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Finance - Test 2


1. Which of the following is a measure of liquidity?
    A. return on investment
    B. return on equity
    C. acid-test ratio
    D. debt to equity ratio


2. Why do men trade in securities more actively than women?
    A. mental accounting
    B. overconfidence
    C. market efficiency
    D. conservatism


3. Which of the following types of mortgages will probably have the lowest initial interest rate?
    A. conventional 30-year fixed rate
    B. 30-year fixed rate FHA loan
    C. conventional 15-year fixed rate
    D. conventional 30-year ARM


4. Par value is also known as:
    A. face value
    B. redemption value
    C. market value
    D. replacement value


5. Which of the following assets would be most suitable to financing with larger amounts of debt?
    A. current assets, such as inventory
    B. specialized long term assets
    C. intangible long term assets
    D. tangible, tradable fixed assets


6. An airline loses ticket sales because of news of difficulty in servicing its debt. This is an example of:
    A. agency problems
    B. a tax shield
    C. financial distress
    D. sales management


7. What is a bond with no collateral called?
    A. callable bond
    B. zero-coupon bond
    C. debenture
    D. convertible bond


8. When is a limit order to buy stock executed?
    A. immediately, at the last traded price
    B. immediately, at the best available price
    C. at the lowest available price
    D. when at or below a specified price


9. In technical analysis, when a stock falls below a support level, this is interpreted as:
    A. a bearish sign
    B. the edge of a bull market
    C. a hold recommendation
    D. an uncertain indicator


10. All of the following are advantages of debt-financing except which?
    A. interest is a tax-deductible expense
    B. it allows for leverage in financing the business
    C. debt financing is cheaper than equity financing
    D. partial loss of control






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