D365 Financial Management II - Set 3 - Part 2

Correct Answer: $1.00

Dividend per share = Dividend payout ratio EPS. In this case: 30% $4 = $1.20.

Correct Answer: The additional return expected for taking on additional risk

Risk premium is the extra return investors expect for holding riskier assets compared to risk-free assets.

Correct Answer: The stock is more volatile than the market

A high beta indicates that a stocks price moves more than the market, suggesting higher volatility.

Correct Answer: A bond that pays no interest until maturity

Zero-coupon bonds are sold at a discount and do not make periodic interest payments, instead paying the face value at maturity.

Correct Answer: The company collects its receivables 10 times per year

Accounts receivable turnover ratio measures how many times a company collects its average receivables during a period.

Correct Answer: Gross margin

Gross margin is a profitability metric that shows the percentage of revenue remaining after deducting the cost of goods sold.

Correct Answer: It increases the future value

Compounding interest leads to exponential growth of an investment by earning interest on both the initial principal and accumulated interest.

Correct Answer: The right to buy an asset at a specific price before a certain date

A call option gives the holder the right to purchase an asset at a predetermined price within a certain period.

Correct Answer: The relationship between bond yields and maturities

A yield curve plots bond yields against their maturities, often used to predict economic trends and interest rate movements.

Correct Answer: A market where new securities are issued

In the primary market, companies issue new stocks or bonds directly to investors for the first time.

Correct Answer: It decreases purchasing power

Inflation causes prices to rise, which reduces the purchasing power of money over time.

Correct Answer: To report the companys revenues, expenses, and profits over a period

The income statement summarizes a companys financial performance over a given period, showing revenues, expenses, and net income.

Correct Answer: 40% of the companys assets are financed by debt

The debt ratio shows the proportion of a companys assets that are financed through debt.

Correct Answer: A dollar today is worth more than a dollar in the future

The time value of money states that money available now is worth more than the same amount in the future due to its earning potential.

Correct Answer: To protect investors and maintain fair and efficient markets

The SEC is responsible for regulating financial markets and ensuring transparency and fairness for investors.

Correct Answer: Selling shares of stock

Equity financing involves raising capital by selling ownership shares in the company.

Correct Answer: $200,000

Gross profit = Sales revenue - Cost of goods sold. In this case: $500,000 - $300,000 = $200,000.

Correct Answer: Stock prices fully reflect all available information

EMH suggests that stock prices incorporate and reflect all relevant information, making it difficult to consistently outperform the market.

Correct Answer: A provision requiring the borrower to maintain certain financial ratios

Financial covenants are terms in a loan agreement that require the borrower to meet specific financial conditions.

Correct Answer: Asset turnover ratio

The asset turnover ratio measures how efficiently a company uses its assets to generate revenue.