Accountant s Guide to Financial Management. Course #5965B/QAS5965B Exam Packet

Transcription

1 Accountant s Guide to Financial Management Course #5965B/QAS5965B Exam Packet

2 ACCOUNTANT S GUIDE TO FINANCIAL MANAGEMENT (COURSE #5965B/QAS5965B) COURSE DESCRIPTION AND INTRODUCTION This course is designed for accountants who must have financial knowledge but who have not had formal training in finance. Topics include: The Sarbanes-Oxley Act financial reporting requirements, uses and analysis of financial statements, financial forecasting and cash budgeting, risk and return, valuation of stocks and bonds, time value of money, investing and financing, leverage, optimal capital structure, portfolio selection, management of financial resources, and international finance. The goals of the course are fourfold: 1) It provides an understanding and working knowledge of the fundamentals of financial decision making and strategy that can be put to practical application in day-to-day jobs of accountants and managers; 2) It concentrates on providing a working vocabulary for communication; 3) It uses examples and illustrations, with emphasis on the practical application of financial concepts, tools, and methodology; and 4) It includes checklists, guidelines, rules of thumb, diagrams, graphs, and tables to aid your comprehension of the subjects discussed. Uses the course material entitled Accountant s Guide to Financial Management. Prerequisites: Intermediate math and statistics. Course level: Intermediate. Course #5965B/QAS5965B 20 CPE hours. LEARNING ASSIGNMENTS and OBJECTIVES As a result of studying each assignment, you should be able to meet the objectives listed below each individual assignment ASSIGNMENT SUBJECT 1 An Overview of Financial Management Financial Statements and Cash Flow Study the course materials from pages 1-1 to 2-30 Complete the review questions at the end of each chapter Answer the final exam questions 1 to 15 Objectives: To identify the goal of the firm To distinguish between profit maximization and stockholder wealth maximization To explain how agency problems may interfere with the goal of stockholder wealth maximization To describe the scope and role of finance To define some key finance vocabulary To explain the role of financial managers To describe the relationship between accounting and finance To explain the financial and operating environment in which financial managers operate To compare the various legal forms of business organization To read and interpret the basic financial statements: the balance sheet, income statement, and statement of cash flows To explain how the balance sheet portrays a company's financial position To describe how the income statement reveals the entity's operating performance To determine and assess a company's cash inflows and cash outflows To outline the many types of accounts that may exist in the accounting system To explain what the annual report is and read and list its components, including the financial statements, footnotes, review of operations, auditor's report, and supplementary schedules To describe what management s discussion and analysis (MD&A) involves To summarize how the Sarbanes-Oxley Section 404 reporting differs from traditional reporting Exam Page -1

3 ASSIGNMENT SUBJECT 2 Evaluating a Firm s Financial Performance Improving Financial Performance Study the course materials from pages 3-1 to 4-11 Complete the review questions at the end of each chapter Answer the final exam questions 16 to 28 Objectives: To explain what financial statement analysis is and why it is important To compare horizontal analysis and vertical analysis To list the basic components of ratio analysis To distinguish between trend analysis and industry comparison To calculate a comprehensive set of financial ratios and interpret them To explain the limitations of ratio analysis To define ROI To identify the basic components of the Du Pont formula and to explain how it can be used for profit improvement To analyze how financial leverage affects the stockholder's return Exam Page -2

4 ASSIGNMENT SUBJECT 3 Budgeting, Planning, and Financial Forecasting The Time Value of Money The Meaning and Measurement of Risk and Rates of Return Study the course materials from pages 5-1 to 7-14 Complete the review questions at the end of each chapter Answer the final exam questions 29 to 40 Objectives: To apply the percent-of-sales method to determine the amount of external financing needed To diagram the firm's budgetary system, including the cash budget and the forecasted (pro forma) income statement and balance sheet To calculate a firm's sustainable rate of growth To formulate the master budget, step by step To discuss why budgeting is used for profit planning and "what-if" analysis To outline the concept of future value, with both annual and intra-year compounding To distinguish between future value and present value concepts To calculate the future value of a single payment and an annuity To calculate the present value of a single payment and an annuity To compare and contrast future value and present value tables To determine some important financial variables such as a sinking fund amount, the monthly payment of an amortized loan, and annual percentage rate (APR) To define return and describe how it is measured To distinguish between arithmetic return and geometric return To calculate and state risk statistics: the variance, standard deviation, and coefficient of variation To identify the types of risk To explain the nature of diversification and how it reduces risk To calculate portfolio return and portfolio risk To compare the Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Model (APM) To calculate a beta value and describe its use in designing a portfolio Exam Page -3

