罗斯公司理财题库全集

Chapter 13 - Risk, Cost of Capital, and Capital Budgeting

24. The beta of a firm is more likely to be high under what two conditions? A. High cyclical business activity and low operating leverage B. High cyclical business activity and high operating leverage C. Low cyclical business activity and low financial leverage D. Low cyclical business activity and low operating leverage E. None of the above.

Difficulty level: Medium

Topic: FACTORS AFFECTING BETA Type: CONCEPTS

25. A firm with cyclical earnings is characterized by: A. revenue patterns that vary with the business cycle. B. high levels of debt in its capital structure. C. high fixed costs. D. high price per unit.

E. low contribution margins.

Difficulty level: Medium

Topic: CYCLICAL EARNINGS Type: CONCEPTS

26. A firm with high operating leverage has: A. low fixed costs in its production process. B. high variable costs in its production process. C. high fixed costs in its production process. D. high price per unit. E. low price per unit.

Difficulty level: Medium

Topic: OPERATING LEVERAGE Type: CONCEPTS

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Chapter 13 - Risk, Cost of Capital, and Capital Budgeting

27. If a firm has low fixed costs relative to all other firms in the same industry, a large change in sales volume (either up or down) would have:

A. a smaller change in EBIT for the firm versus the other firms.

B. no effect in any way on the firms as volume does not effect fixed costs. C. a decreasing effect on the cyclical nature of the business. D. a larger change in EBIT for the firm versus the other firms. E. None of the above.

Difficulty level: Medium

Topic: OPERATING LEVERAGE Type: CONCEPTS

28. A firm with high operating leverage is characterized by __________ while one with high financial leverage is characterized by __________.

A. low fixed cost of production; low fixed financial costs

B. high variable cost of production; high variable financial costs C. high fixed costs of production; high fixed financial costs D. low costs of production; high fixed financial costs

E. high fixed costs of production; low variable financial costs

Difficulty level: Medium

Topic: OPERATING AND FINANCIAL LEVERAGE Type: CONCEPTS

29. Firms whose revenues are strongly cyclical and whose operating leverage is high are likely to have: A. low betas. B. high betas. C. zero betas. D. negative betas. E. None of the above.

Difficulty level: Medium

Topic: DETERMINANTS OF BETA Type: CONCEPTS

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Chapter 13 - Risk, Cost of Capital, and Capital Budgeting

30. An industry is likely to have a low beta if the:

A. stream of revenues is stable and less volatile than the market. B. economy is in a recession.

C. market for its goods is unaffected by the market cycle. D. Both A and B. E. Both A and C.

Difficulty level: Medium

Topic: DETERMINANTS OF BETA Type: CONCEPTS

31. For the levered firm the equity beta is __________ the asset beta. A. greater than B. less than C. equal to

D. sometimes greater than and sometimes less than E. None of the above.

Difficulty level: Medium

Topic: ASSET AND EQUITY BETAS Type: CONCEPTS

32. All else equal, a more liquid stock will have a lower ________. A. beta

B. market premium C. cost of capital D. Both A and B. E. Both A and C.

Difficulty level: Challenge Topic: LIQUIDITY Type: CONCEPTS

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Chapter 13 - Risk, Cost of Capital, and Capital Budgeting

33. Two stock market based costs of liquidity that affects the cost of capital are the: A. bid-ask spread and the specialist spread. B. market impact cost and the brokerage costs.

C. investor opportunity cost and the brokerage costs. D. bid-ask spread and the market impact costs. E. None of the above.

Difficulty level: Medium Topic: LIQUIDITY Type: CONCEPTS

34. When a specialist is caught in the middle of a trade between informed and uniformed traders, which effectively eliminates the spread or causes a loss, is subject to: A. market impact costs. B. adverse selection.

C. broker's quotation bias.

D. increasing the number of uninformed traders. E. None of the above.

Difficulty level: Challenge

Topic: ADVERSE SELECTION Type: CONCEPTS

35. All else equal, new shareholders will ____ the capital gains of existing shareholders. A. dilute

B. hold constant C. increase

D. All of the above

E. It is impossible to tell.

Difficulty level: Medium Topic: CAPITAL GAINS Type: CONCEPTS

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