D365 Financial Management II - Set 1 - Part 3

Test your knowledge of technical writing concepts with these practice questions. Each question includes detailed explanations to help you understand the correct answers.

Question 41: What is the definition of capital structure?

The mix of assets and liabilities in a company

The mix of debt and equity used to finance a company

The proportion of long-term and short-term debt

The distribution of dividends and retained earnings

Question 42: A bond has a face value of $1,000 and pays interest annually at a coupon rate of 6%. If the bondholder sells the bond for $900, what is the yield to maturity (YTM) compared to the coupon rate?

YTM is higher than the coupon rate

YTM is lower than the coupon rate

YTM is equal to the coupon rate

YTM is negative

Question 43: What does the term liquidity refer to?

The ability of a company to meet long-term obligations

The ability of a company to raise equity capital

The ability of a company to pay short-term obligations

The ability of a company to invest in long-term projects

Question 44: What is the effect of depreciation on cash flow?

It decreases cash flow

It increases cash flow

It has no effect on cash flow

It decreases net income but increases cash flow

Question 45: What is the formula for calculating return on assets (ROA)?

Net Income / Total Assets

Net Income / Total Equity

EBIT / Total Assets

EBIT / Total Equity

Question 46: A companys dividend yield is 4%, and its stock price is $50. What is its annual dividend per share?

$1.00

$2.00

$3.00

$4.00

Question 47: Which of the following is a measure of a companys solvency?

Current ratio

Quick ratio

Debt-to-equity ratio

Inventory turnover ratio

Question 48: What is the difference between a stock dividend and a cash dividend?

Stock dividends increase the number of shares outstanding, while cash dividends reduce retained earnings

Cash dividends increase the number of shares outstanding, while stock dividends reduce retained earnings

Stock dividends are paid in cash, while cash dividends are paid in stock

Cash dividends are reinvested in the company, while stock dividends are not

Question 49: What is meant by diversification in investing?

Investing in a single asset class

Spreading investments across different assets to reduce risk

Buying only high-risk assets

Investing all assets in foreign markets

Question 50: A companys operating expenses are $300,000, and its sales are $1,200,000. What is its operating expense ratio?

20%

25%

30%

35%

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