5 ASSIGNMENT SUBJECT 4 Valuation of Stocks and Bonds The Cost of Capital Capital Budgeting: Techniques and Practice Study the course materials from pages 8-1 to Complete the review questions at the end of each chapter Answer the final exam questions 41 to 53 Objectives: To outline the key inputs and concepts underlying the security valuation process To determine the value of bonds To identify and calculate various yields on a bond To distinguish between preferred stock and common stock To describe the various methods of common stock valuation To determine the investor's expected rate of return on preferred stock and common stock To compute individual costs of financing including long-term debt, bonds, preferred stock, common stock, and retained earnings To determine the overall cost of capital To discuss the various weighting schemes To explain how the weighted marginal cost of capital can be used with the investment opportunity schedule to find the optimal capital budget To describe the types and special features of capital budgeting decisions To calculate, interpret, and evaluate five capital budgeting techniques To select the best mix of projects with a limited capital spending budget To discuss how income tax factors affect investment decisions To explain the types of depreciation methods To discuss the effect of Modified Accelerated Cost Recovery System (MACRS) on capital budgeting decisions Exam Page -4

6 ASSIGNMENT SUBJECT 5 Determining the Financing Mix Managing Liquid Assets Short-Term Financing Study the course materials from pages 11-1 to Complete the review questions at the end of each chapter Answer the final exam questions 54 to 69 Objectives: To discuss the basics of break-even analysis and operating leverage and how they relate to each other To measure operating leverage and financial leverage and distinguish between them To apply the EBIT-EPS approach to evaluate alternative financing plans To explain how to determine the best capital structure To accelerate cash receipts To delay cash payments To determine an optimal cash balance To identify the types of marketable securities To explain how to manage accounts receivable To describe what credit and discount policies may be advisable To outline some ways to manage inventory To compute the carrying cost and ordering cost of inventory To determine how much inventory to order each time and when to order it To explain the different short-term financing instruments and when each one is most appropriate To list the advantages of trade credit To identify the types of bank loans and how they work To compute interest To outline the attributes of commercial paper financing To finance using receivables and inventory as collateral To distinguish between short-term and long-term financing To list the advantages and disadvantages of leasing Exam Page -5

7 ASSIGNMENT SUBJECT 6 Debt Financing Equity Financing International Finance Study the course materials from pages 14-1 to Complete the review questions at the end of each chapter Answer the final exam questions 70 to 100 Objectives: To identify the types of bonds that can be issued To outline the advantages of using bonds for long term financing To discuss how bond interest is calculated and paid To decide if a bond issue should be refunded before maturity To outline the advantages and disadvantages of the different kinds of stock and other equity securities To list the characteristics of the different classes of stock To describe the role of the investment banker To explain the importance of making wise capital structure decisions To distinguish the difference between a private and public placement of securities To outline the key features of the financial management of a multinational corporation (MNC) To describe some popular financial goals of MNCs To distinguish between spot and forward foreign exchange rates To explain ways to control currency risk To outline three different types of foreign exchange exposure To explain long versus short position To list some key questions to ask that help to identify foreign exchange risk To identify the ways to forecast foreign exchange rates To analyze foreign investments To measure and deal with political risk To identify various international sources of financing ASSIGNMENT 7 Complete the Answer Sheet and Course Evaluation and mail to PES for credit NOTICE This course and test have been adapted from materials and information contained in materials entitled Accountant s Guide to Financial Management and any supplemental material provided. This course is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice and assumes no liability whatsoever in connection with its use. Since laws are constantly changing, and are subject to differing interpretations, we urge you to do additional research and consult appropriate experts before relying on the information contained in this course to render professional advice. Professional Education Services, LP 2012 Program publication date 01/9/12 Exam Page -6

