Financial Management - Study Mode

[#111] Future value interest factor takes ____________.
Correct Answer

(A) Compounding rate

Explanation

Solution: Future value interest factor takes Compounding rate. Future value (FV) is the value of a current asset at a specified date in the future based on an assumed rate of growth.

[#112] Financial leverage measures ____________.
Correct Answer

(C) sensitivity of EPS with respect to % change in level of EBIT

Explanation

Solution: The Financial Leverage (FL) measures the relationship between the EBIT and the EPS and it reflects the effect of change in EBIT on the level of EPS. The FL measures the responsiveness of the EPS to a change in EBIT and is defined as the % change in EPS divided by the % change in EBIT.
Symbolically,
= Increase in EPS ¸EPS/Increase in EBIT¸EBIT

[#113] ___________ are financial assets.
Correct Answer

(D) A and C

Explanation

Solution: A financial asset is a liquid asset that gets its value from a contractual right or ownership claim. Cash, stocks, bonds, mutual funds, and bank deposits are all are examples of financial assets.

[#114] Present value takes _________.
Correct Answer

(A) Discounting rate

Explanation

Solution: Present value takes Discounting rate. Present value (PV) is the current value of a future sum of money or stream of cash flows given a specified rate of return.

[#115] Operating leverage measures ____________.
Correct Answer

(A) business risk

Explanation

Solution: Operating leverage measures a company’s fixed costs as a percentage of its total costs. It is used to evaluate the break-even point of a business, as well as the likely profit levels on individual sales.