. A firm has BEP of 14%, debt to equity ratio of 0.8, tax rate of 35% and the
interest rate on debt is 10%. The firm’s ROE is …
a. 11.18%
b. 8.97%
c. 11.54%
d. 12.62%
25. Firm A has ROE of 24% while firm B has ROE of 15% during the same year.
Both firms have the debt ratio of 0.8. Firm A’s asset turnover is 0.9 while firm B’s
asset turnover is 0.4. Which of the following statement is true?
a. Firm A has a higher profit margin the firm B
b. Firm B has a higher profit margin than firm A
c. Firm A and B have the same profit margin
d. Firm A has higher equity multiplier than firm B
26. If a firm has VND 100 billion in inventories and its current ratio is 1.2, its quick
ratio is 1.1. What is the firm’s net working capital?
a. VND 100 billion
b. VND 200 billion
c. VND 1000 billion
d. VND 1,200 billion
27. A firm has following information: sales = VND 4.8b, total debt = VND 1.5b,
debt ratio = 40%, ROE = 18%. Calculate the firm’s ROA?
a. 10.8%
b. 12,2%
c. 9.8%
d. 11.6%
28. Company X has current liabilities of VND 15b, Cash makes up 10% of the
current assets and Accounts receivable makes up another 40% of current assets.
The firm’s Current ratio is 2.1. Calculate the value of the inventory of the firm?
a. VND 31.5b
b. VND 12.6b
c. VND 15.75b
d. VND 18.9b
29. Company X had current liabilities of VND 435,000 m, a quick ratio of 0.95,
inventory turnover of 6.2 and current ratio of 1.6. What is the firm’s COGS?
a. VND 696,000 m
b. VND 282,750 m
c. VND 457,890 m
d. VND 1,753,050
30. Company Y has following information: Current liability is VND 5b, current
ratio is 2, inventory turnover is 8, DSO is 30 days, sales is VND 42b and COGS is
32b. Calculate the value of cash and marketable securities?
a. VND 10b
b. VND 2.5b
c. VND 4b
d. VND 3.5b