8 ACCOUNTANT S GUIDE TO FINANCIAL MANAGEMENT (COURSE #5965B/QAS5965B) EXAM OUTLINE COURSE EXPIRATION DATE: Per AICPA and NASBA standards, this course must be completed within one year from the date of purchase. TEST FORMAT: The following final exam, consisting of 100 true/false and/or multiple choice questions, is based specifically on the material included in this course. The answer sheet must be completed and returned to PES for CPE certification. You will find the answer sheet at the back of this exam packet so that you may easily remove it and use it while taking your test. LICENSE RENEWAL INFORMATION: The Accountant s Guide to Financial Management course (#5965B/QAS5965B) qualifies for 20 CPE hours. PROCESSING: Your exam will be graded promptly. You must score 70% or better to pass. When you pass, your certificate of completion will be mailed. If you do not pass, we will give you a courtesy call to inform you of this and then another answer sheet will be sent to you free of charge. GRADING OPTIONS: Please choose only one of the following. There is no additional charge for any of these grading options. Make sure to fill out your answer sheet completely prior to submitting it. ONLINE GRADING Visit our website at Login to your account (if you are a first-time user you must set up a new user account). Go to the MY CPE tab and click the My CPE Exams in Progress folder. If your exam is not already located in this folder, click Add Exam Previously Purchased and follow the instructions. MAIL Your exam will be graded and your certificate of completion mailed to you the same day we receive it. Your certificate will be dated according to the postmark date; therefore, you do not need to overnight your exam. Please mail your answer sheet to: Professional Education Services, LP 4208 Douglas Blvd., Ste 50 Granite Bay, CA FAX Your exam will be graded and you will be contacted either via phone or fax with your results within 4 business hours of receipt. A copy of your graded exam and certificate of completion will be mailed to you the same day we receive it. Your certificate will be dated according to the fax date. If you choose to fax your exam, please do not mail it. Your fax will serve as the original. Please refer to the attached answer sheet for further instructions on fax grading. Fax number (916) Thank you for using Professional Education Services. We appreciate your business!! Exam Page -7

9 ACCOUNTANT S GUIDE TO FINANCIAL MANAGEMENT (COURSE #5965B/QAS5965B) FINAL EXAM The following questions are either true or false and/or multiple choice. Please indicate your choice on the enclosed Answer Sheet. 1. Objectives of managerial finance do not include: a) employee profits b) stockholder wealth maximization c) profit maximization d) social responsibility 2. Stockholder wealth maximization ad-vantages do not include: a) emphasizes the long term b) maximizes short-term profits c) recognizes risk or uncertainty d) recognizes the timing of returns 3. Which one of the following is not a policy decision that by itself is likely to affect the value of the firm: a) investment in a project with a large net present value b) promotion of more aggressive and creative accounting practices c) sale of a risky division that will now increase the credit rating of the entire company d) use of a more highly leveraged capital structure that resulted in lower cost of capital 4. Financial managers do all of the following except: a) financial analysis and planning b) make investment decisions c) make financial and capital structure decisions d) post payroll deductions 5. In capital markets, the primary market is concerned with the provision of new funds for capital investments through: a) new issues of bond and stock securities b) exchanges of existing bond and stock securities c) the sale of forward or future commodities contracts d) new issues of bond and stock securities and exchanges of existing bond and stock securities 6. Which of the following is not considered a financial institution: a) commercial banks b) money markets c) pension funds d) credit unions 7. The financial statements included in a company s annual report are the: a) balance sheet and income statement b) statement of financial position and income statement c) balance sheet, statement of financial position, and income statement d) balance sheet, income statement, and statement of cash flows 8. The primary purpose of the balance sheet is to reflect: a) the fair value of the firm s assets at some moment in time b) the status of the firm s assets in case of forced liquidation of the firm c) the firm s potential for growth in stock values in the stock market d) assets, liabilities, and equity (net worth) Exam Page -8

10 9. A statement of cash flows is to be presented in general purpose external financial statements by which of the following: a) publicly held business enterprises only b) privately held business enterprises only c) not-for-profit organizations only d) all companies 10. A statement of cash flows is intended to help users of financial statements: a) evaluate a firm s liquidity and ability to pay its debts b) evaluate a firm s economic resources and obligations c) determine a firm s components of income from operations d) determine whether insiders have sold or purchased the firm s stock 11. A financial statement includes all of the following items: net income, depreciation, operating activities, and financing activities. What financial statement is this: a) balance sheet b) income statement c) statement of cash flows d) statement of shareholders equity 12. Footnote disclosures usually do not include: a) accounting methods b) terms and characteristics of long-term debt c) listing of employees d) pension fund estimates 13. A segment is reportable if any one of the following conditions exist except: a) revenue is 10% or more of total corporate revenue b) operating profit is 10% or more of total corporate operating profit c) identifiable assets are 10% or more of total corporate assets d) foreign operations provide 3% or more of total corporate sales 14. highlights the concept of a significant deficiency in internal control over financial reporting. a) SOX Section 906 b) Auditing Standard No. 5 c) Auditing Standard No. 2 d) U.S. GAAP 15. Management is required to state whether or not the company's internal control over financial reporting is effective. A negative assurance statement, such as "nothing has come to management's attention to suggest internal control is ineffective" is acceptable. a) true b) false 16. Factors that an investor considers in evaluating a firm s stock include all of the following except: a) financial health b) industry factors c) number of future investors d) future outlook of the company 17. Which of the following is not a source of industry statistics: a) RMA Annual Statement Studies b) the FTC Quarterly Report c) Value Line Investment Service d) Standard and Poor s industry studies 18. Which of the following is an example of a liquidity ratio: a) times interest earned b) quick ratio c) return on equity d) P/E ratio 19. Given the following data: Sales = 2000; Cost of goods sold = 1500; Average receivables = 100, calculate the average collection period: a) b) c) 137 d) 50 Exam Page -9

11 20. Which of the following is an example of a leverage ratio: a) times interest earned b) quick ratio c) payout ratio d) return on equity 21. Free cash flow (FCF) is cash flow from operations minus cash used to purchase fixed assets minus: a) cash dividends b) stock dividends c) share repurchase d) debt 22. Gross profit margin is: a) gross profits divided by net sales b) net sales divided by gross profit c) sales multiplied by gross profit d) average assets multiplied by gross profits 23. Market value added (MVA) is minus equity capital supplied by shareholders. 26. Margins may be increased by all of the following except: a) reducing expenses b) reducing turnover c) raising selling prices d) increasing sales faster than expenses 27. Another version of the Du Pont formula, called the modified Du Pont formula, reflects the effect of using other people s money. The formula ties together the return on investment (ROI) and: a) operating leverage b) total leverage c) financial leverage d) times interest earned 28. The equity multiplier is not equal to: a) b) Total assets Stockholders' equity Total assets Total liabilities a) economic value added b) market value of the firm s stock c) price-earnings ratio (multiple) d) book value per share 24. Which of the following is not true regarding the ROI breakdown, known as the Du Pont formula: c) d) 1-1 Total liabilities Total assets 1 (1- debt ratio) a) the importance of turnover as a key to overall return on investment is emphasized in the breakdown b) turnover is not as important as profit margin in enhancing overall return c) the importance of sales is explicitly recognized d) the margin and turnover complement each other; in other words, a low turnover can be made up by a high margin; and vice versa 25. Return on investment (ROI) cannot be enhanced by management: a) improving margin b) improving turnover c) improving both turnover and margin d) improving liquidity 29. Basic steps in projecting financial needs by percent of sales method include all of the following except: a) project the firm s sales b) project expenses c) estimate rate of return d) estimate level of investment in current and fixed assets 30. Major steps in preparing the budget do not include: a) prepare a sales forecast b) formulate present value c) estimate manufacturing costs and operating expenses d) determine cash flow and other financial effects Exam Page -10

12 31. Which of the following statements is not true regarding the cash budget: a) it aids in avoiding unnecessary idle cash and possible cash shortages b) it helps management keep cash balances in reasonable relationship to its needs c) it presents the expected cash inflow and outflow for a designated time period d) the cash budget consists typically of three major sections: cash surplus or deficit, financing, and investments 32. The concept of The Time Value of Money refers to: a) a dollar has the same value now as in the future b) a dollar in the past had less value than now c) a dollar now is worth more than a dollar to be received later d) a dollar value is constant in time 33. The annuity is defined as a series of payments or receipts: a) of a variable amount for a definite period b) of a variable amount for an indefinite period c) of a fixed amount for an indefinite period d) of a fixed amount for a specific number of periods 37. What is the risk and the risk-return trade-off: a) the lesser the risk, the greater the return expected b) the greater the risk, the greater the return expected c) the greater the investment, the lesser the risk expected d) the greater the investment, the greater the return expected 38. Beta does not measure which of the following: a) systematic risk b) purchasing power risk c) market risks d) diversifiable risk 39. The Capital Asset Pricing Model (CAPM) computes the expected return on a security by adding the risk-free rate of return to the incremental yield of the expected market return, which is adjusted by the company s beta. Assume that r f =6%, and r m =10%. If DQZ s has a beta of 2.0, what is DQZ s expected rate of return: a) 14.00% b) 12.20% c) 7.20% d) 12.00% 34. The minimum rate of return is also called: a) internal rate of return b) rate of return c) cost of capital d) time-adjusted rate of return 35. Present value of $110,000 expected to be received one year from today at an interest rate (discount rate) of 10% per year is: a) $121,000 b) $100,000 c) $110,000 d) $105, The return of an investment consists of the following sources of income except: a) current income b) preferred return c) appreciation or depreciation in market value d) capital gains or losses Exam Page The arbitrage pricing model (APM) explains asset returns in terms of multiple macroeconomic factors. Assume the macroeconomic variables are the gross domestic product, inflation, real interest rates, differences in yields of different grades of corporate bonds, and differences in yields on long versus short-term government bonds. The market return or risk premium (RPi ) and the sensitivity or beta coefficient (bi) for each variable are given below: Variable = RPi = bi = If the risk-free interest rate is 5%, what is the expected rate of return according to the APM: a) 13.6% b) 10.3% c) 8.3% d) 5.0%

13 41. The valuation process for a bond does not require knowledge of the: a) amount and timing of cash flows to be received by investor b) present bond price c) maturity date of the loan d) investor s required rate of return 42. Preferred stock is like common stock except that: a) it represents equity ownership b) its dividend is fixed for the life of the issue c) it offers control of the firm d) it pays dividends 43. The market value of a firm s outstanding common shares will be higher, everything else equal, according to the Gordon s valuation model, if: a) investors have a higher required return b) investors expect higher dividend growth c) investors have longer expected holding periods d) investors have shorter expected holding periods 44. Which of the following is directly applied in determining the value of a stock when using the dividend growth model: a) the firm s capital structure b) the firm s cash flows c) the firm s liquidity d) the investor s required rate of return on the firm s stock 45. Assume that interest rates just declined substantially but that the expected future dividends for a company over the long run were not affected. As a result of the decrease in required rates of return, according to the Gordon s valuation model, the company s stock price should: a) increase b) decrease c) stay constant d) change, but in no obvious direction 46. Determine the cost of equity capital for a firm with a stock price of $50.00, an estimated dividend at the end of the first year of $5.00 per share, and an expected growth rate of 11.1%: a) 21.1% b) 11.0% c) 10.0% d) 20.0% 47. If the before-tax cost of debt is 10% and the corporate tax rate is 30%, calculate the after-tax cost of debt: a) 10% b) 3% c) 7% d) 13% 48. The cost of equity capital (or common stock) for a firm is: a) the required rate of return on the company's stock b) the yield to maturity on the bond c) the risk-free rate d) the market risk premium 49. weights are not used in computing the overall cost of capital. a) historical b) target c) marginal d) projected 50. The capital budget is a(n): a) plan to ensure that there are sufficient funds available for the operating needs of the company b) exercise that sets the long-range goals of the company including the consideration of external influences c) plan that coordinates and communicates a company s plan for the coming year to all departments and divisions d) plan that assesses the long-term needs of the company for plant and equipment purchases Exam Page -12

14 51. apital budgeting decisions include all except one of the following investment decisions: a) keep or sell a business segment b) lease or buy c) how to decrease turnover d) which assets to invest in 52. Conditions under which mutually exclusive investments create contrary rankings include all of the following except: a) projects that have different life expectancies b) projects that have different sizes of investment c) the cost of capital gives a close approximation for the market rate of return d) one project increases in cost while another decreases over time 53. The easiest and most popular method of calculating depreciation is: a) straight-line method b) sum-of-the-years digit method c) double-declining-balance method d) modified accelerated cost recovery system 54. Leverage is the portion of fixed costs that: a) represents a risk to the firm b) represents a risk to the investors c) represents a risk to the clients d) represents all of the above 55. A company has unit sales of 300,000, the unit variable cost is $1.50, the unit sales price is $2.00, and the annual fixed costs are $50,000. Furthermore, the annual interest expense is $20,000, and the company has no preferred stock. Accordingly, the degree of total leverage is: a) b) 1.50 c) 1.25 d) The primary objective of capital structure decisions is to: a) maximize the firm s liquidity b) minimize the firm s overall weighted cost of capital c) minimize the firm s market value d) maximize the firm s degree of operating leverage 57. Capital structure decisions are influenced by all of the following except: a) growth rate and stability of future sales b) asset makeup of the individual firm c) control status of market forces d) the business risk to which the firm is exposed 58. Working capital is the difference between: a) current assets and current liabilities b) fixed assets and fixed liabilities c) total assets and total liabilities d) shareholders investment and cash 59. During the year, Mason Company s current assets increased by $120, current liabilities decreased by $50, and working capital: a) increased by $70 b) did not change c) decreased by $170 d) increased by $ Types of delays in processing checks include all of the following except: a) mail float b) processing float c) deposit collection float d) credit float 61. A working capital technique that increases the payable float and therefore delays the outflow of cash is: a) concentration banking b) a draft c) electronic data interchange (EDI) d) a lockbox system Exam Page -13

15 62. A change in credit policy has caused an increase in sales, an increase in discounts taken, a reduction in the investment in accounts receivable, and a reduction in the number of doubtful accounts. Based upon this information, we know that: a) net profit has increased b) the average collection period has decreased c) gross profit has declined d) the size of the discount offered has decreased 63. A decrease in inventory ordering costs will: a) decrease the order quantity b) increase the reorder point c) have no effect on the order quantity d) decrease the carrying cost percentage 64. Ardmore Industries is in the process of reviewing its inventory and production policies. The company often has an excess supply of some products and shortages of other products needed for planned production runs. The method that Ardmore should use to establish its inventory policies regarding these products is: a) linear programming b) regression analysis c) economic order quantity (EOQ) d) contribution margin analysis 65. The economic order quantity (EOQ) formula assumes that: a) purchase costs per unit differ because of quantity discounts b) costs of placing an order vary with quantity ordered c) periodic demand for the good is known d) erratic usage rates are cushioned by safety stocks 66. The ABC Inventory Control Method: 67. Short-term financing is: a) less important than long-term financing b) conceptually, more difficult to arrange than long-term financing c) easier to arrange than long-term financing d) necessary for capital budgeting decisions 68. The credit instrument known as a banker s acceptance: a) calls for immediate payment upon delivery of the shipping documents to the bank s customer and acceptance of goods by the bank b) involves an invoice being signed by the banker upon receipt of goods, after which both the banker and the seller record the transaction on their respective books c) is a time draft payable on a specified date and guaranteed by the bank d) is a method of sales financing in which the bank retains title to the goods until the buyer has completed payment 69. Seasonal cash shortfalls and desired inventory buildups are among the reasons to use: a) bankers acceptances b) call options c) commercial paper d) unsecured bank loans 70. In general, it is more expensive for a company to finance with equity capital than with debt capital because: a) long-term bonds have a maturity date and must therefore be repaid in the future b) investors are exposed to greater risk with equity capital c) equity capital is in greater demand than debt capital d) dividends fluctuate to a greater extent than interest rates a) segregates merchandise into components based on quantity b) computes annual dollar usage by grade c) ranks inventory in terms of dollar usage d) works just like JIT Exam Page -14

16 71. Zero-coupon bonds: a) sell for a small fraction of their face value because their yield is much lower than the market rate b) increase in value each year as they approach maturity, providing the owner with the total payoff at maturity c) are redeemable in measures of a commodity such as barrels of oil, tons of coal, or ounces of rare metal (e.g., silver) d) are high-interest-rate, high-risk, unsecured bonds that have been used extensively to finance leveraged buyouts 72. An advantage of issuing new securities to the public is: a) stock prices accurately reflect the true net worth of the company b) pressure is applied from outside shareholders for earnings growth c) the liquidity of the firm s stock increases d) self-dealing by corporate insiders is limited 73. An equity issue sold to the firm's existing stockholders is called: a) a rights offer b) a general cash offer c) a private placement d) a discriminatory-price auction 74. The date when the right to a dividend expires is called the: a) declaration date b) ex-dividend date c) date of record d) payment date 75. Mirage Corporation has 1,000,000 shares outstanding. It wishes to issue 250,000 new shares using rights issue. How many rights are needed to buy one new share: a) 1 right/share b) 2 rights/share c) 3 rights/share d) 4 rights/share 76. A potential investor may obtain information about a firm making a new securities issue from which of the following publications: a) registration statement sent by its broker b) prospectus c) letter of comment d) Regulation A filing 77. All of the following are examples of services normally offered by investment bankers except: a) securities sales b) consultation on the offering price c) underwriting d) checking accounts for corporations 78. In what way do investment bankers make money under best efforts offerings: a) by receiving the difference between the purchasing price and the offering price b) by receiving a commission c) by receiving a discount of the difference between the purchasing price and the offering price d) by purchasing unsold securities for their own account 79. A sale of securities to a very few parties that is exempt from registration with the SEC is known as a: a) cash offer b) rights offer c) private placement d) shelf registration 80. The unique features of financial management of a multinational corporation (MNC) include: multiple currency problems, various legal, institutional and economic constraints, and: a) internal control problems b) translation problems c) accounting exposure d) operations exposure Exam Page -15

17 81. typically involve(s) contracts for the planning, design, and construction of operating facilities for a fee. a) management contracts b) turnkey operations c) joint ventures d) green-field development 82. A foreign exchange rate is: a) the ratio of one country's cost-of-living index to that of another country b) the price of one country's currency in units of another country's currency c) the ratio of one country's imports to its exports d) the difference obtained by subtracting a country's exports from its imports 83. A direct quote is when: a) the quotation is received directly from a foreign correspondent bank b) the price is in units of foreign currency needed to buy one unit of home currency c) the price is given as units of home currency per unit of foreign currency d) the quotation applies directly to forward transactions 84. Exchange rates may be in terms of units of foreign currency per dollars, called a(n): a) cross rate b) indirect quote c) spot rate d) premium quote 85. A "forward" transaction: a) is at a premium over the spot rate b) means that delivery and payment must be made within one business day (Canada) or two business days after the transaction date c) calls for delivery of a currency at a fixed future date at a fixed rate of exchange d) sets the future date when delivery of a currency must be made at an unknown spot 86. A cross rate is: a) the quotation received indirectly from a foreign correspondent bank b) the exchange rate between two currencies derived by dividing each currency's exchange rate with a third currency c) the price given as units of home currency per unit of foreign currency d) the quotation that does not apply directly to forward transactions 87. The potential for an increase or decrease in the parent s net worth and reported net income caused by a change in exchange rates since the last consolidation of international operations is called: a) economic exposure b) operating exposure c) translation exposure d) strategic exposure 88. is the potential for the change in the present value of future cash flows due to an unexpected change in the exchange rate. a) transaction exposure b) operating exposure c) translation exposure d) accounting exposure 89. Hedging: a) increases the variability of expected cash flows b) increases the variability of reported profits c) reduces the affect of unexpected price changes d) decreases the spread between spot and forward market quotes 90. All of the following operating strategies are used for the management of transaction exposure except: a) leading and lagging accounts receivable and payable b) buying or selling foreign exchange in the forward market c) borrowing in foreign currency markets with foreign currency receivables as collateral d) substituting debt for equity in a debt/equity swap Exam Page -16

18 91. Forward (or futures) exchange contracts can be purchased or sold to guard against changes in exchange rates during a period of contract or exposure to risk from such changes. This process is known as: a) exposure b) hedging c) positioning d) parity 92. Operating exposure: a) creates foreign exchange accounting gains and losses b) causes exchange rates to fluctuate c) is the possibility that future cash flows will change due to an unexpected change in foreign exchange rates d) measures a country's propensity to import and export 93. The objective of operating exposure management is: a) to eliminate the foreign exchange losses resulting from the settlement of outstanding financial obligations which are valued in a foreign currency b) to maximize the foreign exchange gains resulting from the settlement of outstanding financial obligations which are valued in a foreign currency c) to anticipate and influence the effect of unexpected changes in exchange rates on a firm s future cash flows d) to anticipate and influence the effect of expected changes in exchange rates on the firm s financial statements 94. The primary method by which a firm may protect itself against operating exposure impacts is: a) money market hedges b) diversification of operations c) forward contract hedges d) balance sheet hedging 95. Interest rate parity (IRP) states: a) interest rate should change in an equal amount but in the opposite direction to the difference in inflation rate between two countries b) the difference in the national interest rates for securities of similar risk and maturity should be equal to, but opposite in sign to, the forward rate discount or premium for the foreign currency, except for transaction costs c) nominal interest rates in each country are equal to the required real rate of return plus compensation for expected inflation d) the interest rates between two countries start in equilibrium, any change in the differential rate of inflation between the two countries tends to be offset over the longrun by an equal but opposite change in the spot exchange rate 96. The mathematical relationship that links changes in exchange rates and changes in price level is called: a) purchasing power parity theorem b) the law of one price c) the Fisher effect d) efficient market theory 97. Which of the following is an acceptable method of adjusting for risk when analyzing the prospects of a foreign investment: a) adjusting the discount rate b) adjusting the cash flows c) conducting sensitivity and scenario analysis d) all of the above are acceptable 98. Independent services that provide political risk rating include: Country Risk Rating, Economist Intelligence Unit, and: a) International Country Risk Guide b) monetary rating guide c) United Kingdom parity rate guide d) Japanese hedging rate manual Exam Page -17

19 99. Buying insurance policies for political risks are called: a) adaptation b) diversification c) risk transfer d) avoidance 100. A Eurodollar is: a) a dollar bank deposit in a bank outside of the United States b) a currency issued by the World Bank and pegged to the U.S. dollar c) another name for a Special Drawing Right (SDR) d) a dollar draft issued by the Bank for International Settlements (BIS) in Switzerland Congratulations you ve completed the exam! Exam Page -18

20 ACCOUNTANT S GUIDE TO FINANCIAL MANAGEMENT #5965B/QAS5965B (20 CPE hours) ANSWER SHEET (01/12) Important Note: For certification, this answer sheet must be completed and submitted to PES for grading within one year from the date of purchase. Please use black ink and print for quicker processing thank you. Name (as it appears on your license) Address City State Zip Home Work Daytime Phone ( ) address (for online grading) License Number State Expiration Date CPA, CFP, EA (circle one) If course was ordered by another party, please indicate name here: GRADING OPTIONS Please choose only ONE of the following: ONLINE GRADING Visit our website at o Login to your account (if you are a first-time user, you must set up a new user account). o Go to the MY CPE tab and click the My CPE Exams in Progress folder. o If your exam is not already located in this folder, click Add Exam Previously Purchased and follow the instructions. Mail Mail your exam to: PES, 4208 Douglas Blvd., Ste 50, Granite Bay, CA Fax Fax your exam to (916) and choose one of the following options: Please: mail my results only or fax phone my results to: ( ) PLEASE INDICATE YOUR ANSWER BY FILLING IN THE APPROPRIATE CIRCLE A B C D A B C D A B C D A B C D A B C D 1. O O O O 21. O O O O 41. O O O O 61. O O O O 81. O O O O 2. O O O O 22. O O O O 42. O O O O 62. O O O O 82. O O O O 3. O O O O 23. O O O O 43. O O O O 63. O O O O 83. O O O O 4. O O O O 24. O O O O 44. O O O O 64. O O O O 84. O O O O 5. O O O O 25. O O O O 45. O O O O 65. O O O O 85. O O O O 6. O O O O 26. O O O O 46. O O O O 66. O O O O 86. O O O O 7. O O O O 27. O O O O 47. O O O O 67. O O O O 87. O O O O 8. O O O O 28. O O O O 48. O O O O 68. O O O O 88. O O O O 9. O O O O 29. O O O O 49. O O O O 69. O O O O 89. O O O O 10. O O O O 30. O O O O 50. O O O O 70. O O O O 90. O O O O 11. O O O O 31. O O O O 51. O O O O 71. O O O O 91. O O O O 12. O O O O 32. O O O O 52. O O O O 72. O O O O 92. O O O O 13. O O O O 33. O O O O 53. O O O O 73. O O O O 93. O O O O 14. O O O O 34. O O O O 54. O O O O 74. O O O O 94. O O O O 15. O O O O 35. O O O O 55. O O O O 75. O O O O 95. O O O O 16. O O O O 36. O O O O 56. O O O O 76. O O O O 96. O O O O 17. O O O O 37. O O O O 57. O O O O 77. O O O O 97. O O O O 18. O O O O 38. O O O O 58. O O O O 78. O O O O 98. O O O O 19. O O O O 39. O O O O 59. O O O O 79. O O O O 99. O O O O 20. O O O O 40. O O O O 60. O O O O 80. O O O O 100. O O O O Please complete the attached course evaluation your opinion is extremely valuable. Exam Page -19

21 Accountant s Guide to Financial Management #5965B/QAS5965B - Course Evaluation Rate on a scale of 1-10 with 1 being poor and 10 being excellent. 1. The course met the course objectives described in the promotional material. 2. The course was up to date, held my interest, was timely, and effective. 3. The course materials were understandable, valuable, and suitable for a correspondence course. 4. The amount of advance knowledge and stated prerequisites were appropriate. 5. The completion time was appropriate for the number of credits allowed. 6. The course met my professional education needs. Please answer the following questions mark/rate any and all that may apply 1. How would you rate PES s order desk customer service 2. What can PES do to keep you as a valued customer? 3. Any other comments regarding this course or our company would be appreciated. 4. What other courses/subjects would you like to see PES offer in the future? Mail to: Professional Education Services, LP 4208 Douglas Blvd., Ste 50, Granite Bay, CA Exam Page -20